Exhibit 10.22
PATTERSON DENTAL COMPANY
2002 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Patterson Dental Company 2002 Stock Option Plan (the
"Plan") is to promote the interests of Patterson Dental Company, a Minnesota
corporation (the "Company"), by providing employees of the Company and certain
independent contractors with an opportunity to acquire a proprietary interest in
the Company and thereby develop a stronger incentive to contribute to the
Company's continued success and growth. In addition, the granting of stock
options will assist the Company in attracting and retaining key personnel of
outstanding ability.
2. DEFINITIONS
Wherever used in the Plan, the following terms have the meanings set forth
below:
2.1 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder.
2.2 "Committee" means a committee of the Board of Directors of the Company
designated by such Board to administer the Plan and composed of not less than
two directors. Beginning on the date the Company first registers the Stock under
Section 12 of the Securities Exchange Act of 1934, each member of the Committee
must be a "disinterested person" within the meaning of Rule 16b-3.
2.3 "Incentive Stock Option" or "ISO" means a stock option which is
intended to qualify as an incentive stock option as defined in Section 422 of
the Code.
2.4 "Non-Statutory Stock Option" or "NSO" means a stock option that is not
intended to, or does not, qualify as an incentive stock option as defined in
Section 422 of the Code.
2.5 "Option" means, where required by the context of the Plan, an ISO or
NSO granted pursuant to the Plan.
2.6 "Optionee" means a Participant in the Plan who has been granted one or
more Options under the Plan.
2.7 "Participant" means an individual described in Section 5 of this Plan
who may be granted Options under the Plan.
2.8 "Rule 16b-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
2.9 "Stock" means the common stock, $.01 par value, of the Company.
2.10 "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns 50% or
more of the voting stock in one of the other corporations in such chain.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee, which shall have full
power, subject to the provisions and restrictions of the Plan, to grant Options,
construe and interpret the Plan, establish rules and regulations with respect to
the Plan and Options granted hereunder, and perform all other acts, including
the delegation of administrative responsibilities, that it believes reasonable
and necessary.
3.2 The Committee shall have the sole discretion, subject to the provisions
of the Plan, to determine the Participants eligible to receive Options pursuant
to the Plan and the amount, type, and terms of any Options and the terms and
conditions of option agreements relating to any Option.
3.3 The Committee may correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or in any Option granted hereunder in the manner
and to the extent it shall deem necessary to carry out the terms of the Plan.
3.4 Any decision made, or action taken, by the Committee arising out of or
in connection with the interpretation and administration of the Plan shall be
final, conclusive and binding upon all Optionees.
4. SHARES SUBJECT TO THE PLAN
4.1 Number. The total number of shares of Stock reserved for issuance upon
exercise of Options under the Plan is 3,000,000. Such shares shall consist of
authorized but unissued Stock. If any Option granted under the Plan lapses or
terminates for any reason before being completely exercised, the shares covered
by the unexercised portion of such Option may again be made subject to Options
under the Plan.
4.2 Changes in Capitalization. In the event of any change in the
outstanding shares of Stock of the Company by reason of any stock dividend,
split, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, or rights offering to purchase stock at a price
substantially below fair market value, or other similar corporate change, the
aggregate number of shares which may be subject to Options under the Plan and
the terms of any outstanding Option, including the number and kind of shares
subject to such Options and the purchase price per share thereof, shall be
appropriately adjusted by the Committee, consistent with such change and in such
manner as the Committee, in its sole discretion, may deem equitable to prevent
substantial dilution or enlargement of the rights granted to or available for
Optionees. Notwithstanding the preceding sentence, in no event shall any
fraction of a share of Stock be issued upon the exercise of an Option.
5. ELIGIBLE PARTICIPANTS
The following persons are Participants eligible to participate in the Plan:
5.1 Incentive Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary, including officers and directors who
are also employees of the Company or any Subsidiary.
5.2 Non-Statutory Stock Options. Non-statutory stock options may be granted
to (i) any employee of the Company or any Subsidiary, including any officer or
director who is also an employee of the Company or any Subsidiary; and (ii) any
consultant to, or other independent contractor of, the Company who is not a
director of the Company.
