<PAGE>
As filed with the Securities and Exchange Commission on May 30, 1997
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SPINE-TECH, INC.
(Exact name of Registrant as specified in its charter)
MINNESOTA 06-1258314
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7375 BUSH LAKE ROAD
MINNEAPOLIS, MINNESOTA 55439
(Address of principal executive offices) (Zip Code)
SPINE-TECH, INC. 1996 OMNIBUS STOCK PLAN
(Full title of the plan)
David W. Stassen
President and Chief Executive Officer
Spine-Tech, Inc.
7375 Bush Lake Road
Minneapolis, Minnesota 55439
(Name and address of agent for service)
Telephone number, including area code, of agent for service: (612) 832-5600
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CALCULATION OF REGISTRATION FEE
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Proposed
Proposed maximum
Title of Amount maximum aggregate Amount of
securities to to be offering price offering registration
be registered registered (1) per share (1) price (1)(2) fee
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Common Stock, 400,000
$.01 par value shares $33.5625 $13,425,000 $4068.18
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(1) This Registration Statement relates to an additional 400,000 shares of
Common Stock to be offered pursuant to the registrant's 1996 Omnibus Stock
Plan, for which 500,000 shares of Common Stock have previously been
registered pursuant to the registrant's Registration Statement No. 333-
07349.
(2) Estimated solely for the purpose of the registration fee pursuant to
Rule 457(h)(1) based on the average of the high and low sales prices per
share of the Registrant's Common Stock on May 22, 1997, as reported on the
Nasdaq National Market.
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SPINE-TECH, INC.
PART II
INFORMATION REQUIRED BY GENERAL INSTRUCTION E OF
FORM S-8 REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
These are incorporated in this Registration Statement by
reference the contents of the registrant's Registration Statement
No. 333-07349.
ITEM 8. EXHIBITS (REQUIRED OPINIONS AND CONSENTS).
Exhibit Description
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5 Opinion of Faegre & Benson LLP.
23.1 Consent of Faegre & Benson LLP (included in Exhibit 5).
23.2 Consent of Ernst & Young LLP.
99 Spine-Tech, Inc. 1996 Omnibus Stock Plan, as amended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, on May 28, 1997.
SPINE-TECH, INC.
By /S/ David W. Stassen
-------------------------------------------
David W. Stassen
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on May 28, 1997 by the following persons
in the capacities indicated.
Signature Capacity
- --------- --------
/S/ David W. Stassen
- ------------------------------ President and Chief Executive Officer
David W. Stassen (Principal Executive Officer)
/S/ Keith M. Eastman
- ------------------------------ Chief Financial Officer and Secretary
Keith M. Eastman (Principal Financial and Accounting Officer)
/S/ David W. Stassen
- ------------------------------
David W. Stassen Director )
/S/ Robert J. DePasqua
- ------------------------------
Robert J. DePasqua Director )
/S/ James F. Lyons
- ------------------------------ A majority of the
James F. Lyons Director ) Board of Directors
- ------------------------------
Stephen D. Kuslich Director )
- ------------------------------
Kenneth W. Anstey Director )
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- ----------------------------------------------------
5 Opinion of Faegre & Benson LLP as to the legality
of the shares being registered . . . . . . . . . . . Electronically
Transmitted
23.1 Consent of Faegre & Benson LLP is contained in
its opinion filed as Exhibit 5 to this Registration
Statement
23.2 Consent of Ernst & Young LLP . . . . . . . . . . . . Electronically
Transmitted
99 Spine-Tech, Inc. 1996 Omnibus Stock Plan,
as amended . . . . . . . . . . . . . . . . . . . . . Electronically
Transmitted
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May 28, 1997
Spine-Tech, Inc.
7375 Bush Lake Road
Minneapolis, Minnesota 55439
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-8 under the
Securities Act of 1933, as amended (the "Registration Statement"), relating to
the offering of up to an additional 400,000 shares of Common Stock, with $.01
par value (the "Shares"), of Spine-Tech, Inc, a Minnesota corporation (the
"Company"), pursuant to the Company's 1996 Omnibus Stock Plan, as amended (the
"Plan"), we have examined such corporate records and other documents, including
the Registration Statement, and have reviewed such matters of law as we have
deemed relevant hereto, and, based upon such examination and review, it is our
opinion that all necessary corporate action on the part of the Company has been
taken to authorize the issuance and sale of the Shares and that, when issued and
sold as contemplated by the Plan and the Registration Statement, the Shares will
be legally issued, fully paid and nonassessable under the current laws of the
State of Minnesota.
We are admitted to the practice of law in the State of Minnesota and the
foregoing opinions are limited to the laws of that state and the federal laws of
the United States of America.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/S/ Faegre & Benson LLP
FAEGRE & BENSON LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Spine-Tech, Inc. 1996 Omnibus Stock of our report dated
February 7, 1997 with respect to the financial statements and schedule of Spine-
Tech, Inc. incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1996, filed with the Securities and Exchange Commission.
/S/ Ernst & Young LLP
Minneapolis, Minnesota
May 28, 1997
<PAGE>
SPINE-TECH, INC.
1996 OMNIBUS STOCK PLAN
AS AMENDED MAY 8, 1997
1. PURPOSE. The purpose of this Spine-Tech, Inc. 1996 Omnibus Stock Plan
(the "Plan") is to motivate key personnel, including non-employee directors, to
produce a superior return to the shareholders of Spine-Tech, Inc. (the
"Company") and its Affiliates by providing such personnel an opportunity to
realize Stock appreciation, by facilitating Stock ownership and by rewarding
them for achieving a high level of corporate financial performance. This Plan
is also intended to facilitate recruiting and retaining key personnel of
outstanding ability by providing an attractive capital accumulation opportunity.
2. DEFINITIONS. The capitalized terms used in this Plan have the
meanings set forth below.
(a) "Affiliate" means any corporation that is a "parent corporation"
or "subsidiary corporation" of the Company, as those terms are defined in
Sections 424(e) and (f) of the Code, respectively, or any successor
provision and, for purposes other than the grant of Incentive Stock
Options, any joint venture in which the Company or any such "parent
corporation" or "subsidiary corporation" owns an equity interest.
(b) "Agreement" means a written contract entered into between the
Company or an Affiliate and a Participant containing the terms and
conditions of an Award in such form and not inconsistent with this Plan as
the Committee shall approve from time to time, together with all amendments
thereto, which amendments may be unilaterally made by the Company (with the
approval of the Committee) unless such amendments are deemed by the
Committee to be materially adverse to the Participant and are not required
as a matter of law.
(c) "Award" means a grant made under this Plan in the form of
Restricted Stock, Options, Stock Appreciation Rights, Performance Units or
any Other Stock-Based Award.
(d) "Board" means the Board of Directors of the Company.
