Exhibit 4.1


 


ENPATH MEDICAL, INC.


1999 NON-EMPLOYEE DIRECTOR AND MEDICAL ADVISORY BOARD


STOCK OPTION PLAN


(as amended through April 28, 2005)


 


1.             PURPOSE OF PLAN


 


This Plan shall be known as
the “Enpath Medical, Inc. 1999 Non-Employee Director and Medical Advisory
Board Stock Option Plan” and is hereinafter referred to as the “Plan.” The
purposes of the Plan are to attract and retain the best available personnel for
service as members of the Board of Directors and Medical Advisory Board of
Enpath Medical, Inc. (the “Company”) and to provide additional incentive
to the non-employee directors and advisors to continue to serve on the Board of
Directors and Medical Advisory Board, respectively, by affording them an
opportunity to acquire a proprietary interest in the Company. It is intended
that these purposes be effected through the granting of stock options or
restricted stock awards, as provided herein.


 


2.             DEFINITIONS


 


The following terms have the
meanings set forth below, unless the context otherwise requires:


 


(a)           “ADVISOR” means a member of the Advisory
Board.


 


(b)           “ADVISORY BOARD” means the Medical Advisory
Board of the Company.


 


(c)           “BOARD” means the Board of Directors of the
Company.


 


(d)           “CODE” means the Internal Revenue Code of
1986, as amended.


 


(e)           “COMMITTEE” means the group of individuals
administering the Plan, as provided in Section 4 of the Plan.


 


(f)            “COMMON STOCK” means the common stock of the
Company, par value $.01 per share (as such par value may be adjusted from time
to time).


 


(g)           “DISABILITY” means the permanent and total
disability of the Participant within the meaning of Section 22 (e) (3) of
the Code.


 


(h)           “EXCHANGE ACT” means the Securities Exchange
Act of 1934, as amended.


 


(i)            “FAIR MARKET VALUE” means, with respect to
the Common Stock, the following:


 


(i)            If the Common Stock is listed or admitted to
unlisted trading privileges on any national securities exchange or is not so
listed or admitted but transactions in the Common Stock are reported on the
NASDAQ National Market System, the last sale price of the Common Stock on such
exchange or reported by the NASDAQ National Market System as of such date (or,
if no shares were traded on such day, as of the next preceding day on which
there was such a trade).


 


(ii)           If the Common Stock is not so listed or
admitted to unlisted trading privileges or reported on the NASDAQ National
Market System, and bid and asked prices therefore in the over-the-counter
market are reported by the NASDAQ System or


 





















 


the National Quotation
Bureau, Inc. (or any comparable reporting service), the average of the
closing bid and asked prices as of such date, as so reported by the NASDAQ
System, or, if-not so reported thereon, as reported by the National Quotation
Bureau, Inc. (or such comparable reporting service).


 


(iii)          If the Common Stock is not so listed or
admitted to unlisted trading privileges, or reported on the NASDAQ National
Market System, and such bid and asked prices are not so reported, such price as
the Committee determines in good faith in the exercise of its reasonable
discretion.


 


(j)            “NON-EMPLOYEE DIRECTOR” means a member of the
Board that meets the requirements of Section 5(a) of the Plan.


 


(k)           “NON-STATUTORY STOCK OPTION” means a right to
purchase Common Stock granted to and pursuant to the Plan that does not qualify
as an Incentive Stock Option, meaning of Section 422 of the Code.


 


(l)            “OPTION” means a Non-Statutory Stock Option
granted pursuant to this Plan.


 


(m)          “PARTICIPANT” means an individual who is
eligible to receive and who receives one or more Options pursuant to the Plan.


 


(n)           “PERSON” means 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 wholly owned
subsidiary of the Company or any employee benefit plan sponsored by the Company
or a wholly owned subsidiary of the Company.


 


(o)           “PREVIOUSLY ACQUIRED SHARES” mean shares of
Common Stock that are already owned by the Participant and shares of Common
Stock that are to be acquired by the Participant pursuant to the exercise of an
Option.


 


(p)           “RESTRICTED STOCK” means an award of Shares
that are subject to restrictions under Section 12 below.


 


(q)           “RETIREMENT” means the retirement of a
Participant pursuant to and in accordance with the regular or, if approved by
the Board for purposes of the Plan, any early retirement plan or practice of
the Company or Subsidiary then covering the Participant.


 


(r)            “SECURITIES ACT” means the Securities Act of
1933, as amended.


 


(s)           “SHARE” or “SHARES” means one or more shares
of Common Stock.


