exv10w2



 





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 I. GRANT 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 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



2









 







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, the Optionee may pay the total purchase price of
the shares to be purchased (i) in cash, (ii) by transfer from the Optionee to the Company of
previously acquired shares of Common Stock, (iii) through the withholding of shares of Stock from
the number of shares otherwise issuable upon the exercise of the Option (e.g., a net share
settlement), or (iv) by a combination thereof; provided, however, that the Optionee may not pay any
portion of the purchase price through a net share settlement unless and until the shareholders of
the Company have approved an amendment to the Plan that authorizes such payment option.
In the event the Optionee elects to pay the purchase price in whole or in part with previously
acquired shares of Common Stock or through a net share settlement, the Fair Market Value of the
shares delivered or withheld shall equal the total exercise price for the shares being purchased in
such manner. 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



3









 







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 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.



4









 





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
“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



5









 







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.



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



6









 







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.



     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                     , ___.



7









 





     The parties hereto have executed this Agreement effective the day and year first above
written.



	 	 	 	 	 
	 	HEALTH FITNESS CORPORATION

 	 
	 	By  	 	 
	 	 	Its: 	 	 
	 	 	 	 
	 




	 	 	 	 	 
	By execution hereof, the

Optionee acknowledges having

received a copy of the Plan.	OPTIONEE

 	 
	 	 
	 






8