NONQUALIFIED STOCK OPTION AGREEMENT KIPS BAY MEDICAL, INC. 2007 LONG-TERM INCENTIVE PLAN
Exhibit 10.20
KIPS BAY MEDICAL, INC.
2007 LONG-TERM INCENTIVE PLAN
2007 LONG-TERM INCENTIVE PLAN
THIS AGREEMENT, made effective as of this ___day of , ___(the “Issue Date”)
by and between Kips Bay Medical, Inc., a Delaware corporation (the “Company”), and
(“Participant”).
W I T N E S S E T H:
WHEREAS, Participant on the date hereof is a key employee or officer of the Company or one of
its Affiliates; and
WHEREAS, the Company wishes to grant a nonqualified stock option to Participant to purchase
shares of the Company’s Common Stock pursuant to the Company’s 2007 Long-Term Incentive Plan (the
“Plan”); and
WHEREAS, the Administrator of the Plan has authorized the grant of a nonqualified stock option
to Participant;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants to Participant on the date set forth
above (the “Date of Grant”), the right and option (the “Option”) to purchase all or portions of an
aggregate of ( ) shares of Common Stock at a per share price equal to the greater of $___or the per
share Fair Market Value
as determined by an independent appraiser selected by the Company, subject to the terms and
conditions set forth herein, and subject to adjustment pursuant to Section 12 of the Plan. This
Option is not intended to be an incentive stock option within the meaning of Section 422,
or any successor provision, of the Internal Revenue Code of 1986, as amended (the “Code”), and the
regulations thereunder.
2. Duration and Exercisability.
a. General. The term during which this Option may be exercised shall terminate on
___, 20___, except as otherwise provided in Paragraphs 2(b) through 2(e)
below. This Option shall become exercisable as follows:
| Vesting Date | Percentage of Shares |
Once the Option becomes exercisable to the extent of 100% of the aggregate number of shares
specified in Paragraph 1, Participant may continue to exercise this Option under the terms and
conditions of this Agreement until the termination of the Option as provided herein. If
Participant does not purchase upon an exercise of this Option the full number of shares which
Participant is then entitled to purchase, Participant may purchase upon any subsequent exercise
prior to this Option’s termination such previously unpurchased shares in addition to those
Participant is otherwise entitled to purchase.
b. Termination of Employment (other than Termination for Cause, Disability or Death).
If Participant’s employment with the Company or any Affiliate is terminated for any reason other
than termination by the Company for “cause,” disability, or death, this Option shall completely
terminate on the earlier of (i) the close of business on the three-month anniversary date of such
termination of employment, and (ii) the expiration date of this Option stated in Paragraph 2(a)
above. In such period following the termination of Participant’s employment, this Option shall be
exercisable only to the extent the Option was exercisable on the vesting date immediately preceding
such termination of employment, but had not previously been exercised. To the extent this Option
was not exercisable upon such termination of employment, or if Participant does not exercise the
Option within the time specified in this Paragraph 2(b), all rights of Participant under this
Option shall be forfeited.
c. Termination of Employment for Cause. If Participant’s employment with the Company
or any Affiliate is terminated for “cause,” the unexercised portion of this Option shall
immediately expire, and all rights of Participant under this Option shall be forfeited. Solely for
purposes of this Paragraph 2(c), “cause” shall mean (i) Participant being charged with a felony or
convicted of any criminal misdemeanor or more serious act; (ii) any intentional and/or willful act
of fraud or dishonesty by Participant related to or connected with Participant’s employment by the
Company or any of its Affiliates; (iii) the willful and/or continued failure, neglect or refusal by
Participant to perform his or her employment duties with the Company or any of its Affiliates, (iv)
a material violation of the Company’s or an Affiliate’s policies or codes of conduct; or (v) the
willful and/or material breach by Participant of any agreement between Participant and the Company
or any of its Affiliates, including but not limited to an employment agreement or a noncompetition
agreement.
