EXHIBIT 10.5
MICRO VISION MEDICAL SYSTEMS, INC.
STOCK OPTION GRANT LETTER
This Stock Option is granted to Xxxxxxx X. Xxxxxx (the-"Grantee") on
June 13, 1996 (the "Date of Grant") by Micro Vision Medical Systems, Inc.
(the "Company").
1. Option Grant and Acceptance
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(a) The Company hereby grants to the Grantee effective as of the Date
of Grant, the right and option (the "Option") to purchase 221,850 shares of
common stock of the Company (the "Shares"). The Option is not intended to
constitute an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code).
(b) The Grantee shall signify his acceptance of the Option by executing
this Grant Letter.
2. Option Price
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The price of each Share covered by the Option shall be $1.00 (the
"Option Price"), which is 100% of the fair market value of a Share on the
Date of Grant.
3. Option Expiration
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The Option, to the extent that it has not theretofore been exercised,
shall automatically expire on the earliest to occur of the following events:
(a) seven years from the Date of Xxxxx;
(b) if the Grantee's employment with the Company terminates voluntarily
or involuntarily for any reason other than death or Disability (as defined
below), the Option may thereafter be exercised by the Grantee, to the extent
it was exercisable at the time of such termination, for a period of three
months from the date of such termination of employment or until the
occurrence of the date specified in Section 3(a), whichever period is
shorter; provided, however, that if the Grantee dies within such three-month
period, the unexercised portion of the Option shall thereafter be exercisable
to the extent to which it was exercisable at the time of termination of
employment, for a period of twelve months from the date of such death or
until the occurrence of the date specified in Section 3(a), whichever period
is shorter;
(c) if the Grantee's employment with the Company terminates by reason
of death, the Option may be thereafter exercised, to the extent then
exercisable, by the legal representative of the estate or by the legatee of
the Grantee under the will of the Grantee, for a period of one year from the
date of such death or until the occurrence of the date specified in Section
3(a), whichever period is shorter;
(d) if the Grantee's employment with the Company terminates by reason
of "Disability" (which for purposes of this Agreement shall mean permanent
and total disability within the meaning of Section 22(e)(3) of the Code), the
Option may thereafter be exercised by the Grantee, to the extent it was
exercisable at the time of such termination, for a period of one year from
the date of such termination of employment or until the occurrence of the
date specified in Section 3(a), whichever period is shorter; provided,
however, that if the Grantee dies within such one-year period, any
unexercised portion of
the Option held by the Grantee shall thereafter be exercisable to the extent
it was exercisable at the time of termination of employment for a period of
twelve months from the date of death or until the occurrence of the date
specified in Section 3(a), whichever period is shorter;
(e) Notwithstanding the foregoing and unless otherwise determined
by the committee of the Board of Directors designated to administer the
Company's stock options and stock option plans (hereinafter the "Committee"),
if Xxxxxxx's employment is terminated for Cause, the Option granted hereby
shall terminate as of the date the Grantee ceases to be employed by the
Company, and the Grantee shall automatically forfeit all Shares underlying
any exercised portion of an Option for which the Company has not yet
delivered the share certificates upon refund by the Company of the exercise
price paid by the Grantee for such Shares. For purposes of this Agreement,
"Termination for Cause" shall have the meaning set forth in Xxxxxxx's
employment letter.
4. Vesting
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(a) Subject to the terms, conditions and limitations expressed herein
and, except as provided below, the Option shall become exercisable in
accordance with the following vesting schedule:
Period Percentage Vested
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On or before December 30, 1996 0%
December 31, 1996 to December 30, 1997 25%
December 31, 1997 to December 30, 1998 50%
December 31, 1998 to December 30, 1999 75%
On or after December 31, 1999 100%
provided, however, that in the event the Option granted hereby has not
otherwise become fully vested and the Company consummates an initial public
offering of its shares of common stock, 50% of the unvested portion of the
Option shall vest on the closing date of the initial public offering and the
remain unvested portion of the Option shall vest on the first anniversary of
the closing date; and provided further, that if Grantee is terminated by the
Company not for Cause, 50% of the then unvested portion of this Option shall
immediately vest.
(b) The right to purchase Shares under the Option as provided in
Section 4(a) above may be exercised in a cumulative fashion, such that any
right to purchase Shares which becomes exercisable on a given date shall
remain exercisable until the date stated in any applicable provision of
Section 3 (with respect to the expiration of the Option).
(c) In the event of a "Change of Control" (as defined below), either
(i) all of the unvested portion of the Option shall vest immediately, or (ii)
if the Committee so determines, the difference between the fair market value
of the shares underlying such unvested portion of the Option and the exercise
price thereof shall be paid to Grantee in cash by the Company.
