Document:

EXHIBIT 4.8

 

EXHIBIT 4.8

CHRONIMED INC.

2001 STOCK INCENTIVE PLAN

ARTICLE I

THE PURPOSE; EFFECT ON PRIOR PLANS

     The purpose of this Plan is to promote the success of the Company by providing an
additional means to attract, motivate and retain employees and, through the grant of Options
and other Awards that provide added long term incentives for high levels of performance, to
improve the financial performance of the Company. The Plan is intended to replace prior
stock option plans that have been previously approved by the shareholders of the Company.
The Company will not issue additional options under such plans except that the Company may,
in accordance with such plans, issue new options to the extent that any currently issued
options are unexercised at the time they terminate or are forfeited.

ARTICLE II

DEFINITIONS

     SECTION 2.1. Definitions.

     (a) “Administrator” shall mean the Compensation Committee or any other Committee of directors
appointed by the Board for purposes of serving as the Committee under this Plan.

     (b) “Award” shall mean a Nonqualified Stock Option, an Incentive Stock Option, a Performance
Stock Option, a Reload Option, a Stock Appreciation Right, a Restricted Stock Award, a Performance
Share Award, or any other stock award granted under this Plan.

     (c) “Award Agreement” shall mean a written agreement setting forth the terms of an Award.

     (d) “Award Date” shall mean the date upon which the Administrator took the action granting an
Award or such later date as is prescribed by the Administrator.

     (e) “Award Period” shall mean the period beginning on an Award Date and ending on the
expiration date of such Award.

     (f) “Beneficiary” shall mean the person, persons, trust or trusts entitled by will or the laws
of descent and distribution to receive the benefits specified under this Plan in the event of a
Participant’s death, and shall mean the Award holder’s executor or administrator in such
circumstances if no other Beneficiary is identified and able to act.

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     (g) “Board” shall mean the Board of Directors of the Corporation.

     (h) “Change in Control” shall be deemed to have occurred if (A) any “person” (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the Corporation’s then
outstanding securities; or (B) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election by the Corporation’s
shareholders, of each new Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Administrator members at the beginning of such period.

     (i) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

     (j) “Commission” shall mean the Securities and Exchange Commission.

     (k) “Committee” shall mean a committee appointed by the Board of Directors.

     (l) “Common Stock” shall mean the Common Stock of the Corporation.

     (m) “Company” shall mean, collectively, Chronimed Inc. and its Subsidiaries.

     (n) “Consultant” means any person or entity, other than an officer or director of the Company,
who provides consulting or advisory services (other than as an Employee) to the Company.

     (o) “Corporation” shall mean Chronimed Inc. and its successors.

     (p) “Eligible Employee” shall mean an officer or employee of the Company.

     (q) “Event” shall mean any of the following:

     (1) Approval by the shareholders of the Corporation of the dissolution or liquidation
of the Corporation;

     (2) Approval by the shareholders of the Corporation of an agreement to merge or
consolidate, or otherwise reorganize, with or into one or more entities which are not
Subsidiaries, as a result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity are, or are to be, owned by former shareholders of the
Corporation;

     (3) Approval by the shareholders of the Corporation of the sale of substantially all of
the Corporation’s business and/or assets to a person or entity which is not a Subsidiary; or

     (4) A Change in Control.

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     (r) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     (s) “Fair Market Value” shall mean (i) if the stock is listed or admitted to trade on a
national securities exchange, the closing price of the stock on the Composite Tape, as published in
the Midwest Edition of The Wall Street Journal, of the principal national securities exchange on
which the stock is so listed or admitted to trade, on such date, or, if there is no trading of the
stock on such date, then the closing price of the stock as quoted on such Composite Tape on the
next preceding date on which there was trading in such shares; (ii) if the stock is not listed or
admitted to trade on a national securities exchange, the last price for the stock on such date, as
furnished by the National Association of Securities Dealers, Inc. (“NASD”) through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no longer reporting such
information; (iii) if the stock is not listed or admitted to trade on a national securities
exchange and is not reported on the National Market Reporting System, the mean between the bid and
asked price for the stock on such date, as furnished by the NASD; or (iv) if the stock is not
listed or admitted to trade on a national securities exchange, is not reported on the National
Market Reporting System and if bid and asked prices for the stock are not furnished by the NASD or
a similar organization, the values established by the Administrator for purposes of the Plan.

     (t) “Incentive Stock Option” shall mean an option which is designated as an incentive stock
option within the meaning of Section 422 of the Code, the award of which contains such provisions
as are necessary to comply with that section.

     (u) “Nonqualified Stock Option” shall mean an option which is designated as a Nonqualified
Stock Option or an option that fails (or to the extent that it fails) to satisfy the applicable
requirements under the Code for an Incentive Stock Option.

     (v) “Option” shall mean an option to purchase Common Stock under this Plan. An Option shall
be designated by the Administrator as a Nonqualified Stock Option, an Incentive Stock Option, or a
Performance Stock Option.

     (w) “Optionee” shall mean the person to whom an Option is granted.

     (x) “Participant” shall mean an Eligible Employee who has been granted an Award.

     (y) “Performance Share Award” shall mean an award of shares of Common Stock, issuance of which
is contingent upon attainment of performance objectives specified by the Administrator.

     (z) “Performance Stock Option” shall mean an option granted under Section 4.6 of this Plan,
the exercise of which is contingent upon the attainment of specified performance objectives.

     (aa) “Personal Representative” shall mean the legal representative or representatives who,
upon the disability or incompetence of a Participant, shall have acquired on behalf of the
Participant by legal proceeding or otherwise the power to exercise the rights and receive the
benefits specified in this Plan.

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     (bb) “Plan” shall mean this 2001 Stock Incentive Plan.

     (cc) “Reload Option” shall have the meaning set forth in Section 4.8 of
this Plan.

     (dd) “Restricted Stock” shall mean those shares of Common Stock issued pursuant to a
Restricted Stock Award which are subject to the restrictions set forth in the related Award
Agreement.

     (ee) “Restricted Stock Award” shall mean an award of a fixed number of shares of Common Stock
to the Participant subject, however, to payment of such consideration, if any, and such forfeiture
provisions, as are set forth in the Award Agreement.

     (ff) “Retirement” shall mean retirement at age 65.

     (gg) “Rule l6b-3” means Rule l6b-3 under Section 16 of the Exchange Act, as applicable to this
Plan (taking into consideration relevant transition period provisions) and as the same may be
amended from time to time.

     (hh) “Section l6 Person” means a person subject to the reporting requirements of Section 16(a)
of the Exchange Act.

     (ii) “Securities Act” shall mean the Securities Act of 1933.

     (jj) “Stock Appreciation Right” shall mean a right to receive a number of shares of Common
Stock or an amount of cash, or a combination of shares and cash, determined as provided in the
applicable Section of this Plan or in the Award Agreement with respect thereto.

     (kk) “Subsidiary” shall mean any corporation or other entity a majority or more of whose
outstanding voting stock or voting power is beneficially owned directly or indirectly by the
Corporation.

     (ll) “Tax-Offset Bonus” shall mean a bonus payable upon exercise of a nonstatutory Option or
upon a disqualifying disposition of Common Stock acquired pursuant to the exercise of an Incentive
Stock Option, determined as provided in the applicable Section of this Plan or in an Award
Agreement providing for such Bonus.