(e) "Change in Control" means:
(i) the sale, lease or other transfer of all or substantially
all of the assets of the Company (in one transaction or in a series of
related transactions) to a corporation that is not a direct or
indirect wholly owned subsidiary of the Company immediately after such
sale, lease or other transfer;
(ii) the approval by the shareholders of the Company of any
plan or proposal for the liquidation or dissolution of the Company;
(iii) approval by the shareholders of the Company of a
reorganization, merger, consolidation or a statutory exchange of
Outstanding Company Voting Securities (as hereinafter defined) held by
shareholders of the Company immediately prior to the statutory
exchange, in each case, with respect to which all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of outstanding Shares (the "Outstanding Company Common
Stock") and Outstanding
<PAGE>
Company Voting Securities immediately prior to such reorganization,
merger, consolidation or exchange do not, immediately following such
reorganization, merger, consolidation or exchange, beneficially own,
directly or indirectly, more than 80% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such reorganization, merger, consolidation or exchange
in substantially the same respective proportions, as among themselves,
as their ownership immediately prior to such reorganization, merger,
consolidation or exchanges of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be; or
(iv) a change in control of the Company of a nature that would
be required to be reported (assuming such event has not been
"previously reported") in response to Item 1(a) of the Current Report
on Form 8-K, as in effect on the Effective Date, pursuant to Section
13 or 15(d) of the Exchange Act, whether or not the Company is then
subject to such reporting requirement;
provided, however, that, without limitation, a Change in Control shall be
deemed to have occurred at such time as (x) any individual, corporation,
partnership, group, association or other "person" (as such term is used in
Section 14(d) of the Exchange Act), other than the Company, a direct or
indirect wholly owned subsidiary of the Company or any employee benefit
plan sponsored by the Company or a direct or indirect wholly owned
subsidiary of the Company (a "Person") becomes, after the Effective Date,
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 20% or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities") through
stock purchase, merger, consolidation, statutory share exchange or
otherwise (or, with respect to a merger, reorganization, consolidation or
statutory share exchange, the shareholders of the Company shall approve a
definitive agreement or plan of merger, reorganization, consolidation or
exchange that, if consummated, would result in such direct or indirect
beneficial ownership of 20% or more of such combined voting power), or (y)
individuals who constitute the Board on the Effective Date cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors comprising or deemed pursuant
hereto to comprise the Board on the Effective Date (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director) shall be, for purposes of this
clause (y), considered as though such person were a member of the Board on
the Effective Date, but excluding, for this purpose, any such individual
who initially becomes a director as a result of either an actual or
threatened election contest (as such terms are used in the Rule 14a-11
under the Exchange Act) or other actual or threatened solicitations of
proxies.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
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<PAGE>
(g) "Committee" means two or more Disinterested Persons designated
by the Board to administer this Plan under Section 3 and constituted so as
to permit this Plan to comply with Exchange Act Rule 16b-3.
(h) "Company" means Spine-Tech, Inc., a Minnesota corporation, or
any successor to substantially all of its businesses by merger,
consolidation, purchase of assets or otherwise.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Director Option" means a Non-Statutory Stock Option granted to
an Outside Director under Section 9.3 hereof.
(k) "Disability" means the disability of a Participant (or in the
case of an Outside Director, would, if an employee, be disabled) (i) as
defined under the long-term disability plan of the Company then covering
employees of the Company or, if no such plan exists, within the meaning of
Section 22(e)(3) of the Code and (ii) which satisfies any requirements
imposed by the Committee.
(l) "Disinterested Person" means a member of the Board who is
considered a disinterested person within the meaning of Exchange Act Rule
16b-3 or any successor definition thereto.
(m) "Effective Date" means the date specified in Section 12.1
hereof.
(n) "Employee" means any full-time or part-time employee, officer,
director, contractor or advisor to or representative of the Company or any
Affiliate thereof, whether or not such person is an employee of the Company
within the meaning of the Code; PROVIDED, HOWEVER, that employees of the
Company or its Affiliates within the meaning of the Code (including any
such employee who is also an officer or director of the Company or any
Affiliate thereof) shall be the only persons eligible to receive Options
intended to constitute Incentive Stock Options. References in this Plan to
"employment" and related terms shall mean the providing of services in any
such capacity.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time; "Exchange Act Rule 16b-3" means Rule 16b-3
promulgated by the Securities and Exchange Commission under the Exchange
Act as in effect with respect to the Company or any successor regulation.
(p) "Fair Market Value" as of any date means, unless otherwise
expressly provided in this Plan:
(i) the closing price of a Share on the date immediately
preceding that date or, if no sale of Shares shall have occurred on
that date, on the next preceding day on which a sale of Shares
occurred,
(A) on the composite tape for New York Stock Exchange
listed shares, or
3
<PAGE>
(B) if the Shares are not quoted on the composite tape
for New York Stock Exchange listed shares, on the principal
United States Securities Exchange registered under the Exchange
Act on which the Shares are listed, or
(C) if the Shares are not listed on any such exchange,
on the Nasdaq National Market, or
(ii) if clause (i) is inapplicable, the mean between the
closing "bid" and the closing "asked" quotation of a Share on the date
immediately preceding that date, or, if no closing bid or asked
quotation is made on that date, on the next preceding day on which a
quotation is made, on the Nasdaq SmallCap Market or any system then in
use, or
(iii) if clauses (i) and (ii) are inapplicable, what the
Committee determines in good faith to be 100% of the fair market value
of a Share on that date.
However, if the applicable securities exchange or system has closed for the
day at the time the event occurs that triggers a determination of Fair
Market Value, all references in this paragraph to the "date immediately
preceding that date" shall be deemed to be references to "that date". In
the case of an Incentive Stock Option, if such determination of Fair Market
Value is not consistent with the then current regulations of the Secretary
of the Treasury, Fair Market Value shall be determined in accordance with
said regulations. The determination of Fair Market Value shall be subject
to adjustment as provided in Section 16 hereof.
(q) "Fundamental Change" means a dissolution or liquidation of the
Company, a sale of substantially all of the assets of the Company, a merger
or consolidation of the Company with or into any other corporation,
regardless of whether the Company is the surviving corporation, or a
statutory share exchange involving capital stock of the Company.
(r) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the Code or
any successor to such section.
(s) "Non-Statutory Stock Option" means an Option other than an
Incentive Stock Option.
(t) "Option" means a right to purchase Stock, including both
Non-Statutory Stock Options and Incentive Stock Options.
(u) "Other Stock-Based Award" means any Award granted under
Section 8.
(v) "Outside Director" means a Director who is not an employee of
the Company or any Affiliate.
(w) "Participant" means an Employee or an Outside Director to whom
an Award is made.
(x) "Performance Cycle" means the period of time as specified in an
Agreement over which Performance Units are to be earned.
4
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(y) "Performance Units" means an Award made pursuant to Section 11.
(z) "Plan" means this Spine-Tech, Inc. 1996 Omnibus Stock Plan, as
amended from time to time.