(d) "Change in Control" is defined to mean the issuance, sale or
transfer (including a transfer as a result of death, disability, operation of
law or otherwise) in a single transaction or group of related transactions to
any entity, person or group (other than Safeguard Scientifics, Inc. and/or
its affiliates) of the beneficial ownership of newly issued, outstanding or
treasury shares of the capital stock of the Company having 50% or
more of the combined voting power of the Company's then outstanding
securities entitled to vote for at least a majority of the authorized number
of directors of the Company, or any merger, consolidation, sale of all or
substantially all of the assets or other comparable transaction as a result
of which all or substantially all of the assets and business of the Company
are acquired directly or indirectly by another entity which prior to the
acquisition was not an affiliate of the Company (as defined in the
regulations of the Securities and Exchange Commission under the Securities
Act of 1933). Group shall have the same meaning as in Section 13(d) of the
Securities Exchange Act of 1934, and "affiliate" shall have the same meaning
as in Rule 405 of the Securities Exchange Commission adopted under the
Securities Act of 1933.
5. Time and Method of Exercise
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Subject to the terms of Section 4 above, the Option may be exercised at
any time, or from time to time, prior to expiration (as defined in Section 3
above), by written notice to the Stock Option Administrator of the Company.
Such written notice shall be effective upon receipt by the Stock Option
Administrator of the Company and shall be accompanied by:
(a) a check, or the equivalent thereof acceptable to the Company in its
discretion, for the full Option Price of the number of Shares being purchased;
(b) one or more certificates representing a number of Shares which are,
in the aggregate, equal in fair market value to the full Option Price for the
Shares being purchased, such certificates being duly endorsed (or accompanied
by stock powers signed in blank) so as to transfer to the Company all right,
title and interest in and to the Shares represented by such certificates;
(c) a combination of the forms of payment specified in Section 5(a) and
5(b) above which, in the aggregate, is equal to the full Option Price of the
number of Shares being purchased; or
(d) where there is a public market for the Shares, by delivering a
properly executed notice of exercise of the Option to the Company and a
broker, with irrevocable instructions to the broker to deliver to the Company
on the settlement date the amount of sale proceeds necessary to pay the
exercise price of the Option.
The fair market value of each share of Company stock delivered by the
Grantee pursuant to Section 5(b) or 5(c) above shall be as determined by the
Committee in good faith based on the best available facts and circumstances
at the time; provided, however, that where there is a public market for the
stock and the stock is registered under the Securities Exchange Act of 1934,
as amended, fair market value shall mean the per share or aggregate value of
the stock as of any given date, determined as follows: (i) if the principal
trading market for the stock is a national securities exchange or the Nasdaq
National Market, the last reported sale price thereof on the relevant date
or, if there were no trades on that date, the latest preceding date upon
which a sale was reported, or (ii) if the stock is not principally traded on
such exchange or market, the mean between the last reported "bid" and "asked"
prices of stock on the relevant date, as reported on Nasdaq or, if not so
reported, as reported by the National Daily Quotation Bureau, Inc. or as
reported in a customary financial reporting service, as applicable and as the
Committee determines.
Payment in the form of unrestricted stock delivered pursuant to
paragraph 5(b) or 5(c) above (including Company stock acquired in connection
with the exercise of an
Option), shall be subject to such restrictions as the Committee deems
appropriate, including, but not limited to, the requirement that the stock
has been owned by the Grantee for the requisite period of time necessary to
avoid a charge to the Company's earnings for financial reporting purposes and
adverse accounting consequences to the Company with respect to the Option.
6. Replacement Option
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Upon an exercise of the Option, in whole or in part, at any time, the
Grantee shall be entitled to receive a replacement Option covering such
number of shares of Common Stock, at such exercise price per share and upon
such terms and conditions as the Committee may, in its sole discretion,
establish in any policy or program adopted from time to time by the
Committee. The Committee may, in its sole discretion, amend, modify or
terminate at any time any such policy or program. Unless otherwise provided
by the Committee, if any such policy or program is amended or modified, such
policy or program shall be deemed to become part of this Grant Letter as so
amended or modified without further action by the Company or the Grantee.
The Committee may specify in any such policy or program that the grant of any
such replacement Option may be automatic upon an exercise of the Option
complying with the terms and conditions of the policy or program.
7. Restrictions on Transfer.
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(a) The Company shall have the right of first refusal to repurchase any
shares offered for sale by the Grantee, his executor, administrator, or
beneficiaries, which shares were issued to the Grantee pursuant to one or
more Options granted to the Grantee. Such offer shall be communicated to the
Company by written notice, stipulating the terms and conditions of such offer
therein, forwarded by registered or certified mail. The Company shall
exercise its right to repurchase (or to designate a third party to
repurchase) by giving written notice thereof by registered or certified mail
to the Grantee, his executor, administrator or beneficiaries no later than 30
days after the date of the receipt of the offer. Within 30 days after
receipt of such notice, the Grantee, his executor, administrator or
beneficiaries shall deliver a certificate or certificates for the shares
being sold, together with appropriate duly signed stock powers transferring
such shares to the Company, and the Company shall deliver to the Grantee, his
executor, administrator or beneficiaries the Company's check in the amount of
the purchase price for the shares being sold.
