Exhibit 10.2
Form 8-K
Viking Systems, Inc.
File No. 000-49636
VIKING SYSTEMS, INC.
2004 NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP PLAN
Section 1: Purpose
The purpose of the Viking Systems, Inc. 2004 Non-Employee Director Stock
Ownership Plan (the "Plan") is to promote the long-term growth and financial
success of Viking Systems, Inc. (the "Company") by attracting and retaining
non-employee directors of outstanding ability and assisting the Company in
promoting a greater identity of interest between the Company's non-employee
directors and its shareholders.
Section 2: Definitions
As used in the Plan, the following terms have the respective meanings set forth
below:
(a) "Award" means any Stock Option or Stock Award granted under the Plan.
(b) "Black-Scholes Model" means the Black-Scholes Option Pricing Model,
which shall be used to calculate the fair value of Stock Option grants under the
Plan, as of the date of such grant. Six factors are required to calculate the
value of a Stock Option using the Black-Scholes Model: the Stock Option's
exercise price; the current price of the Common Stock; the dividend yield of the
Common Stock; the Stock Option's time to expiration; the risk-free market rate
of return; and the future volatility of the Common Stock. Only the future
volatility of the Common Stock cannot be objectively determined. In connection
with using the Black-Scholes Model to calculate the fair value of Stock Option
grants under the Plan, the Committee may use such variations of the
Black-Scholes Model and parameters and procedures respecting the Black-Scholes
Model, including, without limitation, parameters and procedures used to measure
the historical volatility of the Common Stock as of the relevant grant date, as
the Committee deems reasonably appropriate in its sole discretion.
(c) "Board" means the Company's Board of Directors.
(d) "Committee" means a committee of the Board that the Board designates to
administer the Plan. The Committee shall consist of not less than two directors,
each of whom shall qualify as a "non-employee director" within the meaning of
Rule 16b-3 ("Rule 16b-3") under the 1934 Act, or any successor provisions
thereto, as an "outside director" under Section 162(m)(4)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provisions
thereto and as an "independent" director pursuant to the definition of
independence in the listing requirements of the principal national securities
exchange, national securities association or over-the-counter market on which
the Common Stock is traded, if any. If at any time the Committee shall not be in
existence, then the members of the Board that do qualify as non-employee
directors, outside directors and independent directors shall administer the Plan
and shall be deemed to be the Committee for purposes of the Plan.
(e) "Common Stock" means the Common Stock, $.001 par value, of the Company
and such other securities or property as may become subject to Awards pursuant
to an adjustment made under Section 4(b) of the Plan.
(f) "Fair Market Value" means the fair market value of the Common Stock
determined by such methods or procedures as shall be established from time to
time by the Committee; provided, however, that the Fair Market Value shall not
be less than the par value of the Common Stock; and provided further, that so
long as the Common Stock is traded on the Nasdaq National Market, the Nasdaq
Smallcap Market or another over-the-counter market, the Fair Market Value shall
be the average of the bid and asked prices of a share of Common Stock in the
applicable over-the-counter market on the specified date, as reported by the
National Association of Securities Dealers (or if no sales occurred on such
date, the last preceding date on which sales occurred); provided, however, that
if the principal market for the Common Stock is then a national securities
exchange, the Fair Market Value shall be the average of the high and low prices
of a share of Common Stock on the principal securities exchange on which the
Common Stock is traded on the specified date (or if no sales occurred on such
date, the last preceding date on which sales occurred).
(g) "1934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(h) "Participant" means a director of the Board who is not an employee of
the Company, or any entity that is directly or indirectly controlled by the
Company or any entity in which the Company has a significant interest as
determined by the Committee.
(i) "Shares" means shares of Common Stock.
(j) "Stock Award" means an Award to a Participant comprised of Shares
granted under Section 5(b) or 5(c) of the Plan.
(k) "Stock Option" means an award in the form of the right to purchase a
specified number of Shares at a specified price during a specified period
granted under Section 5(a) or 5(c) of the Plan.
Section 3: Effective Dates
The Plan shall become effective on April 30, 2004, subject to the approval of
the Plan by the shareholders of the Company within six months from the effective
date. To the extent that any Awards are granted under the Plan prior to its
approval by shareholders, the grants shall be contingent on approval of the Plan
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by the shareholders of the Company. No Awards may be made under the Plan after
April 30, 2014 or earlier termination of the Plan by the Board.
Section 4: Stock Available for Awards
(a) Common Shares Available. The maximum number of Shares available for
Awards under the Plan may not exceed 500,000 shares of Common Stock (subject to
adjustment pursuant to Section 4(b) hereof).
