EXHIBIT 10.2
INCENTIVE STOCK OPTION AGREEMENT
This AGREEMENT is entered into and effective as of the _______ day of
______________, ______, by and between HEALTH FITNESS CORPORATION (the
"Company") and __________________ (the "Optionee").
RECITALS
A. The Optionee is an employee of the Company or a subsidiary of
the Company.
B. The Company has adopted the 2005 Stock Option Plan (the
"Plan"), authorizing the Board of Directors of the Company, or a committee as
provided for in the Plan (the Board or such a committee to be referred to as the
"Committee"), to grant incentive stock options to eligible employees of the
Company, which options will qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations issued thereunder.
C. The Company desires to give the Optionee an inducement to
acquire a proprietary interest in the Company and an added incentive to advance
the interests of the Company by granting to the Optionee an option to purchase
shares of common stock of the Company.
AGREEMENTS
Accordingly, the parties hereto agree as follows:
ARTICLE X. XXXXX OF OPTION
The Company hereby grants to the Optionee the right, privilege, and
option (the "Option") to purchase up to ______________________ (_________)
shares (subject to adjustment as provided in Article IX hereof), (the "Option
Shares") of the Company's common stock, $.01 par value (the "Common Stock"),
according to the terms and subject to the conditions hereinafter set forth and
as set forth in the Plan. The Option is intended to be an "incentive stock
option," as that term is used in Section 422 of the Code and the regulations
issued thereunder, to the extent permitted by Section 422(d) of the Code.
ARTICLE II. OPTION EXERCISE PRICE
The per share price to be paid by the Optionee in the event of an
exercise of the Option shall be $____________, which has been determined to be
not less than the fair market value of the Company's Common Stock at the date of
grant of this Option.
ARTICLE III. DURATION OF OPTION AND EXERCISABILITY
A. Initial Period of Exercisability. The Option shall be fully
exercisable in _________ (___) installments. The following table sets forth the
initial dates of exercisability of each of each
installment and the number of Option Shares as to which this Option shall become
exercisable on such dates, provided that Optionee has continually served as an
employee of the Company. In no event shall this Option be exercisable after, and
this Option shall become void and expire as to all unexercised Option Shares at,
5:00 p.m. (Central time) on __________________, ________ (the "Expiration
Date").
Initial Date of Number of Option Shares
Exercisability Available for Exercise
B. Termination of Employment Due to Death, Disability or
Retirement. In the event the Optionee's employment is terminated with the
Company and all of its Subsidiaries (within the meaning of Section 424(f) of the
Code) by reason of death, an event that constitutes permanent and total
disability within the meaning of Section 22(e)(3) of the Code ("Disability"), or
retirement pursuant to and in accordance with the regular retirement plan or
practice of the Company or the Subsidiary employing the Optionee ("Retirement"),
then this Option shall immediately become exercisable with respect to one
hundred percent (100%) of the Option Shares. Any unexercised portion of this
Option may be exercised, in whole or in part, by the Optionee (or by the
Optionee's heirs or legal representative(s) in the event of death or Disability)
before the earlier of (a) the expiration of three months, in the case of
Retirement, and one year, in the case of death or Disability, after such date of
termination, and (b) the Expiration Date. If the unexercised portion of this
Option is not exercised within the time specified in this Section III.B., all
rights of the Optionee hereunder shall terminate, and the Option shall
thereafter be void.
C. Termination of Employment for Reasons Other Than Death,
Disability or Retirement. Except as provided in Section III.D. below, in the
event the Optionee's employment with the Company or any of its Subsidiaries is
terminated for any reason other than death, Disability or Retirement, any
unexercised portion of this Option which was exercisable as of the date of such
termination may be exercised, in whole or in part, by the Optionee before the
earlier of (a) the expiration of three months after the date of termination of
employment, and (b) the Expiration Date. If the unexercised portion of this
Option is not exercised within the time specified in this Section III.C., all
rights of the Optionee hereunder shall terminate, and the Option shall
thereafter be void.
D. Change in Control.
(i) For purposes of this Section III.D., the term "Change
in Control" shall have the meaning set forth in Section 11 of the Plan.