(aa) "Prior Plans" means the 1994 Spine-Tech, Inc. Stock Option Plan,
the Spine-Tech, Inc. Non-Employee Director Stock Option Plan and the
Spine-Tech, Inc. 1991 Stock Option Plan.
(bb) "Restricted Stock" means Stock granted under Section 7 so long
as such Stock remains subject to such restrictions.
(cc) "Retirement" as applied to a Participant, means (i) until such
time as the Company adopts an employee pension benefit plan (as that term
is defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974), termination of employment with the Company at any time upon or
after attaining age 65; (ii) after adoption by the Company of an employee
pension benefit plan, termination of employment with the Company at a time
when the Participant is eligible for normal retirement under such a plan,
as amended from time to time, or any successor plan thereto.
(dd) "Share" means a share of Stock.
(ee) "Stock" means the Company's common stock, $.01 par value per
share (as such par value may be adjusted from time to time).
(ff) "Stock Appreciation Right" means an Award granted under Section
10.
(gg) "Subsidiary" means a "subsidiary corporation", as that term is
defined in Section 424(f) of the Code or any successor provision.
(hh) "Successor" with respect to a Participant means the legal
representative of an incompetent Participant and, if the Participant is
deceased, the legal representative of the estate of the Participant or the
person or persons who may, by bequest or inheritance, or pursuant to the
terms of an Award or of forms submitted by the Participant to the Committee
pursuant to Section 20 hereof, acquire the right to exercise an Option or
Stock Appreciation Right or to receive cash and/or Shares issuable in
satisfaction of an Award in the event of a Participant's death.
(ii) "Term" means the period during which an Option or Stock
Appreciation Right may be exercised or the period during which the
restrictions placed on Restricted Stock are in effect.
Except when otherwise indicated by context, reference to the masculine
gender shall include, when used, the feminine gender and any term used in the
singular shall also include the plural.
3. ADMINISTRATION.
3.1 AUTHORITY OF COMMITTEE. The Committee shall administer this
Plan. Subject to the limitations contained in this Plan, the Committee
shall have exclusive power to make
5
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Awards, to determine when and to whom Awards will be granted, the form of
each Award, the amount of each Award, and any other terms or conditions of
each Award. Each Award shall be subject to an Agreement authorized by the
Committee. The Committee may determine whether, to what extent and under
what circumstances Awards may be settled, paid or exercised in cash, Shares
or other Awards or other property, or canceled, forfeited or suspended.
The Committee shall have the authority to interpret this Plan and any Award
or Agreement made under this Plan, to establish, amend, waive and rescind
any rules and regulations relating to the administration of this Plan, to
determine the terms and provisions of any Agreements entered into hereunder
(not inconsistent with this Plan), and to make all other determinations
necessary or advisable for the administration of this Plan. The Committee
may correct any defect, supply any omission or reconcile any inconsistency
in this Plan or in any Award in the manner and to the extent it shall deem
desirable. The determinations of the Committee in the administration of
this Plan, as described herein, shall be final, binding and conclusive.
3.2 DELEGATION OF AUTHORITY. Solely for purposes of determining and
administering Awards to Participants who are not then subject to the
reporting requirements of Section 16 of the Exchange Act, the Committee may
delegate all or any portion of its authority under this Plan to persons who
are not Disinterested Persons.
3.3 AWARDS TO OUTSIDE DIRECTORS. Notwithstanding any contrary
provisions of this Plan, the granting, terms, conditions and eligibility
requirements of Awards granted to Outside Directors under Section 9.3 of
this Plan are governed solely by the provisions of this Plan pertaining
thereto, and the Committee shall have no discretion with respect to the
granting of such Awards or to alter or amend any terms, conditions or
eligibility requirements of such Awards to Outside Directors.
3.4 RULE 16B-3 COMPLIANCE. It is the intent that this Plan and all
Awards granted pursuant to it shall be administered by the Committee so as
to permit this Plan and Awards to comply with Exchange Act Rule 16b-3. If
any provision of this Plan or of any Award would otherwise frustrate or
conflict with the intent expressed in this Section 3.4, that provision to
the extent possible shall be interpreted and deemed amended in the manner
determined by the Committee so as to avoid such conflict. To the extent of
any remaining irreconcilable conflict with such intent, the provision shall
be deemed void as applicable to Participants who are then subject to the
reporting requirements of Section 16 of the Exchange Act to the extent
permitted by law and in the manner deemed advisable by the Committee.
3.5 INDEMNIFICATION. To the full extent permitted by law, (i) no
member of the Committee or any person to whom the Committee delegates
authority under this Plan shall be liable for any action or determination
taken or made in good faith with respect to this Plan or any Award made
under this Plan, and (ii) the members of the Committee and each person to
whom the Committee delegates authority under this Plan shall be entitled to
indemnification by the Company with regard to such actions and
determinations.
4. SHARES AVAILABLE UNDER THIS PLAN.
4.1 SHARES AVAILABLE. The number of Shares available for
distribution under this Plan shall not exceed 900,000 (subject to
adjustment pursuant to Section 16 hereof). Any
6
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Shares subject to the terms and conditions of an Award under this Plan
which are not used because the terms and conditions of the Award are not
met may again be used for an Award under this Plan. However, Shares with
respect to which a Stock Appreciation Right has been exercised (in cash
and/or in Stock) and Shares of Restricted Stock which have been granted
with dividend or voting rights during the Term of the Restricted Stock may
not again be awarded under this Plan.
4.2 UNEXERCISED AWARDS. Any unexercised or undistributed portion of
any terminated, expired, exchanged, or forfeited Award or any Award settled
in cash in lieu of Shares (except as provided in Section 4.1 hereof) shall
be available for further Awards.
4.3 NO FRACTIONAL SHARES. No fractional Shares may be issued under
this Plan; fractional Shares shall be rounded to the nearest whole Share.
4.4 MAXIMUM PAYOUTS. No more than 35% of all Shares subject to this
Plan may be granted in the aggregate pursuant to Restricted Stock and Other
Stock-Based Awards.
4.5 CONDITIONAL ISSUANCES. If this Plan is amended at any time
subject to shareholder approval, then the Committee may, in accordance with
the terms and conditions of this Plan, grant Awards on a conditional basis,
subject to such approval by the shareholders of the Company not later than
the next annual meeting of the shareholders of the Company following the
date of such conditional grant. Any Award granted on a conditional basis
shall not be exercisable unless and until the amendment to this Plan is
approved by the shareholders of the Company. If such an amendment is not
approved by the shareholders at the next annual meeting of shareholders of
the Company following the conditional grant, then the conditional grant
shall be canceled.
5. ELIGIBILITY. Except as otherwise provided in Sections 3.3 and 9.3
hereof, the granting of Awards to Employees is solely at the discretion of the
Committee.