     (mm) “Total Disability” shall mean a “permanent and total disability” within the meaning of
Section 22(e)(3) of the Code.

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ARTICLE III

THE PLAN

     SECTION 3.1. Administration.

     (a) This Plan shall be administered by the Administrator. The Administrator may delegate
ministerial, nondiscretionary functions to individuals who are officers or employees of the
Company.

     (b) Subject to the express provisions of this Plan, the Administrator shall have the authority
to construe and interpret this Plan and any agreements defining the rights and obligations of the
Company and Participants under this Plan; to identify among Eligible Employees and Consultants
those to whom Awards will be granted and (consistent with express limits of this Plan) the terms of
such Awards; to further define the terms used in this Plan and prescribe, amend and rescind rules
and regulations relating to the administration of this Plan; either generally or on a case by case
base to establish terms and conditions pertaining to termination of employment, modify or amend any
outstanding Award or waive any condition or restriction of an Award, or extend (up to a maximum
term of ten (10) years after the initial Award Date) the term or post-termination exercise period
of any outstanding Award, or reduce (subject to Sections 4.4, 5.2(d) and 8.5) the minimum vesting
period after initial grant to a Participant; to determine the duration and purposes of leaves of
absence which may be granted to Participants without constituting a termination of their employment
for purposes of this Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The determinations of the Administrator on the foregoing matters shall
be conclusive.

     (c) Any action taken by, or inaction of, the Corporation, any Subsidiary, the Board or the
Administrator relating to this Plan shall be within the absolute discretion of that entity or body.
No member of the Administrator, or officer of the Corporation or any Subsidiary, shall be liable
for any such action or inaction.

     SECTION 3.2. Participation. Awards of Incentive Stock Options may be granted only to Eligible
Employees. All other Awards may be granted to Eligible Employees and Consultants. Any individual
who has been granted an Award may, if otherwise eligible, be granted additional Awards if the
Administrator shall so determine.

     SECTION 3.3. Stock Subject to the Plan. The maximum aggregated amount of Common Stock that may
be issued pursuant to Awards granted under this Plan shall not exceed 1,760,296 shares, subject to
adjustment as set forth in Section 8.2. Reload Options, however, may be granted pursuant to Section
4.8 without regard to the limit in the preceding sentence. The maximum aggregate amount of Common
Stock includes 760,296 shares previously authorized for issuance by the shareholders under prior
stock option plans for which awards have not been granted.

     SECTION 3.4. Grant of Awards. Subject to the express provisions of the Plan, the Administrator
shall determine from the class of Eligible Employees and Consultants those

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individuals to whom Awards under the Plan shall be granted, the terms of Awards (which need
not be identical) and the number of shares of Common Stock subject to each Award. Each Award shall
be subject to the terms and conditions set forth in the Plan and such other terms and conditions
established by the Administrator as are not inconsistent with the purpose and provisions of the
Plan.

     SECTION 3.5. Exercise of Awards. Notwithstanding any other provision of this Plan, the
Administrator may impose, by rule and in Award Agreements, such conditions upon the exercise of
Awards (including, without limitation, conditions limiting the time of exercise to specified
periods) as may be required to satisfy applicable regulatory requirements, including without
limitation Rule l6b-3.

     SECTION 3.6. Share Reservation. No Award may be granted under this Plan unless, on the date of
grant, the sum of (i) the maximum number of shares issuable at any time pursuant to such Award,
plus (ii) the number of shares that previously have been issued pursuant to Awards granted under
this Plan, other than reacquired shares available for reissue consistent with any applicable
limitations under Rule 16b-3, plus (iii) the maximum number of shares that may be issued after such
date of grant pursuant to Awards granted under this Plan that remain outstanding on such date, does
not exceed the share limit in Section 3.3.

     SECTION 3.7. Provisions for Certain Cash Awards. The number of Awards under this Plan that are
payable solely in cash that would constitute derivative securities (“Cash Only Awards”) shall be
determined by reference to the number of shares referenced for purpose of determining the value or
price of the Cash Only Award (the “underlying shares”). The maximum number of Cash Only Awards
under this Plan shall not, together with the number of shares previously issued and subject to then
outstanding Awards payable (or deemed payable) in shares under this Plan, exceed the share limit in
Section 3.3. To the extent that any Cash Only Awards expire or are terminated without the cash
payment being made, the underlying shares shall again be available under this Plan.

     SECTION 3.8. Reissue of Awards and Shares. Other Awards payable in cash or payable in cash or
shares that are forfeited or for any reason are not so paid under this Plan, as well as shares
subject to Awards that expire or for any reason are terminated and are not issued, shall again, to
the extent permitted under Rule l6b-3, be available for subsequent Awards under the Plan. The
foregoing shall not apply to any forfeited or unexercised Reload Options.

     SECTION 3.9. Plan Not Exclusive. Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Administrator to grant awards or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or authority.

ARTICLE IV

OPTIONS

     SECTION 4.1. Grants. One or more Options may be granted to any Eligible Employee or
Consultant. Each Option so granted shall be designated by the Administrator as either a
Nonqualified Stock Option, an Incentive Stock Option (but only if the Award is to an Eligible

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Employee) or a Performance Stock Option. The maximum number of shares underlying Options that
may be granted to any one person during any given fiscal year of the Corporation shall be 300,000
shares.

     SECTION 4.2. Option Price.

     (a) Subject to applicable law, the purchase price per share of the Common Stock covered by
each Option shall be determined by the Administrator, but in the case of any Incentive Stock
Option, unless otherwise permitted under the Code, shall not be less than 100% (or 110% in the case
of a Participant who owns or under applicable Code provisions is deemed to own more than 10% of the
total combined voting power of all classes of stock of the Company) of the Fair Market Value of the
Common Stock on the date the Incentive Stock Option is granted. The purchase price of any shares
purchased on exercise of any Option shall be paid in full at the time of each purchase in one or a
combination of the following methods:

     (i) in cash, or by check payable to the order of the Corporation,

     (ii) if authorized by the Administrator or specified in the Option being exercised, by
a promissory note made by the Participant in favor of the Corporation, upon the terms and
conditions determined by the Administrator, bearing interest at a rate sufficient to avoid
imputed interest under the Code, and secured by the Common Stock issuable upon exercise in
compliance with applicable law (including, without limitation, state corporate law and
federal margin requirements), or

     (iii) by shares of Common Stock of the Corporation already owned by the Participant;
provided, however, the Administrator may in its absolute discretion limit the Participant’s
ability to exercise an Option by delivering shares, and any shares delivered which were
initially acquired upon exercise of a stock option must have been owned by the Participant
at least six months as of the date of delivery.

     Shares of Common Stock used to satisfy the exercise price of an Option shall be valued at
their Fair Market Value on the date of exercise.

     (b) In addition to the payment methods described in subsection (a), the Option may provide
that the Option can be exercised and payment made by delivering a properly executed exercise notice
together with irrevocable instructions to a bank or broker to promptly deliver to the Corporation
the amount of sale or loan proceeds necessary to pay the exercise price and, unless otherwise
allowed by the Administrator, any applicable tax withholding under Section 8.6. The Corporation
shall not be obligated to deliver certificates for the shares unless and until it receives full
payment of the exercise price therefor.