(b) Adjustments and Reorganizations. In the event that the Committee shall
determine that any dividend (other than a normal cash dividend) or other
distribution (whether in the form of cash, Common Stock, other securities or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Common Stock or other securities of the Company,
issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event
affects the Common Stock such that an adjustment is determined by the Committee
to be necessary or appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available to Participants
under the Plan, then the Committee may, in such manner as it may deem equitable,
adjust any or all of the
(i) number and type of Shares available under the Plan and that thereafter
may be made the subject of Awards under the Plan, and
(ii) number and type and exercise price of Shares subject to outstanding
Stock Options, provided any such adjustments are consistent with the effect
on other shareholders arising from any such action.
The Committee may also make such similar appropriate adjustments in the
calculation of Fair Market Value as it deems necessary or appropriated to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available to Participants under the Plan. Notwithstanding the
foregoing, (x) Stock Options subject to grant or previously granted under the
Plan at the time of any event described above shall be subject to only such
adjustment as shall be necessary to maintain the proportionate interest of the
Participant and preserve, without exceeding, the value of such Stock Options,
and (y) the number of Shares subject to Stock Awards under the Plan at the time
of any event described above shall be subject to only such adjustment as shall
be necessary to maintain the relative proportionate interest represented by such
Shares immediately prior to any such event.
(c) Change of Control. In order to preserve a Participant's rights under a
Stock Option granted under the Plan in the event of any sale of all or
substantially all of the Company's assets, merger, consolidation, combination or
other corporate reorganization, restructuring or change of control of the
Company ("Change of Control") (the Committee in its sole discretion will
determine if there has been a Change of Control), the Committee in its
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discretion may, at the time the Stock Option is granted or at any time
thereafter, take one or more of the following actions:
(i) provide for the acceleration of any time period relating to the
exercise of the Stock Option;
(ii) provide for the purchase of the Stock Option for an amount of cash or
other property that could have been received upon the exercise of the Stock
Option had the Stock Option been currently exercisable or payable;
(iii) adjust the terms of the Stock Option in the manner determined by the
Committee to reflect the Change of Control;
(iv) cause the Stock Option to be assumed, or new right substituted for the
Stock Option, by another entity; or
(v) make such other provision as the Committee may consider equitable and
in the best interests of the Company.
If the terms of Section 4(b) and Section 4(c) would apply to a transaction, then
the transaction will be subject to this Section 4(c) and not Section 4(b).
(d) Common Stock Usage. If, after the effective date of the Plan, any
Shares covered by an Award granted under the Plan, or to which any Award
relates, are forfeited or if an Award otherwise terminates, expires or is
cancelled prior to the delivery of all of the Shares or of other consideration
issuable or payable pursuant to such Award and if such forfeiture, termination,
expiration or cancellation occurs prior to the payment of dividends or the
exercise by the holder of other indicia of ownership of the Shares to which the
Award relates, then the number of Shares counted against the number of Shares
available under the Plan in connection with the grant of such Award, to the
extent of any such forfeiture, termination, expiration or cancellation, shall
again be available for granting of additional Awards under the Plan.
Section 5: Awards
(a) Stock Options. Commencing with April 30, 2004 and continuing on April
30th of each year thereafter, the Company shall issue to each Participant, on
the first business day following each annual meeting of shareholders until the
Plan is terminated or amended, Stock Options having a fair value (calculated as
of the date of the Stock Option grant using the Black-Scholes Model) of $10,000,
or such other amount as the Committee may approve in connection with a specific
grant (each an "Annual Stock Option").
The Committee shall specifically approve each grant of an Annual Stock
Option to a continuing director in advance. The per share exercise price of each
such Stock Option shall be the Fair Market Value of a Share of Common Stock on
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the date of the grant. The exercise price shall be payable at the time of
exercise in cash, previously acquired Shares valued at their Fair Market Value
or such other forms or combinations of forms of consideration as the Committee
may approve. Each such Stock Option shall have a term of ten years and shall
become fully exercisable one year following the date on which it is granted
unless vesting is accelerated pursuant to Section 4(c) or Section 6(d) or (f).
(b) Stock Awards. Commencing with April 30, 2004 and continuing on April
30th of each year thereafter, the Company shall issue to each Participant,
Shares having a Fair Market Value (calculated as of the date of such Stock
Award) of $10,000, or such other amount as the Committee may approve in
connection with a specific grant (each an "Annual Stock Award"). The Committee
shall specifically approve each grant of an Annual Stock Award to a continuing
director in advance.
(c) Awards Upon Election. If a Participant is first elected or appointed as
a director of the Company following April 30th of any year during the existence
of the Plan, such Participant shall automatically receive as an initial grant
the Awards referenced above, (collectively, "Initial Awards"). The Committee
shall specifically approve each grant of Initial Awards to a newly elected
director in advance. These Awards shall be valued as of the date of grant.
Section 6: General Provisions Applicable to Awards
(a) Transferability of Stock Options. Stock Options granted under the Plan
shall not be transferable other than by will or under the laws of descent and
distribution, except as otherwise provided by the Committee.