6. GENERAL TERMS OF AWARDS.
6.1 AWARDS. Awards under this Plan may consist of Options (either
Incentive Stock Options or Non-Statutory Stock Options), Stock Appreciation
Rights, Performance Units, Restricted Stock and Other Stock-Based Awards.
Awards of Restricted Stock may, in the discretion of the Committee, provide
the Participant with dividends or dividend equivalents and voting rights
prior to vesting (whether vesting is based on a period of time or based on
attainment of specified performance conditions).
6.2 AMOUNT OF AWARD. Each Agreement shall set forth the number of
Shares of Restricted Stock, Other Stock-Based Awards or Performance Units
subject to such Agreement, or the number of Shares to which the Option
subject to such Agreement applies or with respect to which payment upon the
exercise of the Stock Appreciation Right subject to such Agreement is to be
determined, as the case may be.
6.3 TERM. Each Agreement, other than those relating solely to
Awards of Stock without restrictions, shall set forth the Term of the
Award, and any applicable Performance Cycle for Performance Units, as the
case may be, but in no event shall the Term of an Award or the Performance
Cycle be longer than ten years after the date of grant. An Agreement may
7
<PAGE>
permit acceleration of the expiration of the applicable Term upon such
terms and conditions as shall be set forth in the Agreement, which may, but
need not, include without limitation acceleration resulting from the
occurrence of a Change in Control or a Fundamental Change or in the event
of the Participant's death, Disability or Retirement. Acceleration of the
Performance Cycle of Performance Units shall be subject to Section 11.2.
6.4 AGREEMENTS. Each Award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions, as determined by the
Committee, which shall apply to such Award, in addition to the terms and
conditions specified in this Plan.
6.5 TRANSFERABILITY. During the lifetime of a Participant to whom
an Award is granted, only such Participant (or such Participant's legal
representative or, if so provided in the applicable Agreement in the case
of a Non-Statutory Stock Option, a permitted transferee as hereinafter
described) may exercise an Option or Stock Appreciation Right, or receive
payment with respect to an Award of Performance Units or any other Award.
No Award of Restricted Stock (prior to the expiration of the restrictions),
Options, Stock Appreciation Rights, Performance Units or Other Stock-Based
Awards (other than an Award of Stock without restrictions) may be sold,
assigned, transferred, exchanged or otherwise encumbered other than
pursuant to a qualified domestic relations order as defined in the Code or
Title 1 of the Employee Retirement Income Security Act ("ERISA") or the
rules thereunder, and any attempt to do so shall be of no effect.
Notwithstanding the immediately preceding sentence, (i) an Agreement may
provide that the Award subject to the Agreement shall be transferable to a
Successor in the event of a Participant's death and (ii) an Agreement may
provide that a Non-Statutory Stock Option shall be transferable to any
member of a Participant's "immediate family" (as such term is defined in
Rule 16a-1(e) promulgated under the Exchange Act, or any successor rule or
regulation) or to one or more trusts whose beneficiaries are members of
such Participant's "immediate family" or partnerships in which such family
members are the only partners; provided, however, that (1) the Participant
receives no consideration for the transfer and (2) such transferred Non-
Statutory Stock Option shall continue to be subject to the same terms and
conditions as were applicable to such Non-Statutory Stock Option
immediately prior to its transfer.
6.6 TERMINATION OF EMPLOYMENT. Except as otherwise set forth in
this Plan or as otherwise determined by the Committee or provided by the
Committee in an applicable Agreement, in case of termination of employment,
the following provisions shall apply:
(i) OPTIONS AND STOCK APPRECIATION RIGHTS.
(A) DEATH. If a Participant who has been granted an
Option or Stock Appreciation Rights shall die before such Option
or Stock Appreciation Rights have expired, the Option or Stock
Appreciation Rights shall become exercisable in full, and may be
exercised by the Participant's Successor at any time, or from
time to time, within one year after the date of the
Participant's death.
(B) DISABILITY OR RETIREMENT. If a Participant's
employment terminates (or in the case of an Outside Director, if
such Outside Director ceases to be a Director of the Company)
because of Disability or Retirement,
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the Option or Stock Appreciation Rights shall become exercisable
in full, and the Participant may exercise his or her Options or
Stock Appreciation Rights at any time, or from time to time,
within one year after the date of such termination.
(C) REASONS OTHER THAN DEATH, DISABILITY OR
RETIREMENT. If a Participant's employment terminates for any
reason other than death, Disability or Retirement, the unvested
or unexercised portion of any Award held by such Participant
shall terminate at the date of termination of employment.
(D) EXPIRATION OF TERM. Notwithstanding the foregoing
paragraphs (A)-(C), in no event shall an Option or a Stock
Appreciation Right be exercisable after expiration of the Term
of such Award.
(ii) PERFORMANCE UNITS. If a Participant's employment with
the Company or any of its Affiliates terminates during a Performance
Cycle because of death, Disability or Retirement, or under other
circumstances provided by the Committee in its discretion in the
applicable Agreement, the Participant shall be entitled to a payment
of Performance Units at the end of the Performance Cycle based upon
the extent to which achievement of performance targets was satisfied
at the end of such period (as determined at the end of the Performance
Cycle) and prorated for the portion of the Performance Cycle during
which the Participant was employed by the Company or any Affiliate.
Except as provided in this Section 6.6(ii) or in the applicable
Agreement, if a Participant's employment terminates with the Company
or any of its Affiliates during a Performance Cycle, then such
Participant shall not be entitled to any payment with respect to that
Performance Cycle.
(iii) RESTRICTED STOCK. In case of a Participant's death,
Disability or Retirement, the Participant shall be entitled to receive
that number of shares of Restricted Stock under outstanding Awards
which has been pro rated for the portion of the Term of the Awards
during which the Participant was employed by the Company or any
Affiliate, and with respect to such Shares all restrictions shall
lapse.
6.7 RIGHTS AS SHAREHOLDER. A Participant shall have no rights as a
shareholder with respect to any securities covered by an Award until the
date the Participant becomes the holder of record.
7. RESTRICTED STOCK AWARDS. Restricted Stock may be granted in the form
of Shares registered in the name of the Participant but held by the Company
until the end of the Term of the Award. Any employment conditions, performance
conditions and the Term of the Award shall be established by the Committee in
its discretion and included in the applicable Agreement. The Committee may
provide in the applicable Agreement for the lapse or waiver of any such
restriction or condition based on such factors or criteria as the Committee, in
its sole discretion, may determine. No Award of Restricted Stock may vest
earlier than one year from the date of grant, except as provided in the
applicable Agreement.
8. OTHER STOCK-BASED AWARDS. The Committee may from time to time grant
Awards of Stock, and other Awards under this Plan (collectively herein defined
as "Other Stock-Based Awards"),
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including without limitation those Awards pursuant to which Shares may be
acquired in the future, such as Awards denominated in Stock units, securities
convertible into Stock and phantom securities. The Committee, in its sole
discretion, shall determine the terms and conditions of such Awards provided
that such Awards shall not be inconsistent with the terms and purposes of this
Plan. The Committee may, in its sole discretion, direct the Company to issue
Shares subject to restrictive legends and/or stop transfer instructions which
are consistent with the terms and conditions of the Award to which such Shares
relate.