 


(t)            “SUBSIDIARY” means any subsidiary corporation
of the Company within the meaning of Section 424(f) and (g) of
the Code.


 


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3.             STOCK SUBJECT TO PLAN


 


The stock subject to option
grants or restricted stock awards under the Plan shall be shares of the Company’s
authorized Common Stock. Subject to the adjustment as provided in Section 15
hereof, the maximum number of Shares for which options may be exercised or
restricted stock awards made under this Plan shall be 400,000(1) Shares. Any
Shares subject to an option or restricted stock award under the Plan which, for
any reason, is forfeited, expires, lapses or is otherwise terminated
unexercised as to such Shares shall be available for options and restricted
stock awards thereafter granted during the term of the Plan and may be again
subjected to an option or restricted stock grant under the Plan.


 


4.             ADMINISTRATION OF PLAN


 


The Plan shall be effective
as of July 29, 1999, according to the terms and conditions herein, and, if
required by Section 17 of the Exchange Act or the rules and
regulations thereunder, subject to subsequent approval by the shareholders of
the Company. The Plan shall be administered by the Board. The Board may
authorize the compensation or other committee thereof, consisting of at least
two (2) members appointed by the Board to exercise the powers conferred on
the Board under the Plan, other than the power under Section 15 hereof to
amend or terminate the Plan.


 


The interpretation and
construction by the Board or Committee of any provisions of the Plan or of any
option or award of restricted stock granted hereunder shall be final. No member
of the Board or Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option or award of restricted
stock granted hereunder.


 


5.             ELIGIBILITY AND GRANT


 


(a)           NON-EMPLOYEE DIRECTORS.


 


Each
member of the Board who satisfies all of the following criteria shall
automatically be a Participant in the Plan:


 


(i)            Such member is not, and has not during the
immediately preceding 12-month period been, an employee of the Company or any
Subsidiary; and


 


(ii)           Such member does not hold any options to
purchase Common Stock of the Company, except for stock options previously
granted pursuant to the Plan, the 1996 or the 1992 Non-Employee Director Stock
Option Plan.


 


(b)           ADVISORY BOARD MEMBERS.


 


Each
member of the Advisory Board who satisfies all of the following criteria shall
be eligible to be a Participant in the Plan:


 


(i)            Such member is not, and has not during the
immediately preceding 12-month period, been an employee of the Company or any
Subsidiary; and


 


(ii)           Such member does not hold any options to
purchase Common Stock of the Company, except for stock options previously
granted pursuant to the Plan.


 










(1)           The Plan originally
authorized 200,000 Shares for issuance. 
An amendment to the Plan to increase the number of Shares authorized
under the Plan by 200,000 shares was approved by the Board on February 16, 2005
and by the Company’s shareholders on April 28, 2005.


 


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6.             NON-EMPLOYEE DIRECTOR OPTIONS


 


(a)           GRANT OF NON-EMPLOYEE DIRECTOR OPTIONS.


 


(i)            Initial Non-Employee Director Option Grants. Each Non-Employee Director first elected or
appointed to the Board at any time after July 29, 1999, shall receive, by
virtue of serving as a Non-Employee Director of the Company, an initial grant
of a Non-Statutory Stock Option to purchase 15,000 Shares which shall be deemed
to be granted to a Non-Employee Director immediately after the Non-Employee
Director’s initial election or appointment to the Board. Each Non-Employee
Director who was a Non-Employee Director of the Company on July 29, 1999,
shall receive, by virtue of serving as a Non-Employee Director, an initial
grant of a Non-Statutory Stock Option to purchase 15,000 shares which shall be
deemed to be granted to such Non-Employee Director on the effective date of
this Plan. Each option granted under this Section 6(a)(i) is referred
to herein as an Initial Non-Employee Director Option. Directors who, as of the
date of initial election or appointment to the Board, are or were employees of
the Company or any Subsidiary and later become Non-Employee Directors shall
receive Initial Non-Employee Director Options one year after they are no longer
employees of the Company.


 


(ii)           On-going Non-Employee Director Option Grants
for Directors first elected after July 29, 1999. On the third anniversary after the grant of
the Initial Non-Employee Director Option, Non-Employee Director shall be
granted a Non-Statutory Stock Option to purchase 18,000 shares and on the sixth
anniversary, and each three year anniversary thereafter, after the grant of the
Initial Non-Employee Director Option, Non-Employee Director shall be granted a
Non-Statutory Stock Option to purchase 21,000 shares, provided Non-Employee
Director continues as a member of the Board of Directors.