(ii) If any events constituting a Change in Control of the
Company shall occur, the Optionee shall be entitled to receive option
rights covering shares of the surviving or acquiring entity in the same
proportion, at an equivalent price, and subject to the same conditions
as this Option; provided, however, that the Committee may, at its sole
discretion, provide for the acceleration of the right to exercise this
Option prior to the anticipated effective date of the Change of Control
or take any other action as it may deem appropriate to further the
purposes of the Plan or protect the interests of the Optionee;
provided, however, that if, with respect to the Optionee, acceleration
of the vesting of this Option as provided herein (which acceleration
could be deemed a payment within the meaning of Section 280G(b)(2) of
the Code) together with any other payments which the Optionee has
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the right to receive from the Company or any corporation which is a
member of an "affiliated group" (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a "parachute payment" (as defined
in Section 280G(b)(2) of the Code), the payments to the Optionee as set
forth herein shall be reduced to the largest amount as will result in
no portion of such payments being subject to the excise tax imposed by
Section 4999 of the Code.
ARTICLE IV. MANNER OF OPTION EXERCISE
A. Notice. This Option may be exercised by the Optionee in whole
or in part from time to time, subject to the conditions contained in the Plan
and herein, by delivery, in person or by registered mail, to the Company at its
principal executive office (Attention: Secretary), of a written notice of
exercise. Such notice shall be in a form satisfactory to the Committee, shall
identify the Option, shall specify the number of Option Shares with respect to
which the Option is being exercised, and shall be signed by the person or
persons so exercising the Option. Such notice shall be accompanied by payment in
full of the total purchase price of the Option Shares purchased. In the event
that the Option is being exercised, as provided by the Plan and Section III.B.
above, by the Optionee's heirs or legal representative(s), the notice shall be
accompanied by appropriate proof of right of such person or persons to exercise
the Option. As soon as practicable after the effective exercise of the Option,
the Optionee (or the Optionee's heirs or legal representative(s) in the event of
death or Disability) shall be recorded on the stock transfer books of the
Company as the owner of the Option Shares purchased, and the Company shall
deliver to the Optionee (or the Optionee's heirs or legal representative(s)) one
or more duly issued stock certificates evidencing such ownership. All requisite
original issue or transfer documentary stamp taxes shall be paid by the Company.
B. Payment. At the time of exercise of this Option, the Optionee
may determine whether to pay the total purchase price of the Option Shares to be
purchased solely in cash (including a personal check or a certified or bank
cashier's check, payable to the order of the Company) or by transfer from the
Optionee to the Company of previously acquired shares of Common Stock of the
Company with a then current aggregate Fair Market Value equal to such total
purchase price, or by a combination of cash and such previously acquired shares
of Common Stock. The Committee may reject the Optionee's election to pay all or
part of the purchase price under this Option with previously acquired shares of
Common Stock and may require such purchase price to be paid entirely in cash if,
in the sole discretion of the Committee, payment in previously acquired shares
would cause the Company to be required to recognize a charge to earnings in
connection therewith. For purposes of this Agreement, (a) "previously acquired
shares" shall include shares of Common Stock of the Company that are already
owned by the Optionee at the time of exercise, and (b) "Fair Market Value" will
be determined as set forth in the Plan.
C. Investment Purpose. The Company shall not be required to issue
or deliver any shares of Common Stock under this Option unless (a)(1) such
shares are covered by an effective and current registration statement under the
Securities Act of 1933 and applicable state securities laws or (2) if the
Committee has determined not to so register such shares, exemptions from
registration under the Securities Act of 1933 and applicable state securities
laws are available for such issuance (as determined by counsel to the Company)
and the Company has received from the Optionee (or the Optionee's heirs(s) or
legal representative(s), in the event of death or Disability) any
representations or agreements requested by the Company in order to permit such
issuance to be made pursuant to such exemptions, and (b) the Company has
obtained any other consent, approval
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or permit from any state or federal governmental agency which the Committee
shall, in its sole discretion upon the advice of counsel, deem necessary or
advisable. Unless a registration statement under the Securities Act of 1933 is
in effect with respect to the issuance or transfer of Option Shares, each
certificate representing any such shares shall be restricted by the Company as
to transfer unless the Company receives an opinion of counsel satisfactory to
the Company to the effect that registration under the Securities Act of 1933 and
applicable state securities laws is not required with respect to such transfer.
ARTICLE V. NONTRANSFERABILITY
This Option shall not be transferable by the Optionee, either
voluntarily or involuntarily, or subject to any lien, directly or indirectly, by
operation of law or otherwise, except as provided in Section 8.2 of the Plan.
Any attempt to transfer or encumber this Option other than in accordance with
Section 8.2 of the Plan shall void this Option.