     (c) An Option shall be deemed to be exercised when the Secretary of the Corporation receives
written notice of such exercise from the Participant, together with payment of the purchase price
made in accordance with Section 4.2(a) and satisfaction of any applicable tax withholding under
Section 6.6, except to the extent payment may be permitted to be made following delivery of written
notice of exercise in accordance with Section 4.2(b).

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     (d) At the discretion of the Committee, an Optionee may also arrange to have the appropriate
number of shares otherwise issuable upon exercise withheld or sold to cover the withholding tax
liability associated with the Option exercise.

     (e) Notwithstanding any other provision of the Plan, at the sole discretion of the Committee,
an Optionee may, at least six months before exercising any Nonqualified Stock Option granted to him
or her under the Plan, elect to defer the receipt of any shares upon the exercise of such Option by
entering into a deferred compensation agreement approved by the Committee.

     SECTION 4.3. Option Period. Each Option and all rights or obligations thereunder shall expire
on such date as shall be determined by the Administrator, but not later than 10 years after the
Award Date, and shall be subject to earlier termination as hereinafter provided.

     SECTION 4.4. Exercise of Options. Except as otherwise provided in Section 8.4 or in the case
of death or Total Disability, no Option shall be exercisable for at least six months after the
Award Date. The Administrator may, at any time after grant of the Option and from time to time,
increase the number of shares purchasable on or after any particular date so long as the total
number of shares then subject to the Option is not increased. No Option shall be exercisable except
in respect of whole shares, and fractional share interests shall be disregarded. Not less than 10
shares of Common Stock may be purchased at one time unless the number purchased is the total number
at the time available for purchase under the terms of the Option.

     SECTION 4.5. Limitations on Grant of Incentive Stock Options.

     (a) To the extent that the aggregate Fair Market Value of stock with respect to which an
Option intended as an Incentive Stock Option first exercisable by a Participant in any calendar
year exceeds $100,000, such options shall be treated as Nonqualified Stock Options. To the extent
any discretionary action is necessary to meet any such limits, the Administrator on behalf of the
Corporation may, in the manner and to the extent permitted by law, take such action.

     (b) There shall be imposed in any Award Agreement relating to Incentive Stock Options such
terms and conditions as are required in order that the Option be an “incentive stock option” as
that term is defined in Section 422 of the Code.

     (c) Unless otherwise permitted under applicable provisions of the Code, no Incentive Stock
Option may be granted to any person who, at the time the Incentive Stock Option is granted, owns or
under applicable Code provisions is deemed to own shares of outstanding Common Stock possessing
more than 10% of the total combined voting power of all classes of stock of the Company, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the stock subject to the
Option and such Option by its terms is not exercisable after the expiration of five years from the
date such Option is granted.

     Performance Stock Options. The Administrator may grant Performance Stock Options
to Eligible Employees and Consultants who are deemed by the Administrator to be members of senior
management whose performance has a direct relationship to improvement of the earnings of the
Company. Vesting of such Options shall be contingent upon attainment of performance

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objectives measured by compounded earnings growth and such other criteria as may be
established by the Administrator.

     Tax Offset Bonuses. In its discretion the Administrator may, in the Award
Agreement, provide for a Tax-Offset Bonus to Participants upon exercise of Nonqualified or
Performance Stock Options or to any Participant who elects to make a disqualifying disposition (as
defined in Section 422(a)(l) of the Code) of Common Stock acquired pursuant to the exercise of an
Incentive Stock Option. The Tax-Offset Bonus shall be in the form of a cash payment equal to a
percentage of the difference between the exercise price and the Fair Market Value on the date of
exercise of the Common Stock with respect to which the Bonus is payable. Such percentage shall be
designed to offset the impact of additional taxes which result from the exercise of the Option or
the disqualifying disposition, as the case may be.

     SECTION 4.8. Reload Options. If an Optionee tenders shares of Common Stock to pay the exercise
price of an Option in accordance with Section 4.2(a)(iii) or arranges to have a portion of the
shares otherwise issuable upon exercise withheld or sold to pay the applicable withholding taxes in
accordance with Section 4.2(d), the Optionee may receive, at the discretion of the Committee, a new
“Reload Option” equal to the number of shares tendered to pay the exercise price and the number of
shares used to pay withholding taxes. Reload Options shall be issued only as Nonqualified Stock
Options and will be granted under such terms, conditions, restrictions and limitations as may be
determined by the Committee from time to time. Reload Options may also be granted in connection
with the exercise of options granted under any other plan of the Company which may be designated by
the Committee from time to time, except as to Incentive Stock Options which have already been
granted.

ARTICLE V

STOCK APPRECIATION RIGHTS.

     SECTION 5.1. Grants.

     In its discretion, the Administrator may grant Stock Appreciation Rights concurrently with the
grant of Options. A Stock Appreciation Right shall extend to all or a portion of the shares covered
by the related Option. A Stock Appreciation Right shall entitle the Participant who holds the
related Option, upon exercise of the Stock Appreciation Right and surrender of the related Option,
or portion thereof, to the extent the Stock Appreciation Right and related Option each were
previously unexercised, to receive payment of an amount determined pursuant to Section 5.3. Any
Stock Appreciation Right granted in connection with an Incentive Stock Option shall contain such
terms as may be required to comply with the provisions of Section 422 of the Code and the
regulations promulgated thereunder. In its discretion, the Administrator may also grant Stock
Appreciation Rights independently of any Option subject to such conditions as the Administrator may
in its absolute discretion provide.

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     SECTION 5.2. Exercise of Stock Appreciation Rights.

     (a) A Stock Appreciation Right granted concurrently with an option shall be exercisable only
at such time or times, and to the extent, that the related Option shall be exercisable and only
when the Fair Market Value of the stock subject to the related Option exceeds the exercise price of
the related Option.

     (b) In the event that a Stock Appreciation Right granted concurrently with an Option is
exercised, the number of shares of Common Stock subject to the related Option shall be charged
against the maximum amount of Common Stock that may be issued or transferred pursuant to Awards
under this Plan. The number of shares subject to the Stock Appreciation Right and the related
Option of the Participant shall also be reduced by such number of shares.

     (c) If a Stock Appreciation Right granted concurrently with an Option extends to less than all
the shares covered by the related Option and if a portion of the related Option is thereafter
exercised, the number of shares subject to the unexercised Stock Appreciation Right shall be
reduced only if and to the extent that the remaining number of shares covered by such related
Option is less than the remaining number of shares subject to such Stock Appreciation Right.

     (d) A Stock Appreciation Right granted independently of any Option shall be exercisable
pursuant to the terms of the Award Agreement but in no event earlier than six months after the
Award Date, except in the case of death or Total Disability.

     SECTION 5.3. Payment.

     (a) Upon exercise of a Stock Appreciation Right and surrender of an exercisable portion of the
related Option, the Participant shall be entitled to receive payment of an amount determined by
multiplying:

     (1) the difference obtained by subtracting the exercise price per share of Common Stock
under the related Option from the Fair Market Value of a share of Common Stock on the date
of exercise of the Stock. Appreciation Right, by

     (2) the number of shares with respect to which the Stock Appreciation Right shall have
been exercised.