 


(iii)          On-going Non-Employee Director Option Grants
for Directors elected before July 29, 1999 (Pre-Plan Non-Employee
Directors. Upon reelection
to the Board at the annual stockholders meeting in 2002, Non-Employee Director
shall be granted a Non-Statutory Stock Option to purchase 18,000 shares and on
re-election to the Board at the annual meeting in 2005 and each three year
annual meeting date thereafter, Non-Employee Director shall be granted a
Non-Statutory Stock Option to purchase 21,000 shares, provided Non-Employee
Director continues to be elected to the Board of Directors.


 


(b)           EXERCISABILITY OF OPTIONS.


 


Non-Employee
Director Options shall vest and become exercisable cumulatively as follows:


 


(i)            For Directors joining the Board after July 29,
1999, one/third upon grant and one/third on each successive one-year
anniversary from date of grant.


 


(ii)           For Pre-Plan Non-Employee Directors,
one/third on date of grant and one/third on each successive annual re-election
to the Board of Directors.


 


Notwithstanding the
foregoing, vesting of a Non-Employee Director Option shall accelerate and the
Non-Employee Director Option shall become immediately exercisable in full in
accordance with Section 16 hereof.


 


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Each Non-Employee Director
Option, to the extent exercisable, shall be exercisable in whole or in part.


 


(c)           TERM.


 


Subject
to Section 13 hereof, Non-Employee Director Options shall expire at the
earlier of (i) the 8-year anniversary date of the grant of the
Non-Employee Director Option, or (ii) except as otherwise provided in Section 16
hereof, one year after the date the Non-Employee Director ceases to be a
director of the Company to the extent that such Option was vested on the date
of termination. In no event shall any Non-Employee Director Option be
exercisable at any time after its expiration date. When a Non-Employee Director
Option is no longer exercisable, it shall be deemed to have lapsed or
terminated.


 


(d)           EXERCISE PRICE.


 


The
purchase price of each Share subject to a Non-Employee Director Option shall be
the Fair Market Value per Share on the date of grant. A Non-Employee Director
may exercise a Non-Employee Director Option using as payment any form of
consideration provided for in Section 8 hereof.


 


7.             ADVISORY COMMITTEE MEMBER OPTIONS


 


(a)           GRANT OF ADVISOR OPTIONS. An Advisor may be
granted from time to time one or more Non-Statutory Stock Options under the
Plan and such Advisor Options shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined by the
Committee in its sole discretion.


 


(b)           EXERCISABILITY. An Advisor Option shall
become exercisable at such times and in such installments (which may be
cumulative) as shall be determined by the Committee in its sole discretion at
the time the Advisor Option is granted.


 


(c)           TERM. Subject to Section 13 hereof, the
duration of Advisor Options shall be fixed by the Committee in its sole
discretion at its date of grant.


 


(d)           EXERCISE PRICE. The per share purchase price
to be paid by the Advisor at the time an Advisor Option is exercised shall be
determined by the Committee in its sole discretion at the time the Advisor
Option is granted; provided, however, that such price shall not be less than
the Fair Market Value of one share of Common Stock on the date the Advisor
Option is granted.


 


8.             PAYMENT OF EXERCISE PRICE


 


The purchase price of each
Share subject to Options granted under the Plan shall be payable at the time
written notice of exercise is given to the Company. Payment for Shares issued
upon exercise of an option may consist of cash, check, exchange of Previously
Acquired Shares (by tendering to the Company shares previously owned by the
Participant which have a Fair Market Value on the date of exercise equal to the
option price), or a combination thereof.


 


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9.             OPTION AGREEMENT


 


Each Option granted under
this Plan shall be evidenced by a stock option agreement between the Company
and the Participant to whom the option is granted.


 


10.          EXERCISE OF OPTION


 


(a)           The exercise of any Option may be contingent
upon receipt from the Participant (or other person rightfully exercising the
option) of a representation that, at the time of such exercise, it is his of
her present intention to acquire the Shares received thereunder for investment
and not with a view to distribution thereof. Certificates for Shares so issued
may be restricted as to transfer upon advice of legal counsel that such
restriction is appropriate to comply with applicable securities laws.


 


(b)           The exercise of any Option shall only be
effective at such time as counsel to the Company shall have determined that the
issuance and delivery of Shares pursuant to such exercise will not violate any
state or federal securities or other laws. The Company may, in its sole
discretion, defer the effectiveness of any Option exercised hereunder in order
to permit registration or an exemption from registration for such issuance of
Shares for the purpose of compliance with applicable federal and state
securities laws.