ARTICLE VI. LIMITATION OF LIABILITY
Nothing in this Agreement shall be construed to (a) limit in any way
the right of the Company or any of its Subsidiaries to terminate the status of
the Optionee as an employee of the Company at any time, or (b) be evidence of
any agreement or understanding, express or implied, that the Company or any of
its Subsidiaries will employ the Optionee in any particular position, at any
particular rate of compensation or for any particular period of time.
ARTICLE VII. DISPOSITION OF STOCK
Prior to making a disposition (as defined in Section 424(c) of the
Code) of any shares of Common Stock acquired pursuant to the exercise of this
Option before the expiration of two years after the date hereof or before the
expiration of one year after the date on which such shares of Common Stock were
transferred to the Optionee pursuant to exercise of this Option, the Optionee
shall send written notice to the Company of the proposed date of such
disposition, the number of shares to be disposed of, the amount of proceeds to
be received from such disposition and any other information relating to such
disposition that the Company may reasonably request. The right of the Optionee
to make such a disposition shall be conditioned on the receipt by the Company of
all amounts necessary to satisfy any federal, state or local withholding tax
requirements attributable to such disposition. The Committee shall have the
right, in its sole discretion, to endorse the certificates representing the
Option Shares with a legend restricting transfer and to cause a stop transfer
order to be entered with the Company's transfer agent until such time as the
Company receives the amounts necessary to satisfy such withholding requirements
or until the later of the expiration of two years from the date hereof or one
year from the date on which such shares were transferred to the Optionee
pursuant to the exercise of this Option.
ARTICLE VIII. WITHHOLDING TAXES
A. General Obligation. The Company is entitled to (a) withhold
and deduct from future payments to the Optionee, or make other arrangements for
the collection of, all legally required amounts necessary to satisfy any
federal, state or local withholding tax requirements attributable to the
Optionee's exercise of this Option, including, without limitation, a disposition
of shares of Common Stock described in Article VII above, that causes this
Option to cease to qualify as an
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"incentive stock option" within the meaning of Section 422 of the Code and the
regulations thereunder, or (b) require the Optionee promptly to remit the amount
of such withholding to the Company before acting on any such disposition of
shares of Common Stock. In the event that the Company is unable to withhold such
amounts, for whatever reason, the Optionee hereby agrees to pay to the Company
an amount equal to the amount the Company would otherwise be required to
withhold under federal, state or local law.
B. Use of Shares. The Committee may, in its sole discretion and
subject to such rules as the Committee may adopt, permit the Optionee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the exercise of this Option either by electing to have the
Company withhold from the shares of Common Stock to be issued upon the exercise
of this Option that number of shares of Common Stock, or by electing to deliver
to the Company already-owned shares of Common Stock, in either case having a
Fair Market Value (determined as set forth in the Plan) on the date such tax is
determined under the Code (the "Tax Date") equal to the amount necessary to
satisfy the minimum required tax withholding amount based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to the supplemental income resulting from the
option. In no event may the Company withhold shares having a Fair Market Value
in excess of such statutory minimum required tax withholding. The Optionee's
election to have the company withhold shares of Common Stock or to deliver
already-owned shares of Common Stock upon exercise is irrevocable and is subject
to the consent or disapproval of the Committee and shall otherwise comply with
such rules as the Administrator may adopt to assure compliance with Rule 16b-3
or any successor provision, as then in effect, of the General Rules and
Regulations under the Securities and Exchange Act of 1934, if applicable. To the
extent that shares of Common Stock may be issued prior to the Tax Date to the
Optionee making such an election, the Optionee hereby agrees to surrender that
number of shares on the Tax Date having an aggregate Fair Market Value
(determined as set forth in the Plan) equal to the withholding tax due.
ARTICLE IX. CAPITAL ADJUSTMENTS
If the number of outstanding shares of Common Stock is increased or
decreased or changed into or exchanged for a different number or kind of shares
of stock or other securities of the Company or of another corporation by reason
of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split, reverse stock split, stock dividend, combination
of shares, rights offering or any other change in the corporate structure or
shares of the Company, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of the
Optionee, shall make appropriate adjustment as to the number and kind of
securities subject to this Option. Any such adjustment affecting this Option
shall be made without change in the aggregate purchase price applicable to the
unexercised portion of the Option but with an appropriate adjustment in the
price for each share or other unit of any security subject to the Option.