     (b) The Administrator, in its sole discretion, may settle the amount determined under
paragraph (a) above solely in cash, solely in shares of Common Stock (valued at Fair Market Value
on the date of exercise of the Stock Appreciation Right), or partly in such shares and partly in
cash, provided that the Administrator shall have determined that such exercise and payment are
consistent with applicable law. In any event, cash shall be paid in lieu of fractional shares.
Absent a determination to the contrary, all Stock Appreciation Rights shall be settled in cash as
soon as practicable after exercise. The exercise price for the Stock Appreciation Right shall be
the exercise price of the related Option. Notwithstanding the foregoing, the Administrator may, in
the Award Agreement, determine the maximum amount of cash or stock or a combination thereof which
may be delivered upon exercise of a Stock Appreciation Right.

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     (c) Upon exercise of a Stock Appreciation Right granted independently of any Option, the
Participant shall be entitled to receive payment of an amount based on a percentage, specified in
the Award Agreement, of the difference obtained by subtracting the Fair Market Value per share of
Common Stock on the Award Date from the Fair Market Value per share of Common Stock on the date of
exercise of the Stock Appreciation Right. Such amount shall be paid as described in paragraph (b)
above.

ARTICLE VI

RESTRICTED STOCK AWARDS.

     SECTION 6.1. Grants. Subject to Section 3.3, the Administrator may, in its discretion, grant
one or more Restricted Stock Awards to any Eligible Employee or Consultant. Each Restricted Stock
Award Agreement shall specify the number of shares of Common Stock to be issued to the Participant,
the date of such issuance, the consideration to be paid for such shares by the Participant and the
restrictions imposed on such shares, which restrictions shall not terminate earlier than six (6)
months nor later than ten (10) years after the Award Date.

     SECTION 6.2. Restrictions.

     (a) Except as provided in or pursuant to Section 8.12, shares of Common Stock comprising
Restricted Stock Awards may not be sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, either voluntarily or involuntarily, until such shares have vested.

     (b) Unless the Administrator otherwise provides, Participants receiving Restricted Stock shall
be entitled to dividend and voting rights for the shares issued even though they are not vested,
provided that such rights shall terminate immediately as to any forfeited Restricted Stock.

     (c) In the event that the Participant shall have paid cash in connection with the Restricted
Stock Award, the Award Agreement shall specify whether and to what extent such cash shall be
returned upon a forfeiture (with or without an earnings factor).

     (d) Restricted Stock Awards may include performance or other conditions to vesting as the
Administrator deems appropriate.

ARTICLE VII

PERFORMANCE SHARE AWARDS

     SECTION 7.1. Grants. The Administrator may, in its discretion, grant other types of
performance-based Awards related to equity of the Company or any part thereof (“Performance Share
Awards”) to Eligible Employees or Consultants based upon such factors as the Administrator shall
determine. A Performance Share Award Agreement shall specify the number of shares of Common Stock
subject to the Performance Share Award, the price, if any, to be paid

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for such shares by the Participant and the conditions upon which issuance to the Participant
shall be based, which issuance shall not be earlier than six (6) months nor later than ten (10)
years after the Award Date.

ARTICLE VIII

OTHER PROVISIONS

     SECTION 8.1. Rights of Eligible Employees, Participants and Beneficiaries.

     (a) Adoption of this Plan shall not be construed as a commitment that any Award will be made
under this Plan to an Eligible Employee or to Eligible Employees generally.

     (b) Nothing contained in this Plan (or in Award Agreements or in any other documents related
to this Plan or to Awards) shall confer upon any Eligible Employee or Participant any right to
continue in the employ of the Company or constitute any contract or agreement of employment, or
interfere in any way with the right of the Company to reduce such person’s compensation or other
benefits or to terminate the employment of such Eligible Employee or Participant, with or without
cause. Nothing contained in this Plan or any document related thereto shall affect any other
contractual right of any Eligible Employee or Participant.

     SECTION 8.2. Adjustments Upon Changes in Capitalization.

     (a) If the outstanding shares of Common Stock are changed into or exchanged for cash or a
different number or kind of shares or securities of the Corporation or of another issuer, or if
additional shares or new or different securities are distributed with respect to the outstanding
shares of the Common Stock, through a reorganization or merger to which the Corporation is a party,
or through a combination, consolidation, recapitalization, reclassification, stock split, stock
dividend, reverse stock split, stock consolidation or other capital change or adjustment, an
appropriate proportionate, equitable adjustment shall be made in the number and kind of shares or
other consideration that is subject to or may be delivered under this Plan and pursuant to
outstanding Awards. Corresponding adjustments to the consideration payable with respect to Awards
granted prior to any such change and to the price, if any, paid in connection with or the criteria
applicable to Restricted Stock Awards or Performance Share Awards shall also be made. Any such
adjustments, however, shall be made without change in the total payment, if any, applicable to the
portion of the Award not exercised but with a corresponding adjustment in the price for each share.
Corresponding adjustments shall be made with respect to Stock Appreciation Rights based upon the
adjustments made to the Options to which they are related or, in the case of Stock Appreciation
Rights granted independently of any Option, based upon the adjustments made to Common Stock.

     (b) Upon the dissolution or liquidation of the Corporation, or upon a reorganization, merger
or consolidation of the Corporation with one or more corporations as a result of which the
Corporation is not the surviving corporation, the Plan shall terminate. The Administrator may
provide in writing in connection with, or in contemplation of, any such transaction for any or all
of the following alternatives (separately or in combination): (i) for the assumption by the

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successor corporation (if any) of the Awards theretofore granted or the substitution by such
corporation for such Awards of grants covering the stock of the successor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kind of securities and/or
other property and prices; (ii) for the continuance of the Plan by such successor corporation in
which event the Plan and the Awards shall continue in the manner and under the terms so provided;
or (iii) for the payment in cash, securities and/or other property in lieu of and in complete
satisfaction of such Awards.

     (c) In adjusting Awards to reflect the changes described in this Section 8.2, or in
determining that no such adjustment is necessary, the Administrator may rely upon the advice of
independent counsel and accountants of the Corporation, and the determination of the Administrator
shall be conclusive. No fractional shares of stock shall be issued under this Plan on account of
any such adjustment.

     SECTION 8.3. Termination of Employment. Unless the Administrator otherwise expressly
provides, either in the applicable Award Agreement or by subsequent modification thereof:

     (a) If the Participant’s employment by the Company terminates for any reason other than
Retirement (except in cases involving Incentive Stock Options), death or Total Disability, the
Participant shall have, subject to earlier termination pursuant to or as contemplated by Section
4.3, three (3) months from the date of termination of employment to exercise any Option to the
extent it shall have become exercisable on the date of termination of employment, and any Option
not exercisable on that date shall terminate. Notwithstanding the preceding sentence, in the event
the Participant is discharged for cause as determined by the Administrator in its sole discretion,
all Options shall terminate immediately upon receipt of the notice of termination of employment.

     (b) If the Participant’s employment by the Company terminates as a result of Retirement
(except in cases involving Incentive Stock Options) or Total Disability, the Participant or
Participant’s Personal Representative, as the case may be, shall have, subject to earlier
termination pursuant to or as contemplated by Section 4.3, twelve (12) months from the date of
termination of employment to exercise any Option to the extent it shall have become exercisable by
the date of termination of employment, and any Option not exercisable on that date shall terminate.