(b) Non-Transferability of Stock Awards. Shares awarded under Section 5(b)
or Section 5(c) hereof shall not be assignable, alienable, saleable or otherwise
transferable by the respective Participant until such Participant ceases for any
reason to serve on the Board or a Change of Control is effected. Notwithstanding
the preceding sentence, the following transfers or other dispositions will not
be deemed to be a violation of the transfer restrictions set forth herein:
A gift or other transfer of Shares issued to (i) any trust or other
estate in which such Participant has a substantial beneficial interest or
as to which such Participant serves as a trustee or in a similar capacity
or (ii) any relative or spouse of such Participant, or any relative of such
spouse, who has the same home as the Participant which in either case would
not change the Participant's beneficial ownership of those Shares for
purposes of reporting under Section 16(a) of the 1934 Act; provided, that
any Shares transferred by gift or otherwise pursuant to this subparagraph
will continue to be subject to the non-transfer restrictions of this
Section as though such Shares were held by the Participant.
(c) Legend on Certificates. The Committee may cause a legend or legends to
be put on any certificates for shares delivered under the Plan pursuant to any
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Stock Award or upon the exercise of any Stock Option to make appropriate
references to any applicable transfer restrictions.
(d) Termination of Directorship. If for any reason other than death a
Participant ceases to be a director of the Company one year or more after the
director's initial election or appointment to the Board while holding a vested
Stock Option granted under the Plan, such Stock Option shall continue to be
exercisable for a period of three years after such termination or the remainder
of the Stock Option term, whichever is shorter (any unvested Stock Option shall
be cancelled as of the date of such termination). If for any reason other than
death a Participant ceases to be a director of the Company within one year of
the director's initial election or appointment to the Board, the Stock Option
granted under the Plan and held by the director shall be cancelled as of the
date of such termination. In the event a Participant dies, any unvested Stock
Option granted under the Plan to such Participant shall immediately vest and be
exercisable by the designated beneficiary, or, in the absence of a designated
beneficiary, by will or in accordance with the laws of descent and distribution
for a period of three years following the date of death.
(e) Documentation of Grants. Awards made under the Plan shall be evidenced
by written agreements or such other appropriate documentation as the Committee
shall prescribe, including an option agreement. The Committee need not require
the execution of any instrument or acknowledgment of notice of an Award under
the Plan, including an option agreement, in which case acceptance of such Award
by the respective Participant will constitute agreement to the terms of the
Award.
(f) Plan Amendment. The Board may at any time amend, alter, suspend,
discontinue or terminate the Plan, including without limitation an amendment to
decrease or increase the amount of the Awards under Section 4; provided,
however, that shareholder approval of any amendment of the Plan shall be
obtained if otherwise required by (a) the Code or any rules promulgated
thereunder, (b) the listing requirements of the principal national securities
exchange, national securities association or over-the-counter market on which
the Common Stock is then traded, or (c) any other applicable law. To the extent
permitted by applicable law, the Committee may also amend the Plan, including
without limitation an amendment to decrease or increase the amount of the Awards
under Section 4, provided that any such amendments by the Committee shall be
reported to the Board. Termination of the Plan shall not affect the right of
Participants with respect to Stock Options previously granted to them, and all
unexpired Stock Options shall continue in force and effect after termination of
the Plan except as they may lapse or be terminated by their own terms and
conditions. Notwithstanding the foregoing, the Board and Committee are
prohibited from amending Section 6(g) of the Plan without shareholder approval.
(g) Repricing Prohibited. Notwithstanding anything in the Plan to the
contrary, and except for the adjustments provided in Section 4(b), the Committee
and the Board are prohibited from decreasing the exercise price for any
outstanding Stock Option granted to a Participant under the Plan after the date
of grant or allowing a Participant to surrender an outstanding Stock Option
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granted under the Plan to the Company as consideration for the grant of a new
Stock Option with a lower exercise price.
(h) No Rights as Shareholder. No Participant shall have any voting or
dividend rights or other rights as a shareholder with respect to any Shares
subject to a Stock Option granted under the Plan before the date of transfer to
the Participant of a certificate or certificates for such Shares and recording
of the Participant's name on the Company's shareholder ledger as the holder of
record of such Shares.
(i) No Right to Continue as Director. Nothing contained in the Plan or any
agreement under the Plan will confer upon any Participant any right to continue
to serve as a director of the Company.
(j) Severability. If any provision of the Plan or any option agreement, if
any, or any Award (a) is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person or Award, or (b) would
disqualify the Plan or any option agreement under any law deemed applicable by
the Committee, then such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Plan, any option agreement, if any, or Award, such provision shall be
stricken as to such jurisdiction, person or Award, and the remainder of the
Plan, any such option agreement and any such Award shall remain in full force
and effect.
(k) Governing Law. The validity, construction and effect of the Plan, any
option agreement and any Award, and any actions taken under or relating to the
Plan, any option agreement and any Award shall be determined in accordance with
the laws of the State of Nevada and applicable federal law.
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