Without the consent of the Optionee, however, no such change shall be made in
the terms of the Option if such change would disqualify the Option from
treatment as an "incentive stock option" within the meaning of Code Section 422,
or any successor provision, or would be considered a modification, extension or
renewal of an option under Code Section 424(h), or any successor provision.
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ARTICLE X. BINDING EFFECT
This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties hereto.
ARTICLE XI. SUBJECT TO PLAN
The Option represented by this Agreement has been granted under, and is
subject to the terms of, the Plan. The terms of the Plan are hereby incorporated
by reference herein in their entirety and the Optionee, by execution hereof,
acknowledges having received a copy of the Plan. The provisions of this
Agreement shall be interpreted as to be consistent with the Plan and any
ambiguities herein shall be interpreted by reference to the Plan. In the event
that any provision hereof is inconsistent with the terms of the Plan, the latter
shall prevail.
ARTICLE XII. MISCELLANEOUS
A. Lockup Period Limitation. The Optionee agrees that in the
event the Company advises the Optionee that it plans an underwritten public
offering of its common stock in compliance with the Securities Act of 1933, as
amended, and that the underwriter(s) seek to impose restrictions under which
certain shareholders may not sell or contract to sell or grant any option to buy
or otherwise dispose of part or all of their stock purchase rights of the
underlying common stock, the Optionee hereby agrees that for a period not to
exceed 180 days from the prospectus, the Optionee will not sell or contract to
sell or grant an option to buy or otherwise dispose of this option or any of the
underlying shares of common stock without the prior written consent of the
underwriter(s) or its representative(s).
B. Blue Sky Limitation. Notwithstanding anything in this
Agreement to the contrary, in the event the Company makes any public offering of
its securities and determines in its sole discretion that it is necessary to
reduce the number of issued but unexercised stock purchase rights so as to
comply with any state securities or Blue Sky law limitations with respect
thereto, the Board of Directors of the Company shall have the right (i) to
accelerate the exercisability of this Option and the date on which this Option
must be exercised, provided that the Company gives the Optionee 15 days' prior
written notice of such acceleration, and (ii) to cancel any portion of this
Option or any other option granted to the Optionee pursuant to this Agreement
which is not exercised prior to or contemporaneously with such public offering.
Notice shall be deemed given when delivered personally or when deposited in the
United States mail, first class postage prepaid and addressed to the Optionee at
the address of the Optionee on file with the Company.
C. Accounting Compliance. The Optionee agrees that, in the event
a Change of Control occurs and the Optionee is an "affiliate" of the Company or
any Subsidiary (as defined in applicable legal and accounting principles) at the
time of such Change of Control, the Optionee will comply with all requirements
of Rule 145 of the Securities Act of 1933, as amended, and the requirements of
such other legal or accounting principles, and will execute any documents
necessary to ensure such compliance. For purposes of this Agreement, the term
"Change of Control" shall have the meaning set forth in Section 11 of the Plan.
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D. Stock Legend. The certificates for any shares of common stock
purchased by the Optionee (or, in the case of death, the Optionee's heirs or
legal representative(s)) shall bear an appropriate legend to reflect the
restrictions of this Article XII and Section IV.C.
E. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud and inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least ten (10) years.
If the parties cannot agree on an arbitrator within twenty (20) days, any party
may request that the chief judge of the District Court of Hennepin County,
Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the
provisions of this Agreement and the commercial arbitration rules of the
American Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement. Limited civil discovery shall be permitted for the
production of documents and taking of depositions. Unresolved discovery disputes
may be brought to the attention of the arbitrator who may dispose of such
disputes. The arbitrator shall have the authority to award any remedy or relief
that a court of this state could order or grant; provided, however, that
punitive or exemplary damages shall not be awarded. The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of its costs
and fees, including the arbitrator's fee, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorney's fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.
ARTICLE XIII. GOVERNING LAW
This Agreement and all rights and obligations hereunder shall be
construed in accordance with the Plan and governed by the laws of the State of
Minnesota.
ARTICLE XIV. EXECUTION OF AGREEMENT
This offer by the Company to Employee of an Option to purchase capital
stock of the Company shall be void if not agreed to by the Employee on or before
_________________, _____.
The parties hereto have executed this Agreement effective the day and
year first above written.
HEALTH FITNESS CORPORATION
By
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Its:
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By execution hereof, the OPTIONEE
Optionee acknowledges having
received a copy of the Plan.
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