REGEN BIOLOGICS, INC. INCENTIVE STOCK OPTION AGREEMENT
Exhibit 4.10
REGEN BIOLOGICS, INC.
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT
This Incentive Stock Option Agreement (this “Agreement”), dated as of the Grant Date set forth
below, is by and between ReGen Biologics, Inc., a Delaware corporation (the “Corporation”), and the
employee of the Corporation or its subsidiary identified below (the “Optionee”).
Optionee: [ ]
Grant Date: [ ]
Number of shares of Common Stock, par value $0.01 per share subject to option (the “Shares”):
[ ]
Exercise Price per Share: [ ] [NOTE: For 10% shareholders, the exercise price must
be 110% of fair market value, measured on the date of grant; for other optionees, the exercise
price must be 100% of fair market value.]
Vesting: [ ] [NOTE: Under an ISO, no more than $100,000 of options may become
exercisable in any one calendar year. The $100,000 threshold is determined by looking at the fair
market value of the stock underlying the option as of the date of grant. All ISOs issued to the
optionee by a corporation are aggregated for purposes of this rule.]
Optionee’s Address for Notices: [ ]
Exhibit A attached hereto is incorporated herein by reference.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
Grant Date.
| REGEN BIOLOGICS, INC. | ||||
| By: | ||||
| Title: | ||||
| OPTIONEE | ||||
| [Insert Name] | ||||
1. Grant of Option. Subject to the provisions of the ReGen Biologics, Inc. Employee
Stock Option Plan (the “Plan”) and this Agreement, ReGen Biologics, Inc. (the “Corporation”) hereby
grants to the Optionee the right and option (the “Option”) to purchase from the Corporation shares
of the Corporation’s common stock, par value $0.01 per share (the “Shares”). The number of Shares
covered by the Option and the exercise price per Share are set forth on the cover page to this
Agreement (the “Cover Page”). To the maximum extent permitted, it is intended that the Option
shall constitute an “incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended from time to time, or subsequent comparable statute (the “Code”).
2. Vesting, Exercisability and Expiration.
(a) Except to the extent otherwise provided herein or in the Plan, the Option shall vest and
become exercisable according to the vesting schedule set forth on the Cover Page.
(b) Notwithstanding any other provision hereof, the Option shall expire on the tenth
anniversary of the Grant Date. [NOTE: For 10% shareholders, the option term is limited to 5
years.]
3. Exercise Following Termination of Employment, Consulting or Director Relationship.
If the Optionee ceases “Continuous Service” as an employee, consultant or director of the
Corporation, the outstanding portion of the Option shall be exercisable only in accordance with the
provisions of this section. “Continuous Service” means that the Optionee’s service with the
Corporation or an “Affiliate”, whether as an employee, director or consultant, is not interrupted
or terminated. The Optionee’s Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Optionee renders service to the Corporation or an
Affiliate as an employee, consultant or director or a change in the entity for which the Optionee
renders such service, provided that there is no interruption or termination of the Optionee’s
Continuous Service. For example, a change in status from an employee of the Corporation to a
consultant of an Affiliate or a director of the Corporation shall not constitute an interruption of
Continuous Service. The Committee or the chief executive officer of the Corporation, in that
party’s sole discretion, may determine whether Continuous Service shall be considered interrupted
in the case of any leave of absence approved by that party, including sick leave, military leave or
any other personal leave. The term “Affiliate” includes the terms “parent corporation” and
“subsidiary corporation” as such terms are defined in Section 424 of the Code.
(a) If the Optionee’s Continuous Service as an employee, consultant or director for the
Corporation is terminated for “cause” (as defined in the Plan), the outstanding vested portion of
the Option (determined as of the time at which notice of termination is given to
the Optionee) shall be and remain exercisable until the first to occur of (i) the expiration
date referred to in Section 2, and (ii) the time at which notice of termination is given to the
Optionee, and the unvested portion of the Option shall be forfeited.
(b) If the Optionee’s Continuous Service as an employee, consultant or director for the
Corporation is terminated for any reason other than for “cause” (as defined in the Plan), the
portion of the Option that was unvested as of such termination shall be forfeited (except to the
extent provided herein) and the unexercised portion of the Option that was vested as of such
termination shall remain exercisable until the first to occur of (i) the expiration dates referred
to in Section 2, and (ii) the expiration of ninety (90) days from the date the Optionee ceases
Continuous Service as an employee, consultant or director for the Corporation, provided that if the
Optionee ceases Continuous Service as an employee, consultant or director for the Corporation by
reason of death or Disability, the period referred to in this clause (ii) shall be one year
following the date the Optionee ceases Continuous Service as an employee, consultant or director
for the Corporation and any unvested portion of the Options granted under this Agreement shall
become fully vested and exercisable as of the date of death or the date of termination due to
Disability. If the Optionee dies during the ninety (90) day period referred to in clause (ii),
his or her estate may exercise the Option, but not later than the earlier of one year after the
date of death or the expiration of the term of the Option.