d. Disability. If Participant’s employment terminates because of disability (as
defined in Code Section 22(e), or any successor provision), this Option shall terminate on the
earlier of (i) the close of business on the twelve-month anniversary date of such termination of
employment, and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such
period following the termination of Participant’s employment, this Option shall be exercisable only
to the extent the Option was exercisable on the vesting date immediately preceding such termination
of employment, but had not previously been exercised. To the extent this Option was not
exercisable upon such termination of employment, or if Participant does not exercise the Option
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within the time specified in this Paragraph 2(d), all rights of Participant under this Option shall
be forfeited.
e. Death. In the event of Participant’s death, this Option shall terminate on the
earlier of (i) the close of business on the twelve-month anniversary date of Participant’s death,
and (ii) the expiration date of this Option stated in Paragraph 2(a) above. In such period
following Participant’s death, this Option shall be exercisable by the person or persons to whom
Participant’s rights under this Option shall have passed by Participant’s will or by the laws of
descent and distribution only to the extent the Option was exercisable on the vesting date
immediately preceding Participant’s death, but had not previously been exercised. To the extent
this Option was not exercisable upon the date of Participant’s death, or if Participant does not
exercise the Option within the time specified in this Paragraph 2(e), all rights of Participant
under this Option shall be forfeited.
3. Manner of Exercise.
a. General. The Option may be exercised only by Participant (or other proper party in
the event of death or incapacity), subject to the conditions of the Plan and subject to such other
administrative rules as the Administrator may deem advisable, by delivering within the Option
Period written notice of exercise to the Company at its principal office. The notice shall state
the number of shares as to which the Option is being exercised and shall be accompanied by payment
in full of the Option price for all shares designated in the notice. The exercise of the Option
shall be deemed effective upon receipt of such notice by the Company and upon payment that complies
with the terms of the Plan and this Agreement. The Option may be exercised with respect to any
number or all of the shares as to which it can then be exercised and, if partially exercised, may
be so exercised as to the unexercised shares any number of times during the Option period as
provided herein.
b. Form of Payment. Subject to approval by the Administrator, payment of the option
price by Participant may be in the form of (i) cash, personal check, or certified check, (ii)
promissory note, (iii) installments, (iv) through the withholding of shares of Stock having a Fair
Market Value equal to the total exercise price for the shares being purchased from the number of
shares otherwise issuable upon the exercise of the Option (e.g., a net share settlement), (v)
previously-owned shares of the Company’s Common Stock valued at such Stock’s then Fair Market
Value, or (vi) any combination thereof. Any stock tendered as part of such payment shall be valued
at its Fair Market Value as provided in the Plan. For purposes of this Agreement,
“previously-acquired shares of Common Stock” shall have the meaning set forth in Section 8 of the
Plan. The Administrator may, in its discretion, permit Participant to tender such
previously-acquired shares through the actual delivery of such shares or through attestation of
ownership on such forms as the Administrator may prescribe.
c. Stock Transfer Records. As soon as practicable after the effective exercise of all
or any part of the Option, Participant shall be recorded on the stock transfer books of the Company
as the owner of the shares purchased, and the Company shall deliver to Participant 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.
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4. Miscellaneous.
a. Employment-at-Will; Rights as Shareholder. This Agreement shall not confer on
Participant any right with respect to continuance of employment by the Company or any of its
Affiliates, nor will it interfere in any way with the right of the Company to terminate such
employment. Participant’s employment relationship with the Company and its Affiliates shall be
employment-at-will, and nothing in this Agreement shall be construed as creating an employment
contract for any specified term between Participant and the Company or any Affiliate. Participant
shall have no rights as a shareholder with respect to shares subject to this Option until such
shares have been issued to Participant upon exercise of this Option. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date such shares are
issued, except as provided in Section 12 of the Plan.