 


(c)           A Participant electing to exercise an Option
shall give written notice to the Company of such election and of the number of
Shares subject to such exercise. The full purchase price of such Shares shall
be tendered with such notice of exercise. Until such person has been issued a
certificate or certificates for the Shares subject to such exercise, he or she
shall possess no rights as a shareholder with respect to such Shares.


 


11.          RIGHT TO TERMINATE SERVICE


 


Nothing in the Plan or in
any agreement hereunder shall confer on any Participant any right to continue
as a Director or Advisor of the Company or affect, in any way, the right of the
Company to terminate his or her service as a Director or Advisor at any time.


 


12.          RESTRICTED STOCK


 


(a)           Administration. 
Shares of Restricted Stock may be issued either alone or in addition to
other awards granted under the Plan.  The
Committee has the right to determine to whom, and the time or times at which,
Restricted Stock awards will be made, the number of shares to be awarded, the
time or times within which such awards may be subject to forfeiture, and all
other conditions of the awards.  The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.


 


(b)           Awards and Certificates.  The
prospective recipient of an award of shares of Restricted Stock shall not have
any rights with respect to such award, unless and until such recipient has
executed an agreement evidencing the award and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.


 


(i)            Each participant shall be issued a stock
certificate in respect of shares of Restricted Stock awarded under the
Plan.  Such certificate shall be registered
in the name of the participant, and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such award,
substantially in the following form:


 


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“The transferability of this
certificate and the shares of stock represented hereby are subject to the terms
and conditions (including forfeiture) of the Enpath Medical, Inc. 1999
Non-Employee Director and Medical Advisory Board Stock Option Plan and an
Agreement entered into between the registered owner and Enpath Medical, Inc.  Copies of such Plan and Agreement are on file
in the offices of Enpath Medical, Inc., 15301 Hwy 55 West, Plymouth, MN
55447.”


 


(ii)           The Committee must require that the stock
certificates evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Shares covered by such award.


 


(c)           Restrictions and Conditions.  The
shares of Restricted Stock awarded pursuant to the Plan shall be subject to the
following restrictions and conditions:


 


(i)            Subject to the provisions of this Plan and
the award agreement, during a period set by the Committee commencing with the
date of such award (the “Restriction Period”), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan.  Within these
limits, the Committee may provide for the lapse of such restrictions in
installments where deemed appropriate.


 


(ii)           Except as provided in paragraph (c)(i) of
this Section 12, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares and the right to receive any cash dividends.  The Committee, in its sole discretion, may
permit or require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested in additional shares of Restricted Stock
(to the extent shares are available under Section 3 and subject to
paragraph (c)(vi) of this Section 12).


 


(iii)          Subject to the provisions of the award
agreement and paragraph (c)(iv) of this Section 12, upon termination
of employment for any reason during the Restriction Period, all shares still
subject to restriction shall be forfeited by the participant.


 


(iv)          In the event of special hardship
circumstances of a participant whose directorship is terminated (other than for
cause), including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the Committee may,
in its sole discretion, when it finds that a waiver would be in the best
interest of the Company, waive in whole or in part any or all remaining
restrictions with respect to such participant’s shares of Restricted Stock.


 


(v)           Notwithstanding the foregoing, in the event
of the sale by the Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, exchange,
consolidation or liquidation of the Company, the Board shall, in its sole
discretion, in connection with the Board’s adoption of the plan for sale,
merger, exchange, consolidation or liquidation, provide for one or more of the
following with respect to Restricted Stock Awards that are, on such date, still
subject to a Restriction Period:  (i) the
removal of the restrictions on any or all outstanding Restricted Stock Awards; (ii) the
complete termination of this Plan and forfeiture of outstanding Restricted
Stock Awards prior to a date


 


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specified
by the Board; and (iii) the continuance of the Plan with respect to the
Restricted Stock Award which were outstanding as of the date of adoption by the
Board of such plan for sale, merger, exchange, consolidation or liquidation and
provide to participants holding Restricted Stock Awards the right to an
equivalent number of restricted shares of stock of the corporation succeeding
the Company by reason of such sale, merger, exchange, consolidation or
liquidation.  The grant of a Restricted
Stock Award pursuant to the Plan shall not limit in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.