     (c) If the Participant dies while employed by the Company or during the twelve (12) month
period referred to in subsection (b) above, the Participant’s Option shall be exercisable by the
Participant’s Beneficiary, subject to earlier termination pursuant to or as contemplated by Section
4.3, during the twelve (12) month period following the Participant’s death, as to all or any part
of the shares of Common Stock covered thereby to the extent exercisable on the date of death (or
earlier termination).

     (d) Each Stock Appreciation Right granted concurrently with an Option shall have the same
termination provisions and exercisability periods as the Option to which it relates. The
termination provisions and exercisability periods of any Stock Appreciation Right granted
independently of an Option shall be established in accordance with Section 5.2(d). The

13

 

exercisability period of a Stock Appreciation Right shall not exceed that provided in Section
4.3 or in the related Award Agreement and the Stock Appreciation Right shall expire at the end of
such exercisability period.

     (e) In the event of termination of employment with the Company for any reason, (i) shares of
Common Stock subject to a Participant’s Restricted Stock Award shall be forfeited in accordance
with the provisions of the related Award Agreement to the extent such shares have not become vested
on that date; and (ii) shares of Common Stock subject to the Participant’s Performance Share Award
shall be forfeited in accordance with the provisions of the related Award Agreement to the extent
such shares have not been issued or become issuable on that date.

     (f) In the event of (or in anticipation of) a Participant’s termination of employment with the
Company for any reason, other than discharge for cause, the Administrator may, in its discretion,
accelerate the exercisability of or increase the portion of the Participant’s Award available to
the Participant, or Participant’s Beneficiary or Personal Representative, as the case may be, or
(subject to the ten (10)-year limit) extend the period after termination during which the Award may
continue to vest and/or be exercisable upon such terms and subject to such conditions as the
Administrator shall determine.

     (g) If an entity ceases to be a Subsidiary, such action shall be deemed for purposes of this
Section 8.3 to be a termination of employment of each employee of that entity who does not continue
as an employee of another entity within the Company.

     SECTION 8.4. Acceleration of Awards. Upon the occurrence of an Event (i) each Option and each
related Stock Appreciation Right shall become immediately exercisable to the full extent
theretofore not exercisable, (ii) Restricted Stock shall immediately vest free of restrictions and
(iii) the number of shares covered by each Performance Share Award shall be issued to the
Participant; subject, however, to compliance with applicable regulatory requirements, including
without limitation Rule l6b-3 promulgated by the Commission pursuant to the Exchange Act and
Section 422 of the Code.

     SECTION 8.5. Government Regulations. This Plan, the granting of Awards under this Plan and
the issuance or transfer of shares of Common Stock (and/or the payment of money) pursuant thereto
are subject to all applicable federal and state laws, rules and regulations and to such approvals
by any regulatory or governmental agency (including without limitation “no action” positions of the
Commission) which may, in the opinion of counsel for the Corporation, be necessary or advisable in
connection therewith. Without limiting the generality of the foregoing, no Awards may be granted
under this Plan, and no shares shall be issued by the Corporation, nor cash payments made by the
Corporation, pursuant to or in connection with any such Award, unless and until, in each such case,
all legal requirements applicable to the issuance or payment have, in the opinion of counsel to the
Corporation, been complied with. In connection with any stock issuance or transfer, the person
acquiring the shares shall, if requested by the Corporation, give assurances satisfactory to
counsel to the Corporation in respect of such matters as the Corporation may deem desirable to
assure compliance with all applicable legal requirements.

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     SECTION 8.6. Tax Withholding. (a) Upon the disposition by a Participant or other person of
shares of Common Stock acquired pursuant to the exercise of an Incentive Stock Option prior to
satisfaction of the holding period requirements of Section 422 of the Code, or upon the exercise of
a Nonqualified Stock Option or a Performance Stock Option, the exercise of a Stock Appreciation
Right, the vesting of a Restricted Stock Award, the payment of a Performance Share Award, payment
pursuant to a Stock Depreciation Right or payment of a Tax-Offset Bonus, the Company shall have the
right to require such Participant or such other person to pay by cash, or certified or cashier’s
check payable to the Company, the amount of any taxes which the Company may be required to withhold
with respect to such transactions.

     The above notwithstanding, in any case where a tax is required to be withheld in connection with
the issuance or transfer of shares of Common Stock under this Plan, the Participant may elect,
pursuant to such rules as the Administrator may establish, to have the Company reduce the number of
such shares issued or transferred by the appropriate number of shares to accomplish such
withholding; provided, the Administrator may impose such conditions on the payment of any
withholding obligation as may be required to satisfy applicable regulatory requirements, including,
without limitation, Rule 16b-3 promulgated by the Commission pursuant to the Exchange Act.

     (b) The Administrator may, in its discretion, permit a loan from the Company to a Participant
in the amount of any taxes which the Company may be required to withhold with respect to shares of
Common Stock received pursuant to a transaction described in subsection (a) above. Such a loan will
be for a term, at a rate of interest and pursuant to such other terms and rules as the
Administrator may establish.

     SECTION 8.7. Amendment, Termination and Suspension.

     (a) The Board may, at any time, terminate or, from time to time, amend, modify or suspend this
Plan. The amendment shall be approved by the stockholders to the extent then required by Rule
16b-3, Section 424 of the Internal Revenue Code or any successors thereto, or any other applicable
law or rules.

     (b) In the case of Awards issued before the effective date of any amendment, suspension or
termination of this Plan, such amendment, suspension or termination of this Plan shall not, without
specific action of the Administrator and the consent of the Participant, in any manner materially
adverse to the Participant, modify, amend, alter or impair any rights or obligations under any
Award previously granted under this Plan.

     (c) No Awards may be granted during any suspension of this Plan or after its termination, but
Awards theretofore granted may be amended to the same extent as if this Plan had not been
terminated or suspended, provided no additional shares become the subject of the Award by reasons
of the amendment.

     (d) The Administrator may, subject to the consent of the Participant in the case of an
amendment that might have a material adverse effect on the Participant, make such modifications of
the terms and conditions of such Participant’s Award as it shall deem advisable, including an
amendment to the terms of any Option to provide that the Option price of the shares remaining

15

 

subject to the original Award shall be established at a price not less than 100% of the Fair
Market Value of the Common Stock on the effective date of the amendment. No modification of any
other term or provision of any Option which is amended in accordance with the foregoing shall be
required, although the Administrator may, in its discretion, make such other modifications of any
such Option as are not inconsistent with or prohibited by this Plan.

     (e) Adjustments pursuant to Section 8.2 shall not be deemed amendments requiring the consent
of the Participant.

     SECTION 8.8. Privileges of Stock Ownership; Nondistributive Intent. A Participant shall not
be entitled to the privilege of stock ownership as to any shares of Common Stock not actually
issued to him or her. Upon the issuance and transfer of shares to the Participant, unless a
registration statement is in effect under the Securities Act, relating to such issued and
transferred Common Stock and there is available for delivery a prospectus meeting the requirements
of Section 10 of the Securities Act, the Common Stock may be issued and transferred to the
Participant only if he or she represents and warrants in writing to the Corporation that the shares
are being acquired for investment and not with a view to the resale or distribution thereof. No
shares shall be issued and transferred unless and until there shall have been full compliance with
any then applicable regulatory requirements (including those of exchanges upon which any Common
Stock of the Corporation may be listed).

     SECTION 8.9. Effective Date of the Plan. This Plan shall be effective upon its approval by the
shareholders of the Corporation.