9. STOCK OPTIONS.
9.1 TERMS OF ALL OPTIONS. Each Option shall be granted pursuant to
an Agreement as either an Incentive Stock Option or a Non-Statutory Stock
Option. Only Non-Statutory Stock Options may be granted to Employees who
are not employees of the Company or an Affiliate. Subject to Sections 9.2
and 9.3(iv) below, the purchase price of each Share subject to an Option
shall be determined by the Committee and set forth in the Agreement, but
shall not be less than 85% of the Fair Market Value of a Share as of the
date the Option is granted. The purchase price of the Shares with respect
to which an Option is exercised shall be payable in full at the time of
exercise, provided that, to the extent permitted by law, Participants may
simultaneously exercise Options and sell the Shares thereby acquired
pursuant to a brokerage or similar relationship and use the proceeds from
such sale as payment of the purchase price of such Shares. The purchase
price may be payable in cash, or through a reduction of the number of
Shares delivered to the Participant upon exercise of the Option or by
delivery to the Company of Shares held by such Participant (in each case,
such Shares having a Fair Market Value as of the date the Option is
exercised equal to the purchase price of the Shares being purchased
pursuant to the Option), or a combination thereof, unless otherwise
provided in the Agreement. Each Option shall be exercisable in whole or in
part on the terms provided in the Agreement. In no event shall any Option
be exercisable at any time after its Term. When an Option is no longer
exercisable, it shall be deemed to have lapsed or terminated. No
Participant may receive any combination of Options to purchase and Stock
Appreciation Rights relating to more than 250,000 Shares in the aggregate
pursuant to Awards over a five-year period (subject to adjustment pursuant
to Section 16 hereof).
9.2 INCENTIVE STOCK OPTIONS. In addition to the other terms and
conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of the
date the Option is granted) of the Shares with respect to which
Incentive Stock Options held by an individual first become exercisable
in any calendar year (under this Plan and all other incentive stock
option plans of the Company and its Affiliates) shall not exceed
$100,000 (or such other limit as may be required by the Code) if such
limitation is necessary to qualify the Option as an Incentive Stock
Option and to the extent an Option or Options granted to a Participant
exceed such limit, such Option or Options shall be treated as a
Non-Statutory Stock Option;
(ii) the purchase price of Shares covered by Incentive Stock
Options must not be less than 100% of the Fair Market Value of the
Shares on the date of grant;
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(iii) an Incentive Stock Option shall not be exercisable more
than 10 years after the date of grant (or such other limit as may be
required by the Code) if such limitation is necessary to qualify the
Option as an Incentive Stock Option; and
(iv) if the Participant owns, or is deemed under Section
424(d) of the Code to own, stock of the Company or of any Affiliate
possessing more than 10% of the total combined voting power of all
classes of stock therein at the time the Incentive Stock Option is
granted:
(A) the purchase price of the Shares covered by the
Incentive Stock Option must not be less than 110% of the Fair
Market Value of Shares on the date of grant; and
(B) the Term of the Incentive Stock Option must not be
greater than five years from the date of grant.
(v) the Agreement covering an Incentive Stock Option shall
contain such other terms and provisions which the Committee determines
necessary to qualify such Option as an Incentive Stock Option.
9.3 OUTSIDE DIRECTOR OPTIONS.
(i) (A) Upon the Initial Election (as defined below) of an
Outside Director, such Outside Director shall be granted Non-Statutory
Stock Options to purchase 11,250 Shares (subject to adjustment
pursuant to Section 16 hereof). The date of such Initial Election
also shall be the date of grant for Options granted pursuant to this
clause (i)(A). The "Initial Election" shall be an individual's
initial appointment or election to be a Director of the Company.
Notwithstanding the foregoing, no Director who has received Options
under the 1994 Spine-Tech, Inc. Stock Option Plan (the "1994 Plan") as
an Outside Director shall receive Options under this Section
9.3(i)(A).
(B) Each person who is an Outside Director shall be
granted Non-Statutory Stock Options to purchase 3,750 Shares (subject
to adjustment pursuant to Section 16 hereof) at the conclusion of each
Annual Meeting of Shareholders of the Company (the "Annual Meeting")
occurring after the Initial Election Vesting Date (as defined below).
The date of each such Annual Meeting shall also be the date of grant
for options granted pursuant to this clause (i)(B). The "Initial
Election Vesting Date" is the date which is the second anniversary of
the Initial Election in the case of a Director appointed or elected to
become a Director after the Effective Date, and the in case of a
Director serving as a director as of the Effective Date, the "Initial
Election Vesting Date" of such Director under the 1994 Plan.
(ii) Subject to the provisions of subparagraph 9.3(iii) below:
(A) Non-Statutory Stock Options granted to an Outside
Director pursuant to subparagraph 9.3(i)(A) above shall vest and
become exercisable pursuant to the following schedule:
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OPTIONS: VESTING DATE:
-------- -------------
3,750 date of grant
3,750 first anniversary of date of grant
3,750 second anniversary of date of grant
(B) Non-Statutory Stock Options granted to an Outside
Director pursuant to subparagraph 9.3(i)(B) above shall vest and
become exercisable one year after the date of grant.
(iii) Each Non-Statutory Option granted to an Outside Director
pursuant to this Section 9.3 and all rights to purchase Shares
thereunder shall terminate on the earlier of ten years after the date
such Option is granted or as otherwise set forth herein. In no event
shall such Non-Statutory Option be exercisable at any time after its
original expiration date. When a Non-Statutory Option is no longer
exercisable, it shall be deemed to have lapsed or terminated and will
no longer be outstanding.
(iv) The purchase price of each Share subject to an Option
granted pursuant to this Section 9.3 shall be 100% of the Fair Market
Value of a Share as of the date of grant. Notwithstanding anything to
the contrary stated in this Plan, for purposes of this Section 9.3 and
the definition of Fair Market Value in Section 2(p) hereof, each
Non-Statutory Stock Option granted pursuant to this Section 9.3 shall
be deemed conclusively to have been granted prior to close of the
applicable securities exchange or system on the date of grant. An
Outside Director may exercise a Director Option using as payment any
form of consideration provided for in Section 9.1 hereof.
(v) Director Options shall be evidenced by an agreement
signed on behalf of the Company by an officer thereof which only
incorporates by reference the terms of this Plan. It is intended that
the provisions of this Section 9.3 shall not cause Outside Directors
to cease to be considered Disinterested Persons and, as a result, the
provisions of this Section 9.3 shall be interpreted to be consistent
with the foregoing intent. Outside Directors may not be granted
Awards under this Plan other than pursuant to this Section 9.3.