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6. GRANT OF OPTIONS
Subject to the terms, conditions, and limitations set forth in this Plan,
the Company, by action of the Committee, may from time to time grant Options to
purchase shares of the Company's Stock to those eligible Participants as may be
selected by the Committee, in such amounts and on such other terms as the
Committee in its sole discretion shall determine. Such Options may be (i)
"Incentive Stock Options" so designated by the Committee and which, when
granted, are intended to qualify as incentive stock options as defined in
Section 422 of the Code; (ii) "Non-Statutory Stock Options" so designated by the
Committee and which, when granted, are not intended to, or do not, qualify as
incentive stock options under Section 422 of the Code; or (iii) a combination of
both. The date on which the Committee approves the granting of an Option shall
be the date of grant of such Option, unless a different date is specified by the
Committee on such date of approval. Notwithstanding the foregoing, with respect
to the grant of any Incentive Stock Option under the Plan, the aggregate fair
market value of Stock (determined as of the date the Option is granted) with
respect to which Incentive Stock Options are exercisable for the first time by
an Optionee in any calendar year (under all such stock option plans of the
Company or Subsidiaries) shall not exceed $100,000. Each grant of an Option
under the Plan shall be evidenced by a written stock option agreement between
the Company and the Optionee setting forth the terms and conditions, not
inconsistent with the Plan, under which the Option so granted may be exercised
pursuant to the Plan and containing such other terms with respect to the Option
as the Committee in its sole discretion may determine.
7. OPTION PRICE AND FORM OF PAYMENT
The purchase price for a share of Stock subject to an Option granted
hereunder shall not be less than 100% of the fair market value of the Stock. For
purposes of this Section 7, the "fair market value" of the Stock shall be
determined as follows:
(a) if the Stock of the Company is listed or admitted to unlisted
trading privileges on a national securities exchange, the fair market value
on any given day shall be the closing sale price for the Stock, or if no
sale is made on such day, the closing bid price for such day on such
exchange;
(b) if the Stock is not listed or admitted to unlisted trading
privileges on a national securities exchange, the fair market value on any
given day shall be the closing sale price for the Stock as reported on the
NASDAQ National Market System on such day, or if no sale is made on such
day, the closing bid price for such day as entered by a market maker for
the Stock;
(c) if the Stock is not listed on a national securities exchange, is
not admitted to unlisted trading privileges on any such exchange, and is
not eligible for inclusion in the NASDAQ National Market System, the fair
market value on any given day shall be the average of the closing
representative bid and asked prices as reported on the NASDAQ System, and
if not reported on such system, then as reported by the National Quotation
Bureau, Inc. or such other publicly available compilation of the bid and
asked prices of the Stock in any over-the-counter market on which the Stock
is traded; or
(d) if there exists no public trading market for the Stock, the fair
market value on any given day shall be an amount determined in good faith
by the Committee in such manner as it may reasonably determine in its
discretion, provided that such amount shall not be less than the book value
per share as reasonably determined by the Committee as of the date of
determination or less than the par value of the Stock.
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Notwithstanding the foregoing, in the case of an Incentive Stock Option
granted to any Optionee then owning more than 10% of the voting power of all
classes of the Company's stock, the purchase price per share of the Stock
subject to such Option shall not be less than 110% of the fair market value of
the Stock on the date of grant of the Incentive Stock Option, determined as
provided above.
Except as provided herein, the purchase price of each share of Stock
purchased upon the exercise of any Option shall be paid:
(a) in United States dollars in cash or by check, bank draft or money
order payable to the order of the Company; or
(b) at the discretion of the Committee, through the delivery of shares
of Stock, having initially or as a result of successive exchanges of
shares, an aggregate fair market value (as determined in the manner
provided under this Plan) equal to the aggregate purchase price for the
Stock as to which the Option is being exercised; or
(c) at the discretion of the Committee, by a combination of both (a)
and (b) above; or
(d) by such other method as may be permitted in the written stock
option agreement between the Company and the Optionee.
If such form of payment is permitted, the Committee shall determine
procedures for tendering Stock as payment upon exercise of an Option and may
impose such additional limitations and prohibitions on the use of Stock as
payment upon the exercise of an Option as it deems appropriate.
If the Committee in its sole discretion so agrees, the Company may finance
the amount payable by an Optionee upon exercise of any Option upon such terms
and conditions as the Committee may determine at the time such Option is granted
under this Plan.
8. EXERCISE OF OPTIONS
8.1 Manner of Exercise. An Option, or any portion thereof, shall be
exercised by delivering a written notice of exercise to the Company and paying
to the Company the full purchase price of the Stock to be acquired upon the
exercise of the Option. Until certificates for the Stock acquired upon the
exercise of an Option are issued to an Optionee, such Optionee shall not have
any rights as a shareholder of the Company with respect to such Stock.
8.2 Limitations and Conditions on Exercise of Options. In addition to any
other limitations or conditions contained in this Plan or that may be imposed by
the Committee from time to time or in the stock option agreement to be entered
into with respect to Options granted hereunder, the following limitations and
conditions shall apply to the exercise of Options granted under this Plan:
8.2.1 No Incentive Stock Option may be exercisable by its terms after
the expiration of 10 years from the date of the grant thereof.