     SECTION 8.10. Term of the Plan. Unless previously terminated by the Board, this Plan shall
terminate at the close of business on November 12, 2010, and no Awards shall be granted under it
thereafter, but such termination shall not affect any Award theretofore granted or the authority of
the Administrator with respect to then outstanding Awards.

     SECTION 8.11. Governing Law. This Plan and the documents evidencing Awards and all other
related documents shall be governed by, and construed in accordance with, the laws of the State of
Minnesota. If any provision shall be held by a court of competent jurisdiction to be invalid and
unenforceable, the remaining provisions of this Plan shall continue to be fully effective.

     SECTION 8.12. Transfer Restrictions.

     (a) Awards constituting derivative securities shall be exercisable only by, and shares, cash
or other property payable pursuant to such Awards shall be paid only to, the Participant (or, in
the event of the Participant’s death, to the Participant’s Beneficiary or, in the event of the
Participant’s Total Disability, to the Participant’s Personal Representative or, if there is none,
to the Participant). Other than by will or the laws of descent and distribution, no such Awards, or
interest in or under any such Award or this Plan, shall be transferable or subject in any manner to
encumbrance or other charge and any such attempted transfer or charge shall be void.

     (b) The restrictions on exercise, transfer and payment in Section 8.12 (a) shall not be deemed
to prohibit (l) “cashless exercise” procedures through unaffiliated third parties which provide
financing for the purpose of exercising an Award consistent with applicable legal

16

 

restrictions and Rule 16b-3, nor (2) to the extent permitted by the Administrator and
expressly set forth in the Award Agreement or an amendment thereto, transfers (other than transfers
of Incentive Stock Options) without consideration for estate or financial planning purposes,
notwithstanding that the inclusion of such features may render the particular Awards ineligible for
the benefits of Rule l6b-3, nor (3) in the case of Participants who are not Section 16 Persons,
transfers in such other circumstances as the Administrator may (to the extent consistent with Rule
16b-3, applicable provisions of the Code and applicable securities or other laws) in the applicable
Award Agreement or other writing expressly provide, nor (4) the subsequent transfer of shares
issued on exercise of a derivative security or the vesting of a Restricted Stock or Performance
Share Award (except to the extent that the Award, this Plan or the Administrator otherwise
expressly provides).

     (c) No Participant, Beneficiary or other person shall have any right, title or interest in any
fund or in any specific asset (including shares of Common Stock) of the Company by reason of any
Award granted hereunder. Neither the provisions of this Plan (or of any documents related hereto),
nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this
Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship
between the Company and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive an Award hereunder, such right
shall be no greater than the right of any unsecured general creditor of the Company.

     SECTION 8.13. Limitations as to Section 16 Persons; Plan Construction.

     It is the intent of the Corporation that this Plan and Awards hereunder satisfy and be
interpreted in a manner that in the case of persons who are or may be subject to Section 16 of the
Exchange Act satisfies the applicable plan requirements of Rule l6b-3, so that such persons will be
entitled (unless otherwise expressly acknowledged in writing) to the benefits of the Rule 16b-3 or
other exemptive rules under Section 16 Exchange Act and will not be subjected to avoidable
liability thereunder. In furtherance of such intent, any provision of this Plan or of any Award
would otherwise frustrate or otherwise conflict with the intent expressed above, that provision to
the extent possible shall be interpreted and deemed amended so as to avoid conflict, but to the
extent of any remaining irreconcilable conflict with such intent as to such persons in the
circumstances, such provision may be deemed void.

17EXHIBIT 4.9

 

EXHIBIT 4.9

CHRONIMED INC.

1994 STOCK OPTION PLAN FOR DIRECTORS

Article I.  Establishment and Purpose

     1.1 Establishment. Chronimed Inc., a Minnesota Corporation (“Company”), hereby
establishes a stock option plan for members of its Board of Directors, as described herein, which
shall be known as the “1994 STOCK OPTION PLAN FOR DIRECTORS” (“Plan”).

     1.2 Purpose. The purpose of this Plan are to enhance shareholder investment by
attracting, retaining, and motivating Directors of the Company and to encourage stock ownership by
such Directors by providing them with a means to acquire a proprietary interest in the Company’s
success.

Article II.  Definitions

     2.1 Definitions. Unless the context clearly requires otherwise, the following terms
shall have the respective meanings set forth below, and when said meaning is intended, the term
shall be capitalized.

     (a) “Board” means the Board of Directors of the Company.

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

     (c) “Committees” shall mean the Committee, as specified in Article IV
hereof, appointed by the Board to administer the Plan.

     (d) “Company” means Chronimed Inc., a Minnesota corporation (including
any and all subsidiaries).

     (e) “Date of Exercise” means the date the Company receives notice, by
an Optionee, of the exercise of an Option pursuant to section 8.1 of this Plan. Such
notice shall indicate the number of shares of Stock as to which the Optionee intends
to exercise an Option.

     (f) “Director” means any person, including an officer or employee of
the Company, who has been elected to the Board of Directors of the Company and is
currently serving on the Board.

     (g) “Exchange Act” means the Securities and Exchange Act of 1934, as
amended.

     (h) “Fair-Market Value” means the close price of the Stock as reported
by NASDAQ on the applicable day, or if there has been no sale on that date, on

 

 

the last preceding date on which a sale occurred, or such other value of the
Stock as shall be specified by the Board.

     (i) “Option” means the right, granted under this Plan, to purchase
Stock of the Company at the option price for a specified period of time. For
purposes of this Plan, an Option is a nonstatutory option and is not intended to
qualify as an incentive stock option within the meaning of Section 422 of the Code.

     (j) “Optionee” means a person to whom an Option has been granted under
the Plan.

     (k) “Option Price” means the exercise price per share of Stock
purchasable under an Option.

     (l) “Option Shares” means the total number of shares of Stock to which an
Option applies.

     (m) “stock” means the Common Stock of the Company.

     2.2 Gender and Number. Except when otherwise indicated by the context, any masculine
terminology when used in this Plan also shall include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.

     2.3 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.

Article III.  Eligibility and Participation

     3.1 Eligibility. Options will be granted only to persons who at the time of the grant
are Directors of the Company.

Article IV.  Administration

     4.1 The Committee. The Plan shall be administered by a Committee consisting of such
persons as are appointed by the Board from time to time, and such persons shall serve at the
discretion of the Board of Directors.

     4.2 Authority of the Committee. The Committee will have full authority to interpret
the Plan, to promulgate such rules and regulations with respect to the Plan as it deems desirable,
and to make all other determinations necessary or appropriate for the administration of the Plan.
Such determinations will be final and binding upon all persons having an interest in the Plan.

2

 

Article V.  Stock Subject to the Plan

     5.1 Number. Subject to adjustment as provided in Section 5.3 herein, the total number
of shares of Stock hereby made available for grant and reserved for issuance under the Plan shall
be 300,000. The aggregate number of shares of Stock available under this Plan shall be subject to
adjustment as provided in section 5.3. The total number of shares of Stock may be authorized but
uninsured shares of Stock, or shares acquired by purchase as directed by the Board from time to
time in its discretion, to be used for issuance upon exercise of Options granted hereunder.

     5.2 Lapsed Options. If an Option shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares of Stock subject thereto shall (unless the
Plan shall have terminated) become available for other Options under the Plan.