(vi) Unless the Director Option shall have expired, in the
event of an Outside Director's death, the Director Option granted to
such Outside Director shall be transferable to the beneficiary, if
any, designated by the Outside Director in writing to the Company
prior to the Outside Director's death and such beneficiary shall
succeed to the rights of the Outside Director to the extent permitted
by law. If no such designation of a beneficiary has been made, the
Outside Director's legal representative shall succeed to the Director
Option, which shall be transferable by will or pursuant to the laws of
descent and distribution.
(vii) During the lifetime of an Outside Director who has been
granted a Non-Statutory Stock Option pursuant to this Section 9.3,
only the Outside Director (or such Outside Director's legal
representative or, if transfers to members of the Outside Director's
"immediate family" or to family trusts or partnerships become
permitted as hereinafter provided, a permitted transferee) may
exercise the Non-Statutory Stock
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Option. No such Non-Statutory Stock Option may be sold, assigned,
transferred, exchanged, or otherwise encumbered, and any attempt to do
so shall be of no effect. The foregoing sentence notwithstanding,
from and after the earlier of (i) the time that Exchange Act
Rule 16b-3 no longer prohibits such transfers as a condition to
application of such Rule or (ii) the time that the Outside Director
retires from the Board and is no longer subject to the reporting
requirements of Section 16 of the Exchange Act, such Outside Director
may transfer a Non-Statutory Stock Option granted pursuant to this
Section 9.3 to any member of such Outside Director's "immediate
family" (as such term is defined in Rule 16a-1(e) promulgated under
the Exchange Act, or any successor rule or regulation) or to one or
more trusts whose beneficiaries are members of such Outside Director's
"immediate family" or partnerships in which such family members are
the only partners; provided, however, that (i) the transferor receives
no consideration for the transfer and (ii) such transferred
Non-Statutory Stock Option shall continue to be subject to the same
terms and conditions as were applicable to such Non-Statutory Stock
Options immediately prior to its transfer.
(viii) Each Option granted pursuant to this Section 9.3 which
has not lapsed or expired shall immediately vest and become
exercisable as set forth in Section 6.6(i) hereof and vest and become
exercisable in full upon a Change in Control.
10. STOCK APPRECIATION RIGHTS. An Award of a Stock Appreciation Right
shall entitle the Participant, subject to terms and conditions determined by the
Committee, to receive upon exercise of the Stock Appreciation Right all or a
portion of the excess of (i) the Fair Market Value of a specified number of
Shares as of the date of exercise of the Stock Appreciation Right over (ii) a
specified price which shall not be less than 100% of the Fair Market Value of
such Shares as of the date of grant of the Stock Appreciation Right. A Stock
Appreciation Right may be granted in connection with a previously or
contemporaneously granted Option, or independent of any Option. If issued in
connection with an Option, the Committee may impose a condition that exercise of
a Stock Appreciation Right cancels the Option with which it is connected and
exercise of the connected Option cancels the Stock Appreciation Right. Each
Stock Appreciation Right may be exercisable in whole or in part on the terms
provided in the Agreement. Notwithstanding anything to the contrary stated in
this Plan, no Stock Appreciation Right shall be exercisable prior to six months
from the date of grant except in the event of the death or Disability of the
Participant. No Stock Appreciation Right shall be exercisable at any time after
its expiration date. When a Stock Appreciation Right is no longer exercisable,
it shall be deemed to have lapsed or terminated. Except as otherwise provided
in the applicable Agreement, upon exercise of a Stock Appreciation Right,
payment to the Participant (or to his or her Successor) shall be made in the
form of cash, Stock or a combination of cash and Stock as promptly as
practicable after such exercise. The Agreement may provide for a limitation
upon the amount or percentage of the total appreciation on which payment
(whether in cash and/or Stock) may be made in the event of the exercise of a
Stock Appreciation Right. As specified in Section 9.1 hereof, no Participant
may receive any combination of Options to purchase and Stock Appreciation Rights
relating to more than 250,000 Shares in the aggregate pursuant to awards over a
five-year period under this Plan.
11. PERFORMANCE UNITS.
11.1 INITIAL AWARD. An Award of Performance Units under this Plan
shall entitle a Participant (or a Successor) to future payments of cash,
Stock or a combination of cash and Stock, as determined by the Committee
and provided in the Agreement, based upon the
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achievement of pre-established performance targets established in writing
by the Committee. Such performance targets may, but need not, include
without limitation targets relating to one or more of corporate, group,
unit, division, Affiliate or individual performance. With respect to those
Employees who are "covered employees" within the meaning of Section 162(m)
of the Code and the regulations thereunder, such performance targets shall
consist of one or any combination of two or more of revenue, revenue per
employee, earnings before income tax (profit before taxes), earnings before
interest and income tax, net earnings (profits after tax), earnings per
employee, tangible, controllable or total asset turnover, earnings per
share, stock price, operating income, total shareholder return, market
share, return on equity, before- or after-tax return on net assets,
distribution expense, inventory turnover, or economic value added, and any
such targets may relate to one or any combination of two or more of
corporate, group, unit, division, Affiliate or individual performance. The
Agreement may establish that a portion of a full or maximum amount of a
Participant's Award will be paid for performance which exceeds the minimum
target but falls below the maximum target applicable to such Award. The
Agreement shall also provide for the timing of such payment. Following the
conclusion or acceleration of each Performance Cycle, the Committee shall
determine the extent to which (i) performance targets have been attained,
(ii) any other terms and conditions with respect to an Award relating to
such Performance Cycle have been satisfied and (iii) payment is due with
respect to an Award of Performance Units. No Participant may receive
Performance Units relating to more than 100,000 Shares pursuant to Awards
over a five-year period under this Plan.
11.2 ACCELERATION AND ADJUSTMENT. The Agreement may permit an
acceleration of the Performance Cycle and an adjustment of performance
targets and payments with respect to some or all of the Performance Units
awarded to a Participant, upon such terms and conditions as shall be set
forth in the Agreement, upon the occurrence of certain events, which may
but need not include without limitation a Change in Control, a Fundamental
Change, a recapitalization, a change in the accounting practices of the
Company, a change in the Participant's title or employment
responsibilities, the Participant's death, Disability or Retirement or,
with respect to payments in Stock with respect to Performance Units, a
reclassification, stock dividend, stock split or stock combination as
provided in Section 16 hereof.
11.3 VALUATION. Each Performance Unit earned after conclusion of a
Performance Cycle shall have a value equal to the average of the Fair
Market Values of a Share for the 20 consecutive business days ending on and
including the last day of such Performance Cycle.
12. EFFECTIVE DATE OF THIS PLAN.
12.1 EFFECTIVE DATE. This Plan shall become effective upon approval
thereof by the Board, provided that this Plan is approved and ratified by
the affirmative vote of the holders of a majority of the outstanding shares
of Stock present or represented and entitled to vote in person or by proxy
at a meeting of the shareholders of the Company no later than December 31,
1996.