8.2.2 No Incentive Stock Option granted pursuant to the Plan to an
eligible Participant then owning more than 10% of the voting power of all
classes of the Company's stock may be exercisable by its terms after the
expiration of five years from the date of the grant thereof.
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8.2.3 To the extent required to comply with Rule 16b-3, Stock acquired
upon exercise of an Option granted under to the Plan may not be sold or
otherwise disposed of for a period of six months from the date of grant of
the Option.
9. INVESTMENT PURPOSES
Unless a registration statement under the Securities Act of 1933 is in
effect with respect to Stock to be purchased upon exercise of Options to be
granted under the Plan, the Company shall require that an Optionee agree with
and represent to the Company in writing that he or she is acquiring such shares
of Stock for the purpose of investment and with no present intention to
transfer, sell or otherwise dispose of such shares of Stock other than by
transfers which may occur by will or by the laws of descent and distribution,
and no shares of Stock may be transferred unless, in the opinion of counsel to
the Company, such transfer would be in compliance with applicable securities
laws. In addition, unless a registration statement under the Securities Act of
1933 is in effect with respect to the Stock to be purchased under the Plan, each
certificate representing any shares of Stock issued to an Optionee hereunder
shall have endorsed thereon a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND WITHOUT REGISTRATION UNDER ANY APPLICABLE STATE
SECURITIES LAWS, IN RELIANCE UPON EXEMPTION(S) CONTAINED THEREIN.
NO TRANSFER OF THESE SHARES OR ANY INTEREST THEREIN MAY BE MADE
EXCEPT PURSUANT TO EFFECTIVE REGISTRATION STATEMENTS UNDER SUCH
LAWS UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT SUCH TRANSFER OR DISPOSITION DOES NOT
REQUIRE REGISTRATION UNDER SUCH LAWS AND, FOR ANY SALES UNDER
RULE 144 OF THE ACT, SUCH EVIDENCE AS IT SHALL REQUEST FOR
COMPLIANCE WITH THAT RULE, OR APPLICABLE STATE SECURITIES LAWS.
10. TRANSFERABILITY OF OPTIONS
No Option granted under the Plan shall be transferable by an Optionee
(whether by sale, assignment, hypothecation or otherwise) other than by
will or the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined under the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. An Option
shall be exercisable during the Optionee's lifetime only by the Optionee
or, if permissible under applicable law, by the Optionee's guardian or
legal representative.
11. TERMINATION OF OPTIONS
11.1 Generally. Except as otherwise provided in this Section 11, if an
Optionee's employment with the Company or Subsidiary is terminated
(hereinafter "Termination") other than by death or Disability (as
hereinafter defined), the Optionee may exercise any Option granted under
the Plan, to the extent the Optionee was entitled to exercise the Option at
the date of Termination, for a period of three months after the date of
Termination or until the term of the Option has expired, whichever date is
earlier.
11.2 Death or Disability of Optionee. In the event of the death or
Disability of an Optionee prior to expiration of an Option held by him or
her, the following provisions shall apply:
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11.2.1 If the Optionee is at the time of his or her Disability
employed by the Company or a Subsidiary and has been in continuous
employment (as determined by the Committee in its sole discretion) since
the date of grant of the Option, then the Option may be exercised by the
Optionee until the earlier of one year following the date of such
Disability or the expiration date of the Option, but only to the extent the
Optionee was entitled to exercise such Option at the time of his or her
Disability. For the purpose of this Section 11, the term "Disability" shall
mean a permanent and total disability as defined in Section 22(e)(3) of the
Code. The determination of whether an Optionee has a Disability within the
meaning of Section 22(e)(3) shall be made by the Committee in its sole
discretion.
11.2.2 If the Optionee is at the time of his or her death employed by
the Company or a Subsidiary and has been in continuous employment (as
determined by the Committee in its sole discretion) since the date of grant
of the Option, then the Option may be exercised by the Optionee's estate or
by a person who acquired the right to exercise the Option by will or the
laws of descent and distribution, until the earlier of one year from the
date of the Optionee's death or the expiration date of the Option, but only
to the extent the Optionee was entitled to exercise the Option at the time
of death.
11.2.3 If the Optionee dies within three months after Termination, the
Option may be exercised until the earlier of nine months following the date
of death or the expiration date of the Option, by the Optionee's estate or
by a person who acquires the right to exercise the Option by will or the
laws of descent or distribution, but only to the extent the Optionee was
entitled to exercise the Option at the time of Termination.