     5.3 Adjustment in Capitalization. In the event of any change in the outstanding
shares of Stock by reason of a stock dividend or split, recapitalization, reclassification, or
other similar corporate change, the aggregate number of shares of Stock set forth in section 5.1
shall be appropriately adjusted by the Committee, whose determination shall be conclusive;
provided, however, that fractional shares shall be rounded to the nearest whole share. In any such
case, the number and kind of shares that are subject to any Option (including any Option
outstanding after termination of service as a Director) and the Option price per share shall be
proportionately and appropriately adjusted without any change in the aggregate Option price to be
paid therefor upon exercise of the Option.

Article VI.  Duration of the Plan

     6.1 Duration of the Plan. Subject to shareholder approval, the Plan shall be in
effect for ten years from the date of its adoption by the Board. Any Options outstanding at the
end of said period shall remain in effect in accordance with their terms. The Plan shall terminate
before the end of said period if all Stock subject to it has been purchased pursuant to the
exercise of Options granted under the Plan.

Article VII.  Terms of Stock Options

     7.1 Grant of Options. Pursuant to this Plan, each person serving as a Director of the
Company will be granted an Option to purchase Thirty Thousand (30,000) shares of Stock. Except as
otherwise may be provided herein and subject to the approval of this Plan by the Company’s
shareholders, each such Option: (i) will, without any further action, be granted to the members of
the Board as of the date this Plan is adopted by the Board and as to directors first elected after
the date of this Plan, as of the date of their election to the Board (whether by Board vote or
shareholder vote); (ii) will be subject to all terms of this Plan; and (iii) will vest and become
exercisable on the seventh (7th) anniversary of the date of the grant of the Option, if Optionee is
then a Director of the Company, unless vesting is accelerated pursuant to the provisions of Section
7.5 or Article XII.

     7.2 Option Agreement. As determined by the Committee on the date of grant, each

3

 

Option shall be evidenced by an Option agreement which shall incorporate the terms of this
plan by reference.

     7.3 Option Price. The Option Price of an Option granted pursuant to Section 7.1 is
the Fair Market Value on the day the Option is granted to the Optionee.

     7.4 Exercise of Options. Options granted under the Plan shall be exercisable in
accordance with the terms of this Plan. Notwithstanding any other provision of the Plan, however,
in no event may any Option granted under this Plan become exercisable prior to six months following
the date of its grant, or following the date upon which the Plan is ratified, whichever is later.

     7.5 Vesting and Term of Options. Each Option shall expire on the tenth anniversary
date of its grant, or, if earlier, on the date five years after the last date on which the Option
fully vests under Subsection (a) through (c) below. The Option will vest on the seventh
anniversary of the date of grant unless vesting is accelerated as follows:

     (a) If for five days during any consecutive 30-day period ending on or before
the third anniversary of the date hereof, the Fair Market Value of the Stock has
been equal to or greater than a price which is 20 percent greater than the Option
Price, then, on the first date that this requirement is satisfied, if Optionee is
then a Director of the Company, this Option shall become exercisable as to 5,000
Shares. If this requirement has not been satisfied on or before the third
anniversary, then these 5,000 Shares shall not vest before the seventh anniversary
hereof.

     (b) If for five days during any consecutive 30-day period ending on or before
the fourth anniversary of the date hereof, the Fair Market Value of the Stock has
been equal to or greater than a price which is 60 percent greater than the Option
Price, then, on the first date that this requirement is satisfied, if Optionee is
then a Director of the Company, this Option shall become exercisable as to an
additional 10,000 Shares. If this requirement has not been satisfied on or before
the fourth anniversary, then these 10,000 Shares shall not vest before the seventh
anniversary hereof.

     (c) If for five days during any consecutive 30-day period ending on or before
the fifth anniversary of the date hereof, the Fair Market Value of the Stock has
been equal to or greater than a price which is 100 percent greater than the Option
Price, then, on the first date that this requirement is satisfied, if Optionee is
then a Director of the Company, this Option shall become exercisable as to an
additional 15,000 Shares. If this requirement has not been satisfied on or before
the fifth anniversary, then these 15,000 Shares shall not vest before the seventh
anniversary hereof.

     7.6 Payment. Payment for all shares of Stock shall be made at the time that an
Option, or any part thereof, is exercised, and no shares shall be issued until full payment
therefor has been made. Payment shall be made (i) in cash, or (ii) if acceptable to the Committee, in

4

 

Stock having a Fair Market Value at the time of the exercise equal to the exercise price
(provided that the Stock that is tendered as payment upon exercise of the Option has been held by
the Optionee for at least six months prior to its tender), or in some other form, including a
combination of the above. In addition, the Company may establish a cashless exercise program in
accordance with Federal Reserve Board Regulation T.

Article VIII.  Written Notice, Issuance of

Stock Certificates, Shareholder Privileges

     8.1 Written Notice. An Optionee wishing to exercise an Option shall give written
notice to the Chief Financial Officer of the Company, in the form and manner prescribed by the
Committee. Except for approved “cashless exercises,” full payment for the shares exercised pursuant
to the Option must accompany the written notice.

     8.2 Issuance of Stock Certificates. As soon as practicable after the receipt of
written notice and payment, the Company shall deliver to the Optionee or to a nominee of the
Optionee a certificate or certificates for the requisite number of shares of Stock. Such
certificate may bear a legend restricting transfer thereof.

     8.3 Privileges of a Shareholder. An Optionee or any other person entitled to exercise
an Option under this Plan shall not have shareholder privileges with respect to any Stock covered
by the Option until the date of issuance of a stock certificate for such stock.

Article IX.  Termination of Service as Director

     9.1 Death. If an Optionee’s service on the Board terminates by reason of death, the
Option may thereafter be exercised at any time prior to the expiration date of the Option or within
12 months after the date of such death, whichever period is the shorter, by the person or persons
entitled to do so under the Optionee’s will or, if the Optionee shall fail to make a testamentary
disposition of an Option or shall die intestate, the Optionee’s legal representative or
representatives. The Option shall be exercisable only to the extent that such Option was
exercisable as of the date of death.

     9.2 Termination Other Than For Cause Or Due to Death. In the event of an Optionee’s
termination of service on the Board, in the case of a Director, other than by reason of death or
for cause, the Optionee may exercise such portion of his Option as was exercisable by him at the
date of such termination (the “Termination Date”) at any time within three (3) months of the
Termination Date; provided, however, that where the Optionee is a Director, and is terminated due
to disability within the meaning of Code Section 422(c)(6), such Optionee may exercise such portion
of any Option as was exercisable by such Optionee on his or her Termination Date within one year of
such Termination Date. In any event, the Option cannot be exercised after the expiration of the
term of the Option. Options not exercised within the applicable period specified above shall
terminate.

     9.3 Termination for Cause. In the event of an Optionee’s termination of service on
the Board, in the case of a Director, which termination is by the Company for cause, any Option

5

 

or Options held by such Optionee under the Plan, to the extent not exercised before such
termination, shall terminate immediately.

Article X.  No transferability

     All Options granted under this Plan shall be nontransferable by the Optionee, other than by
will or the laws of descent and distribution, and shall be exercisable during the Optionee’s
lifetime only by the Optionee.