12.2 DURATION OF THE PLAN. This Plan shall remain in effect until
the earlier of (i) the date all Stock subject to it shall be distributed or
(ii) the date all Awards have expired or lapsed, or (iii) the date this
Plan is terminated pursuant to Section 15. No Award of an
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Incentive Stock Option shall be made more than 10 years after the Effective
Date (or such other limit as may be required by the Code) if such
limitation is necessary to qualify the Option as an Incentive Stock Option.
Except with regard to Awards granted pursuant to Section 9.3 hereof, the
date and time set forth by the Committee of the granting of an Award shall
be considered the date and time at which such Award is made or granted,
notwithstanding the date of any Agreement with respect to such Award.
13. RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Plan shall confer upon
any Participant the right to continue in the employment of the Company or any
Affiliate or affect any right which the Company or any Affiliate may have to
terminate the employment of the Participant with or without cause.
14. TAX WITHHOLDING. The Company shall have the right to withhold from
any cash payment under this Plan to a Participant or other person an amount
sufficient to cover any required withholding taxes. The Company shall have the
right to require a Participant or other person receiving Stock under this Plan
to pay the Company a cash amount sufficient to cover any required withholding
taxes. In lieu of all or any part of such a cash payment from a person
receiving Stock under this Plan, the Committee may permit the individual to
elect to cover all or any part of the required withholdings, and to cover any
additional withholdings up to the amount needed to cover the individual's full
FICA and Medicare, and federal, state and local income tax with respect to
income arising from payment of the Award, through a reduction of the number of
Shares delivered to him or her or a subsequent return to the Company of Shares
held by the Participant or other person, in each case valued in the same manner
as used in computing the withholding taxes under the applicable laws. Unless
such limitations were waived by the Committee, such elections are subject to the
following limitations if, and to the extent, such limitations are necessary to
comply with Exchange Act Rule 16b-3 or any successor provision:
14.1 TIME OF ELECTION AND EXERCISE. Except as set forth in
paragraph 14.1(iii) below, any such election by a Participant who is then
subject to the reporting requirements of Section 16 of the Exchange Act or
any successor provision ("Section 16") or his or her Successor may be made
only if the conditions set forth in clauses (i) and (ii) below are
satisfied:
(i) (A) The election is made during the period beginning
on the third business day following the date of public release of the
Company's quarterly or annual financial statements and ending on the
twelfth business day following such date of public release, or
(B) The election is made at least six months prior to
the date the Award is paid to such Participant.
(ii) An election by a Participant or his Successor may not be
made within six months of the date of grant of the Award to which the
payment relates; provided, however, that such restriction does not
apply in the event death or Disability of the Participant occurs prior
to such election and during such six month period.
(iii) Notwithstanding the foregoing, a Participant subject to
Section 16 who tenders previously owned Shares to the Company in
payment of the purchase price of
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Shares in connection with exercise of an Option may also tender
previously owned Shares to the Company in satisfaction of any tax
withholding obligations in connection with such Option exercise
without regard to the time periods set forth in clauses (i) and (ii)
above.
The foregoing restrictions do not apply to any Participant who
is not subject to the reporting requirements of Section 16 at the time
of the election.
14.2 COMMITTEE APPROVAL. Any such election by a Participant then
subject to the reporting requirements of Section 16 or his Successor is
irrevocable and is subject to approval by the Committee. The Committee's
approval may be granted in advance but is subject to revocation by the
Committee at any time.
15. AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN. The Board may at
any time terminate, suspend or modify this Plan; provided, however, that the
Board shall not amend Section 9.3 hereof more than once every six months, other
than to comport with changes in the Code, ERISA or the rules thereunder.
Amendments are subject to approval of the shareholders of the Company only if
such approval is necessary to maintain this Plan in compliance with the
requirements of Exchange Act Rule 16b-3, Code Section 422, their successor
provisions or any other applicable law or regulation. No termination,
suspension, or modification of this Plan will materially and adversely affect
any right acquired by any Participant (or his legal representative) or any
Successor under an Award granted before the date of termination, suspension, or
modification, unless otherwise agreed to by the Participant in the Agreement or
otherwise or required as a matter of law; but it will be conclusively presumed
that any adjustment for changes in capitalization provided for in Section 11.2
or Section 16 does not adversely affect any right of a Participant under an
Award.
16. ADJUSTMENT FOR CHANGES IN CAPITALIZATION. Appropriate adjustments in
the aggregate number and type of Shares available for Awards under this Plan, in
the limitations on the number and type of Shares that may be issued to an
individual Participant, in the number and type of Shares subject to and the
vesting schedule of Director Options then outstanding and thereafter issued and
in the number and type of Shares and amount of cash subject to other Awards then
outstanding, in the Option price as to any outstanding Options and, subject to
Section 11.2, in outstanding Performance Units and payments with respect to
outstanding Performance Units may be made by the Committee in its sole
discretion to give effect to adjustments made in the number or type of Shares
through a Fundamental Change (subject to Section 17), recapitalization,
reclassification, stock dividend, stock split, stock combination or other
relevant change, provided that fractional Shares shall be rounded to the nearest
whole Share.
17. FUNDAMENTAL CHANGE. In the event of a proposed Fundamental Change:
(a) involving a merger, consolidation or statutory share exchange,
unless appropriate provision shall be made (which the Committee may, but
shall not be obligated to, make) for the protection of the outstanding
Options and Stock Appreciation Rights by the substitution of options, stock
appreciation rights and appropriate voting common stock of the corporation
surviving any such merger or consolidation or, if appropriate, the parent
corporation of the Company or such surviving corporation, to be issuable
upon the exercise of options or used to calculate payments upon the
exercise of stock appreciation rights in lieu of Options, Stock
Appreciation Rights and capital stock of the Company; or
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(b) involving the dissolution or liquidation of the Company,
the Committee may but shall not be obligated to, declare, at least 20 days prior
to the occurrence of the Fundamental Change, and provide written notice to each
holder of an Option or Stock Appreciation Right of the declaration, that each
outstanding Option and Stock Appreciation Right, whether or not then
exercisable, shall be canceled at the time of, or immediately prior to the
occurrence of, the Fundamental Change in exchange for payment to each holder of
an Option or Stock Appreciation Right, within 20 days after the Fundamental
Change, of cash equal to (i) for each Share covered by the canceled Option, the
amount, if any, by which the Fair Market Value (as defined in this Section 17)
per Share exceeds the exercise price per Share covered by such Option or (ii)
for each Stock Appreciation Right, the price determined pursuant to Section 10
hereof, except that Fair Market Value of the Shares as of the date of exercise
of the Stock Appreciation Right, as used in clause (i) of Section 10, shall be
deemed to mean Fair Market Value for each Share with respect to which the Stock
Appreciation Right is calculated determined in the manner hereinafter referred
to in this Section 17. At the time of the declaration provided for in the
immediately preceding sentence, each Stock Appreciation Right that has been
outstanding for at least six months and each Option shall immediately become
exercisable in full and each person holding an Option or a Stock Appreciation
Right shall have the right, during the period preceding the time of cancellation
of the Option or Stock Appreciation Right, to exercise the Option as to all or
any part of the Shares covered thereby or the Stock Appreciation Right in whole
or in part, as the case may be. In the event of a declaration pursuant to this
Section 17, each outstanding Option and Stock Appreciation Right that shall not
have been exercised prior to the Fundamental Change shall be canceled at the
time of, or immediately prior to, the Fundamental Change, as provided in the
declaration. Notwithstanding the foregoing, no person holding an Option or
Stock Appreciation Right shall be entitled to the payment provided for in this
Section 17 if such Option or Stock Appreciation Right shall have expired
pursuant to an Agreement. For purposes of this Section 17 only, "Fair Market
Value" per Share means the cash plus the fair market value, as determined in
good faith by the Committee, of the non-cash consideration to be received per
Share by the shareholders of the Company upon the occurrence of the Fundamental
Change, notwithstanding anything to the contrary provided in this Plan.