 


(vi)          As a condition of any Restricted Stock award,
the Company may require the participant to represent and warrant to the Company
at the time of the award that the Shares are being acquired only for investment
and without any present intention to sell or distribute the Shares if, in the
opinion of counsel for the Company, that such representation is required under
the Securities Act of 1933, or any other applicable law, regulation or rule of
any governmental agency.


 


13.          SUSPENSION OR TERMINATION OF OPTIONS


 


If the President of the
Company or his or her designee reasonably believes that a Participant has
committed an act of misconduct, the President may suspend the Participant’s
right to exercise any Option pending a determination by the Board (excluding
the Director accused of such misconduct). If the Board (excluding the Director
accused of such misconduct) determines that the Participant has committed an
act of embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of Company rules or
policies resulting in loss, damage or injury to the Company, or if a
Participant makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company, or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Participant nor his or her
estate shall be entitled to exercise any Option whatsoever. In making such a
determination, the Board (excluding the Director accused of such misconduct)
shall give the Participant an opportunity to appear and present evidence on the
Participant’s behalf at a hearing before the Board.


 


14.          NON-TRANSFERABILITY


 


No Option granted under the
Plan shall be transferable by a Participant, other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended, or Title I of the
Employee Retirement Income Security Act or the rules thereunder. During
the lifetime of a Participant, the Option shall be exercisable only by such
Participant.


 


15.          DILUTION OR OTHER ADJUSTMENTS


 


If there shall be any change
in the Shares of the Company through merger, consolidation, reorganization,
recapitalization, stock dividend (of whatever amount), stock split or other
change in the corporate structure, appropriate adjustments in the Plan and
outstanding options shall be made by the Board. In the event of any such
changes, adjustments shall include, where appropriate, changes in the aggregate
number of Shares subject to the Plan and in the number of Shares and the price
per Share subject to outstanding options, in order to prevent dilution or
enlargement of option rights.


 


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16.          CHANGE OF CONTROL OF THE COMPANY


 


In the event of a Change in
Control (as hereinafter defined), an Option granted to a Participant shall
become fully exercisable if, within one year of such Change in Control, such
Participant shall cease for any reason to be a member of the Board or Advisory
Board, as the case may be. Any exercise of an Option permitted by these Change
of Control provisions may be made at any time during the remaining term of the
Option. A Change in Control shall be deemed to have occurred if (i) there
shall be consummated (x) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant to which
Shares would be converted into cash, securities, or other property, other than
a merger in which shareholders of the Company immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or (ii) the
shareholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company; or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934
(the “1934 Act”)) shall become the beneficial owner (within the meaning of Rule 1
3d-3 under the 1934 Act) of 30% or more of the Company’s outstanding Common
Stock; or (iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board of Directors shall
cease for any reason to constitute a majority thereof unless the election, or
the nomination for election by the Company’s shareholders, of each new Director
was approved by a vote of at least two-thirds of the Directors then still in
office who were Directors at the beginning of the period.


 


17.          AMENDMENT OR DISCONTINUANCE OF PLAN


 


The Board may amend or
discontinue the Plan at any time provided, however, that, if necessary to
maintain the Plan in compliance with Exchange Act Rule 16b-3, the Plan may
not be amended more than once every six months, other than to comport with
changes in the Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder. Further, if necessary to maintain the Plan
in compliance with Exchange Act Rule 16b-3, no amendment of the Plan
shall, without shareholder approval: (i) increase by more than 10% the
number of Shares issuable under the Plan (not including increases to reflect
stock splits and stock dividends); (ii) change the eligibility
requirements or the limits on Options; (iii) decrease the minimum option
price; (iv) extend the maximum option term; or (v) materially
increase the benefits which may accrue to Participants under the Plan. Except
as provided in Section 13 hereof, the Board shall not alter or impair any
Option previously granted under the Plan without the consent of the holder of
the Option.


 


18.          TERMINATION OF PLAN


 


Unless the Plan shall have
been discontinued as provided in Section 17 hereof, the Plan shall
terminate on July 29, 2011. No Option may be granted after such date, but
termination of the Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option granted prior to
termination of the Plan.


 


19.          SHAREHOLDER APPROVAL


 


Provided that approval of
the Company’s shareholders is required under Section 17 of the Exchange
Act and the rules and regulations thereunder, the Plan shall be null and
void, and each option granted hereunder shall be null and void, if the
shareholders of the Company shall not have approved the Plan prior to May 1,
2000.


 


_____________________


Originally adopted
by Board on July 29, 1999 and approved by shareholders on April 27,
2000.


Subsequently amended
by Board on February 16, 2005 and approved by shareholders on April 28,
2005.


 


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