4. Exercise. The Option may be exercised by delivering to the Corporation at its
principal offices a written notice, signed by a person entitled to exercise the Option, of the
election to exercise the Option and stating the number of Shares to be purchased. Such notice
shall be accompanied by the payment of the full exercise price of the Shares to be purchased.
Upon payment in accordance with the Plan and within the time period specified by the Corporation of
the amount, if any, required to be withheld for Federal, state and local tax purposes on account of
the exercise of the Option, the Option shall be deemed exercised as of the date the Corporation
received such notice. The Corporation may withhold, or allow the Optionee to remit to the
Corporation, any Federal, state or local taxes required by law to be withheld with respect to any
event giving rise to income tax liability with respect to the Option. In order to satisfy all or
any portion of such income tax liability, the Optionee may elect to surrender Shares previously
acquired by the Optionee or to have the Corporation withhold Shares that would otherwise have been
issued to the Optionee pursuant to the exercise of the Option, the number of such withheld or
surrendered Shares to be sufficient to satisfy all or a portion of the income tax liability that
arises upon the event giving rise to income tax liability with respect to the Option. Payment of
the full exercise price shall be (i) in cash, (ii) through the surrender of previously-acquired
Shares having a Fair Market Value equal to the exercise price of the Option provided that such
previously-acquired shares have been held by the Optionee for at least six months, unless the
Committee in its discretion permits the use of shares held less than six months, (iii) through the
withholding by the Corporation (at the election of the Optionee) of Shares having a Fair Market
Value equal to the exercise price, provided that the Optionee attests in a manner acceptable to the
Committee that he or she holds previously-acquired Shares equal in number to the number of Shares
withheld by the Corporation and has held such previously-acquired shares for at least six months,
(iv) through the withholding by the Corporation (at the discretion of the Committee) of Shares
having a Fair Market Value equal to the exercise price, or (v) by a combination of (i), (ii), (iii)
and (iv), in the discretion of the Committee. Upon the proper exercise of the Option, subject to
the other provisions of this Agreement, the Corporation
shall issue in the name of the person exercising the Option, and deliver to such person, a
certificate or certificates for the Shares purchased.
5. Nontransferability of Option. The Option shall not be transferable by the
Optionee except by will or the laws of descent and distribution. Without limiting the generality
of the foregoing, the Option shall not be sold, transferred except as aforesaid, assigned, pledged
or otherwise encumbered or disposed of, shall not be assignable by operation of law, and shall not
be subject to execution, attachment or similar process. Any attempted sale, transfer, pledge,
assignment or other encumbrance or disposition of the Option contrary to the provisions hereof, or
the levy of any execution, attachment or similar process upon the Option, shall be null and void
and without effect. During the lifetime of the Optionee, the Option may be exercised only by the
Optionee or the Optionee’s agent, attorney-in-fact or guardian. Following the death of the
Optionee, the Option may be exercised by the Optionee’s beneficiary or estate to the extent
permitted by Section 3.
6. Adjustments Upon Reorganization or Changes in Capitalization. In the event of a
stock split, stock dividend, recapitalization, reclassification or combination of shares, merger,
sale of assets or similar event, the Compensation Committee of the Board of Directors shall adjust
equitably (a) the number and class of Shares or other securities that are reserved for issuance
under the Option, (b) the number and class of Shares or other securities that are subject to the
Option, and (c) the appropriate Fair Market Value and other price determinations applicable to the
Option, and make other changes (including cashing out the Option) in its discretion that are
appropriate and equitable in the context of the transaction. The Compensation Committee of the
Board of Directors shall make all determinations under this Section 6, and all such determinations
shall be conclusive and binding. Notwithstanding the foregoing, in the event of a stock split,
stock dividend, reverse stock split, or substantially similar transaction (the “Event”): (1) the
number of Shares subject to the Option shall be automatically adjusted so that upon exercise of the
Option, the Optionee shall be entitled to receive the number of Shares which the Optionee would
have been entitled to receive after the Event had the Option been exercised immediately before the
earlier of the date of the consummation of the Event or the record date of the Event (the “Event
Date”); (2) the exercise price of a Share subject to the Option shall be automatically adjusted to
equal the exercise price per share set forth in the Agreement, divided by the “Adjustment Factor”
(the “Adjustment Factor” shall equal the number (or fractional number) of Shares that the holder of
one Share before the Event Date would hold after the Event Date); (3) any per Share exercise price
containing a fraction of a cent shall be rounded up to the next highest cent; and (4) any Option to
purchase fractional shares shall be automatically eliminated. The automatic adjustments described
in the foregoing sentence shall not be made to the extent that the Committee determines in its
discretion that the automatic adjustment(s) would constitute a modification under Section 424(h)(3)
of the Code, would result in the loss of incentive stock option status for an option, would result
in a charge for financial accounting purposes, or would not constitute an equitable adjustment
under the circumstances. In such cases, the Committee shall determine the appropriate adjustments
to be made to outstanding awards, per share exercise prices, and the share limits set forth in the
Plan, and the Committee’s determination shall be binding and conclusive.