b. Securities Law Compliance. The exercise of all or any parts of this Option shall
only be effective at such time as counsel to the Company shall have determined that the issuance
and delivery of Common Stock pursuant to such exercise will not violate any state or federal
securities or other laws. Participant may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all Common Stock to be
acquired pursuant to such exercise shall be held, until such time that such Common Stock is
registered and freely tradable under applicable state and federal securities laws, for
Participant’s own account without a view to any further distribution thereof, that the certificates
for such shares shall bear an appropriate legend to that effect and that such shares will be not
transferred or disposed of except in compliance with applicable state and federal securities laws.
c. Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and subject to Section 12
of the Plan, certain changes in the number or character of the Common Stock of the Company (through
merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment,
reduction or enlargement, as appropriate, in Participant’s rights with respect to any unexercised
portion of the Option (i.e., Participant shall have such “anti-dilution” rights under the
Option with respect to such events, but shall not have “preemptive” rights).
d. Shares Reserved. The Company shall at all times during the option period reserve
and keep available such number of shares as will be sufficient to satisfy the requirements of this
Agreement.
e. Withholding Taxes. To permit the Company to comply with all applicable federal and
state income tax laws or regulations, the Company may take such action as it deems appropriate to
ensure that, if necessary, all applicable federal and state payroll, income or other taxes are
withheld from any amounts payable by the Company to Participant. If the Company is unable to
withhold such federal and state taxes, for whatever reason, Participant hereby agrees to pay to the
Company an amount equal to the amount the Company would otherwise be required to withhold under
federal or state law. Subject to such rules as the Administrator may adopt, the Administrator may,
in its sole discretion, permit Participant to
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satisfy such withholding tax obligations, in whole or in part (i) by delivering shares of Common
Stock, or (ii) by electing to have the Company withhold shares of Common Stock otherwise issuable
to Participant, in either case having a Fair Market Value, as of the date the amount of tax to be
withheld is determined under applicable tax law, equal to the minimum amount required to be
withheld for tax purposes. Participant’s request to deliver shares or to have shares withheld for
purposes of such withholding tax obligations shall be made on or before the date that triggers such
obligations or, if later, the date that the amount of tax to be withheld is determined under
applicable tax law.
f. Nontransferability. During the lifetime of Participant, the accrued Option shall
be exercisable only by Participant or by the Participant’s guardian or other legal representative,
and shall not be assignable or transferable by Participant, in whole or in part, other than by will
or by the laws of descent and distribution.
g. 2007 Long-Term Incentive Plan. The Option evidenced by this Agreement is granted
pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby
incorporated into this Agreement. This Agreement is subject to and in all respects limited and
conditioned as provided in the Plan. The Plan governs this Option, and, in the event of any
questions as to the construction of this Agreement or in the event of a conflict between the Plan
and this Agreement, the Plan shall govern, except as the Plan otherwise provides.
h. Stock Subject to Agreement. Participant specifically acknowledges and understands
that any shares of Common Stock purchased by Participant pursuant to this Agreement or otherwise
owned by Participant shall be subject to a shareholder control agreement which, among other
matters, shall include provisions restricting the pledge, encumbrance, sale, assignment, transfer,
gift, or disposition of any such stock and provisions protecting any election the Company may have
in place to be taxed as an S corporation under the Code whenever such election is in effect.
i. Stock Legend. The Administrator may require that the certificates for any shares
of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall
bear an appropriate legend to reflect the restrictions of Paragraph 4(b) and Paragraph 4(h) of this
Agreement; provided, however, that failure to so endorse any of such certificates shall not render
invalid or inapplicable Paragraph 4(h).
j. Scope of Agreement. This Agreement shall bind and inure to the benefit of the
Company, its Affiliates and its successors and assigns and Participant and any successor or
successors of Participant permitted by Paragraph 2 or Paragraph 4(f) above.
k. 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 in the 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 10 years. If the parties cannot
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agree on an arbitrator within 20 days, any party may request that the chief judge of the District
Court for 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 only for the production of documents. Unresolved
discovery disputes may be brought to the attention of the arbitrator who may dispose of such
dispute. 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 fees, administrative fees, travel
expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the
parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day
and year first above written.
| KIPS BAY MEDICAL, INC. |
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| By: | ||||
| Its: | ||||
| Participant |
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