Article XI.  Amendment,

Modification and Termination of the Plan

     The Board may suspend or terminate the Plan or any portion thereof at any time, and the Board
may amend the Plan from time to time as may be deemed to be in the best interests of the Company;
provided, however, that no such amendment, alteration, or discontinuation will be made (a) that
would impair the rights of a Director with respect to an Option theretofore awarded, without such
person’s consent, or (b) without the approval of the shareholders, if such approval is necessary to
comply with any legal, tax, or regulatory requirement, including any approval requirement that is a
prerequisite for exemptive relief from Section 16(b) of the Exchange Act. No amendment will be
made that will change the terms of the Options to be granted hereunder with regard to amount,
exercise price, vesting or date of grant more than once every six months other than to comport to
changes in the Code, Employee Retirement Income Security Act, or the rules thereunder.

Article XII.  Merger, Consolidation or Acceleration Fund

     12.1 Merger of Consolidation.

     (a) Subject to any required action by the shareholders, if the Company shall be
the surviving corporation in any merger or consolidation, any Option granted
hereunder shall pertain to and apply to the securities to which a holder of the
number of shares of Stock subject to the Option would have been entitled in such
merger or consolidation.

     (b) A dissolution or a liquidation of the Company or a merger and consolidation
in which the Company is not the surviving corporation shall cause every Option
outstanding hereunder to terminate as of the effective date of such dissolution,
liquidation, merger or consolidation. However, the Optionee either (i) shall be
offered a firm commitment whereby the resulting or surviving corporation in a merger
or consolidation will tender to the Optionee an option (the “Substitute Option”) to
purchase its shares on terms and conditions both as to number of shares and
otherwise, which will substantially preserve to the Optionee the rights and benefits
of the Option outstanding hereunder granted by the Company, or (ii) shall have the
right immediately prior to such merger, or

6

 

consolidation to exercise any unexercised Options whether or not then
exercisable, subject to the provisions of this Plan.

     12.2 Impact of Acceleration Event. All options granted hereunder will become fully
exercisable and vested in the event of an “Acceleration Event” as defined in Section 12.3 or a
“Potential Acceleration Event” as defined in Section 12.4.

     12.3 Definition of “Acceleration Event.” For purposes of Section 12.2, an
“Acceleration Event” means the happening of any of the following:

     (a) When any “person” as defined in Section 3(a)(9) of the Exchange Act and as
used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section
13(d) of the Exchange Act, but excluding the Company or any subsidiary or parent or
any employee benefit plan sponsored or maintained by the Company or any subsidiary
or parent (including any trustee of such plan acting as trustee), directly or
indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act, as amended from time to time), of securities of the Company
representing 30 percent or more of the combined voting power of the Company’s then
outstanding securities;

     (b) When, during any period of 24 consecutive months during the existence of
the Plan, the individuals who, at the beginning of such period, constitute the Board
(“Incumbent Directors”) cease for any reason other than death to constitute at least
a majority thereof; provided, however, that a Director who was not a Director at the
beginning of such 24-month period will be deemed to have satisfied such 24-month
period requirement (and be an Incumbent Director) if such Director was elected by,
or on the recommendation or, or with the approval of, at least 60% of the Directors
who then qualified as Incumbent Directors either actually (because they were
Directors at the beginning of such 24-month period) or by prior operation of this
Section 12.3(b); or

     (c) The approval by the shareholders of 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 the adoption of any plan or
proposal for the liquidation or dissolution of the Company.

     12.4 Definition of “Potential Acceleration Event.” For purposes of Section 12.2, a
“Potential Acceleration Event” means the approval by the Board of an agreement by the Company the
consummation of which would result in an Acceleration Event of the Company as defined in Section
12.3.

Article XIII.  Securities Registration

     13.1 Securities Registration. In the event that the Company shall deem it necessary
or desirable to register under the Securities Act of 1933, as amended, or any other applicable
statute, any Options or any Stock with respect to which an Option may be or shall have been granted
or exercised, or to qualify any such Options or Stock under the Securities Act of 1933, as

7

 

amended, or any other statute, then the Optionee shall cooperate with the Company and take
such action as is necessary to permit registration or qualification of such Options or Stock.

     Unless the Company has determined that the following representation is unnecessary, each
person exercising an Option under the Plan may be required by the Company, as a condition to the
issuance of the shares pursuant to exercise of the Option, to make a representation in writing (a)
that he or she is acquiring such shares for his or her own account for investment and not with a
view to, or for sale in connection with, the distribution of any part thereof, (b) that before any
transfer in connection with the resale of such shares, he or she will obtain the written opinion of
counsel for the Company, or other counsel acceptable to the Company, that such shares may be
transferred. The Company may also require that the certificates representing such shares contain
legends reflecting the foregoing.

Article XIV.  Tax Withholding

     14.1 Tax Withholding. The Company shall have the power and the right to deduct or
withhold, or require an Optionee to remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes (including the Optionee’s FICA obligation), if any, required by law to be
withheld with respect to any grant, exercise, or payment made under or as a result of the Plan.

     14.2 Share Withholding. With respect to withholding required upon the exercise of
Options, or upon any other taxable event hereunder, Optionees may elect, subject to the approval of
the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company
withhold shares having a Fair Market Value, on the date the tax is to be determined, equal to the
minimum marginal tax which could be imposed on the transaction.

     Share withholding upon the exercise of an Option will be done if the Optionee makes a signed,
written election and either of the following occurs:

     (a) The Option exercise occurs during a “window period” and the election to use
such share withholding is made at any time prior to exercise. For this purpose,
“window period” means the period beginning on the third (3rd) business day following
the date of public release of the Company’s quarterly financial information and
ending after the twelfth (12th) business day following such date. An earlier
election can be revoked up until the exercise of the Option during the window
period; or

     (b) An election to withhold shares is made at least six months before the
Option is exercised. If this election is made, then the Option can be exercised and shares may be withheld outside of the window period.

Article XV.  Indemnification

     15.1 Indemnification. To the extent permitted by law, each person who is or shall
have been a member of the Committee or of the Board shall be indemnified and held harmless by the

8

 

Company against and from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be involved by reason of any
action taken or failure to act under the Plan and against and from any and all amounts paid by him
or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of
judgment in any such action, suit, or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company’s articles of incorporation or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them harmless.

Article XVI.  Requirements of Law

     16.1 Requirements of Law. The granting of Options and the issuance of shares of Stock
upon the exercise of an Option shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any governmental agencies or national securities exchanges as may be required.

     16.2 Governing Law. To the extent not preempted by federal law, the Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the laws of the State
of Minnesota.

Article XVII.  Effective Date of Plan

     17.1 Effective Date. Subject to ratification by an affirmative vote of holders of a
majority of shares present and entitled to vote at the 1994 Annual Meeting, the Plan shall be
effective as of September 29, 1994, the date of its adoption by the Board.

Article XVIII.  No Obligation to Exercise Option

     18.1 No Obligation to Exercise. The granting of an option shall impose no obligation
upon the holder thereof to exercise such Option.

Article XIX.  Nonexclusivity of the Plan

     19.1 Nonexclusivity of the Plan. The adoption of this Plan will not be construed as
limiting the power of the Board to adopt such other incentive arrangements as it may deem
desirable, including the granting of stock options otherwise than under this Plan. Such
arrangements may be either generally applicable or applicable only in specific cases.

9

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