18. UNFUNDED PLAN. This Plan shall be unfunded and the Company shall not
be required to segregate any assets that may at any time be represented by
Awards under this Plan. Neither the Company, its Affiliates, the Committee, nor
the Board shall be deemed to be a trustee of any amounts to be paid under this
Plan nor shall anything contained in this Plan or any action taken pursuant to
its provisions create or be construed to create a fiduciary relationship between
the Company and/or its Affiliates, and a Participant or Successor. To the
extent any person acquires a right to receive an Award under this Plan, such
right shall be no greater than the right of an unsecured general creditor of the
Company.
19. OTHER BENEFIT AND COMPENSATION PROGRAMS. Payments and other benefits
received by a Participant under an Award made pursuant to this Plan shall not be
deemed a part of a Participant's regular, recurring compensation for purposes of
the termination, indemnity or severance pay law of any country and shall not be
included in, nor have any effect on, the determination of benefits under any
other employee benefit plan, contract or similar arrangement provided by the
Company or an Affiliate unless expressly so provided by such other plan,
contract or arrangement, or unless the Committee expressly determines that an
Award or portion of an Award should be included to accurately reflect
competitive compensation practices or to recognize that an Award has been made
in lieu of a portion of competitive cash compensation.
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20. BENEFICIARY UPON PARTICIPANT'S DEATH. To the extent that the transfer
of a Participant's Award at his death is permitted by this Plan or under an
Agreement, (i) a Participant's Award shall be transferable at his death to the
beneficiary, if any, designated on forms prescribed by and filed with the
Committee and (ii) upon the death of the Participant, such beneficiary shall
succeed to the rights of the Participant to the extent permitted by law. If no
such designation of a beneficiary has been made, the Participant's legal
representative shall succeed to the Awards which shall be transferable by will
or pursuant to laws of descent and distribution to the extent permitted by this
Plan or under an Agreement.
21. FORFEITURES. In the event an Employee has received or been entitled
to payment of cash, delivery of Shares or a combination thereof pursuant to an
Award within six months prior to the Employee's termination of employment with
the Company and its Affiliates, the Committee, in its sole discretion, may
require the Employee to return or forfeit the cash and/or Shares received with
respect to the Award (or its economic value as of (i) the date of the exercise
of Options or Stock Appreciation Rights, (ii) the date of, and immediately
following, the lapse of restrictions on Restricted Stock or the receipt of Stock
without restrictions, or (iii) the date on which the right of the Employee to
payment with respect to Performance Units vests, as the case may be) in the
event of any of the following occurrences: competition with the Company or any
Affiliate, unauthorized disclosure of material proprietary information of the
Company or any Affiliate, a violation of applicable business ethics policies or
business policies of the Company or any Affiliate, or any other occurrence
specified in the related Agreement. The Committee's right to require forfeiture
must be exercised within 90 days after discovery of such an occurrence but in no
event later than 15 months after the Employee's termination of employment with
the Company and its Affiliates.
22. LIMITS OF LIABILITY.
(i) Any liability of the Company to any Participant with
respect to an Award shall be based solely upon contractual obligations
created by this Plan and the Agreement.
(ii) Except as may be required by law, neither the Company nor
any member or former member of the Board or of the Committee, nor any
other person participating (including participation pursuant to a
delegation of authority under 3.2 hereof) in any determination of any
question under this Plan, or in the interpretation, administration or
application of this Plan, shall have any liability to any party for
any action taken, or not taken, in good faith under this Plan.
23. COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS. No certificate for
Shares distributable pursuant to this Plan shall be issued and delivered unless
the issuance of such certificate complies with all applicable legal requirements
including, without limitation, compliance with the provisions of applicable
state securities laws, the Securities Act of 1933, as amended and in effect from
time to time or any successor statute, the Exchange Act and the requirements of
the exchanges on which the Company's Shares may, at the time, be listed.
24. PARACHUTE PAYMENTS. Notwithstanding any provision to the contrary
contained herein except the last sentence of this Section 24, if Awards to which
a Participant shall become entitled to hereunder, either alone or together with
other payments in the nature of compensation to the Participant which are
contingent on a change in the ownership or effective control of the
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Company or in the ownership of a substantial portion of the assets of the
Company or otherwise, would constitute a "parachute payment" as defined in
Section 280G of the Code or any successor provision thereto, such payment and/or
such other benefits and payments shall be reduced (but not below zero) to the
largest aggregate amount as will result in no portion thereof being subject to
the excise tax imposed under Section 4999 of the Code (or any successor
provision thereto) or being non-deductible to the Company for federal income tax
purposes pursuant to Section 280G of the Code (or any successor provision
thereto). The Participant in good faith shall determine the amount of any
reduction to be made pursuant to this Section 24 and shall select from among the
foregoing benefits and payments those which shall be reduced. No modification
of, or successor provision to, Section 280G or Section 4999 subsequent to the
date of this Plan shall, however, reduce the benefits to which the Participant
would be entitled under this Plan in the absence of this Section 24 to a greater
extent than they would have been reduced if Section 280G and Section 4999 had
not been modified or superseded subsequent to the date of this Plan,
notwithstanding anything to the contrary provided in the first sentence of this
Section 24.
25. TERMINATION OF PRIOR PLANS. Effective upon the approval of this Plan
by the Company's shareholders, no further grants of options shall be made under
the Prior Plans. Thereafter, all options granted under the Prior Plans prior to
such approval by the shareholders shall continue in accordance with the terms of
the Prior Plans.
26. GOVERNING LAW. To the extent that Federal laws do not otherwise
control, this Plan and all determinations made and actions taken pursuant to
this Plan shall be governed by the laws of Minnesota and construed accordingly.