7. Acceleration of Exercisability.
(a) Change in Control. Notwithstanding the provisions of Section 2, the Option shall
become, and until the expiration dates specified in Section 2 shall remain, vested and exercisable
as to all of the Shares forthwith upon the occurrence of any Change in Control of the Corporation.
(b) Termination without Cause. Notwithstanding the provisions of Section 2, the
Option shall become, and until the expiration dates specified in Section 2 shall remain, vested and
exercisable as to all of the Shares forthwith upon a termination by the Corporation of the
Optionee’s Continuous Service as a consultant, director or employee for the Corporation without
“cause” (as defined in the Plan).
8. Miscellaneous.
(a) Notices. Any notice hereunder shall be in writing, and delivered or sent by
first-class U.S. mail, postage prepaid, addressed to:
| (i) | if to the Corporation, at: |
000 Xxxxxxxx Xxxxxx, Xxxx Wing
Xxxxxxxx Xxxxx, XX 00000, and
Xxxxxxxx Xxxxx, XX 00000, and
| (ii) | if to Optionee, at the address set forth on the Cover Page, |
subject to the right of either party, by written notice hereunder, to designate at any time
hereafter some other address.
(b) Compliance with Law and Regulations. The Option and the obligation of the
Corporation to sell and deliver Shares hereunder shall be subject to all applicable Federal and
state laws, rules and regulations and to such approvals by any government or regulatory agency as
may be required. Notwithstanding any other provision of this Agreement, the Option may not be
exercised if its exercise, or the receipt of Shares pursuant thereto, would be contrary to
applicable law.
(c) No Rights as Stockholder. The Optionee shall have no rights as a stockholder
with respect to any Shares subject to the Option prior to the date of issuance to the Optionee of a
certificate or certificates for such Shares.
(d) No Consulting, Employment or Director Relationship Rights. Nothing in the Plan,
this Agreement or the grant of an Option shall confer upon the Optionee any rights to continued
employment, consultant or director status with the Corporation or its Affiliates or shall interfere
with the right of the Corporation to terminate the Optionee’s employment, consulting or director
relationship with the Corporation.
(e) Withholding. The Corporation shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to the Optionee any Federal, state and
local taxes required by law to be withheld or collected with respect to the Option.
(f) Reservation of Shares; Certain Costs. The Corporation shall keep available
sufficient authorized but unissued Shares needed to satisfy the requirements of this Agreement.
The Corporation shall pay any original issue tax that may be due upon the issuance of Shares
pursuant to the Option and all other costs incurred by the Corporation in issuing such Shares.
(g) Plan Governs. The Optionee hereby acknowledges receipt of a copy of the Plan and
agrees to be bound by its terms, all of which are incorporated herein by reference. The Plan
shall govern in the event of any conflict between this Agreement and the Plan. Capitalized terms
used herein shall have the same meaning as in the Plan, except as is expressly modified in this
Agreement.
(h) Choice of Law. This Agreement shall be construed in accordance with and be
governed by the laws of the State of Delaware.
(i) Notice of Disqualifying Disposition. Optionee agrees that he will notify the
Corporation in writing within fifteen (15) days after the date of any disposition of any Shares
acquired pursuant to the exercise of this Option that occurs within two (2) years after the date of
grant of this Option or within one (1) year after such Shares are transferred upon exercise of this
Option.
(j) Termination of Employment and Incentive Stock Option Status. Optionee
acknowledges that under the Code, Optionee generally must exercise the Option within three (3)
months of a termination of employment with the Corporation or its Affiliates in order to preserve
favorable “incentive stock option” treatment under the Code with respect to the Option and Shares
acquired thereunder (regardless of the rules within this Agreement that may permit exercise beyond
such three (3) month period).