11.3 Termination for Cause. If the employment of an Optionee is terminated
by the Company or a Subsidiary for cause, then the Committee shall have the
right to cancel any Options granted to the Optionee under the Plan.
11.4 Suspension or Termination for Misconduct. If the Committee reasonably
believes that an Optionee has committed an act of misconduct, it may suspend the
Optionee's right to exercise any Option pending a determination by the
Committee. If the Committee determines that an Optionee has committed an act of
embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company's rules
resulting in loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential information,
engages in any conduct constituting unfair competition with respect to the
Company, or induces any party to breach a contract with the Company, neither the
Optionee nor the Optionee's estate shall be entitled to exercise any Option
whatsoever. In making such determination, the Committee shall act fairly and
shall give the Optionee an opportunity to appear and present evidence on the
Optionee's behalf at a hearing before the Committee.
12. AMENDMENT AND TERMINATION OF PLAN
12.1 The Committee, may at any time and from time to time suspend or
terminate the Plan in whole or in part or amend it from time to time in such
respects as may be in the best interests of the Company; provided, however, that
no such amendment shall be made without the approval of the shareholders if it
would: (a) materially modify the eligibility requirements for Participants as
set forth in Section 5 hereof; (b) increase the maximum aggregate number of
shares of Stock which may be issued pursuant to Options, except in accordance
with Section 4.2 hereof; (c) reduce the minimum Option price per share as set
forth in Section 7 hereof, except in accordance with Section 4.2 hereof; (d)
extend the period of granting Options; or (e) materially increase in any other
way the benefits accruing to Optionees.
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12.2 No amendment, suspension or termination of this Plan shall,
without the Optionee's consent, alter or impair any of the rights or
obligations under any Option theretofore granted to him or her under the
Plan.
12.3 The Committee may amend the Plan, subject to the limitations
cited above, in such manner as it deems necessary to permit the granting of
Incentive Stock Options meeting the requirements of future amendments to
the Code.
12.4 In the event of the proposed dissolution or liquidation of the
Company, each Option will terminate immediately prior to the consummation
of such proposed action, unless otherwise provided by the Committee. The
Committee may, in the exercise of its sole discretion in such instance,
declare that any Option shall terminate as of a date fixed by the Committee
and give each Optionee the right to exercise his or her Option as to all or
any part of the Option, including Stock as to which the Option would not
otherwise be exercisable. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Committee
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to
exercise the Option in full including Stock as to which the Option would
not otherwise be exercisable. If the Committee makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Committee shall notify the Optionee that the Option
shall be fully exercisable for a period of 15 days from the date of such
notice, and the Option will terminate upon the expiration of such period.
13. MISCELLANEOUS PROVISIONS
13.1 No Right to Continued Employment. No person shall have any claim
or right to be granted an Option under the Plan, and the grant of an Option
under the Plan shall not be construed as giving an Optionee the right to
continued employment with the Company. The Company further expressly
reserves the right at any time to dismiss an Optionee or reduce an
Optionee's compensation with or without cause, free from any liability, or
any claim under the Plan, except as provided herein or in a stock option
agreement.
13.2 Transfer of Stock and Payment of Withholding Taxes. The Company
shall have the right to require that payment or provision for payment of
any and all withholding taxes due upon the grant or exercise of an Option
hereunder or the disposition of any Stock or other property acquired upon
exercise of an Option be made by an Optionee. Stock acquired upon exercise
of an Incentive Stock Option may not be disposed of by the Optionee before
the later of two years from the date of grant or one year from the date of
exercise unless adequate provision is made for payment to the Company of
funds sufficient for payment of any withholding and other taxes required by
any governmental authority in respect of the disposition of such Stock. The
Company may place a legend on certificates restricting the transfer of
Stock issued pursuant to Incentive Stock Options in order to obtain
compliance with tax withholding requirements. The Committee shall have the
right to establish such other rules and regulations or impose such other
terms and conditions in any agreement relating to an Option granted
hereunder with respect to tax withholding as the Committee may deem
necessary and appropriate.
13.3 Governing Law. The Plan shall be administered in the State of
Minnesota, and the validity, construction, interpretation, and
administration of the Plan and all rights relating to the Plan shall be
determined solely in accordance with the laws of such state, unless
controlled by applicable federal law, if any.
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14. EFFECTIVE DATE
The Plan shall become effective upon approval by the shareholders. No
Option may be granted after ten (10) years after the effective date of the
Plan, provided, however, that all outstanding Options shall remain in
effect until such outstanding Options have expired or been canceled.
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