In the event that such offer shall not be accepted by written
notice forwarded by registered or certified mail no later than 30 days after
the date of the receipt of the offer, the Grantee, his executor,
administrator or beneficiaries may dispose of the shares offered to any
person, firm or corporation, without restriction, except that the subsequent
transfer of such shares shall not be on terms more favorable to the
transferee than the terms upon which the shares were originally offered to
the Company. If, within 60 days after the expiration of the 30 day period of
any offer made hereunder, the Grantee, his executor, administrator, or
beneficiaries offering to sell any shares issued hereunder, shall fail to
consummate a sale thereof to any other purchaser, then no sale of such shares
may be made thereafter without again reoffering the same to the Company in
accordance with the provisions of this subparagraph.
(b) In the event of the Grantee's termination of employment for any
reason, whether voluntary or involuntary, the Company shall have the right to
repurchase all shares issued or to be issued to the Grantee under this
Agreement at their then fair market value, as determined in good faith by the
Committee, but not less than Grantee's cost.
The Company's right to repurchase shall be exercisable at any time
within one year after the date of Xxxxxxx's termination of employment by the
delivery of written notice by the Company to such effect to the Grantee, his
executor, administrator or beneficiaries. Within 30 days after receipt of
such notice, the Grantee, his executor, administrator or beneficiaries shall
deliver a certificate or certificates for the shares being sold, together
with appropriate duly signed stock powers transferring such shares to the
Company, and the Company shall deliver to the Grantee, his executor,
administrator or beneficiaries the Company's check in the amount of the
purchase price for the shares being sold.
(c) The right of first refusal and buy-back rights shall terminate when
the Company has consummated a public offering of its common stock pursuant to
the Securities Act of 1933, as amended.
(d) The right of first refusal and buy-back rights granted to the
Company pursuant to subparagraphs 7(a) and 7(b) above are separate and
independent obligations of the Grantee and shall survive any termination of
employment. Furthermore, such rights shall not be construed as an absolute
obligation on the part of the Company to repurchase any shares tendered.
(e) Each certificate for shares issued by the Company to the Grantee
shall bear an appropriate legend that the transfer of such shares is
restricted by the provisions of this Agreement.
8. Nonassignability of Option Rights
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The Option shall not be assigned or transferred by the Grantee except,
in the event of the death of the Grantee, by will or by the laws of descent
and distribution. Upon a transfer by will or by the laws of descent and
distribution, the person to whom the Option is transferred shall have the
right to exercise the Option in accordance with this Grant Letter, subject to
the Company receiving satisfactory proof of his or her right to receive the
Grant under the Grantee's will or under the applicable laws of descent and
distribution. Any attempt to assign, transfer, pledge or dispose of the
Option contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Option, shall be null and void and
without effect. Notwithstanding the foregoing, the Committee may provide, at
or after Xxxxx, that a Grantee may transfer the Option pursuant to a domestic
relations order or to family members or other persons or entities according
to such terms as the Committee may determine.
9. Adjustments
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If any change is made to the common stock (whether by reason of stock
dividend, spin off, recapitalization, stock split, combination or exchange of
shares, merger, reorganization or consolidation in which the Company is the
surviving corporation, reclassification, change in par value, or any other
extraordinary or unusual event affecting the outstanding Company Stock as a
class without the Company's receipt of consideration, or if the value of
outstanding Company Stock is substantially reduced as a result of a spin off
or the Company's payment of an extraordinary dividend or distribution), then
unless such event or change results in the termination of this Option, the
Committee shall preserve the value of the Option by making appropriate
adjustments to the number and class of shares, the Option Price or otherwise,
except that any fractional shares resulting from such adjustments shall be
eliminated by rounding any portion of a share equal to .5 or greater up, and
any portion of a share equal to less than .5 down, in each case to the
nearest whole number.
10. Withholding
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The Grantee or other person receiving Shares upon an exercise of the
Option, in whole or in part, shall be subject to any applicable federal
(including FICA), state and local taxes that the Company is required to
withhold with respect to such exercise. The Company shall have the right to
require a Grantee to pay to the Company, or the Company may deduct from other
wages paid by the Company, the amount of any such withholding taxes the
Company is required to withhold with respect to such exercise. If the
Committee so permits by formal vote, at or after Xxxxx but prior to exercise
of the Option, a Grantee may elect to satisfy the Company's income tax
withholding obligation with respect to such exercise by having shares
withheld up to an amount that does not exceed the Grantee's maximum marginal
tax rate for federal (including FICA), state and local tax liabilities. The
Company's obligation to issue or transfer Shares upon exercise of the Option
shall be conditioned upon the Grantee's compliance with the requirements of
this section to the satisfaction of the Committee.
11. Employment by the Company
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For purposes of this Agreement, employment by the Company shall mean
employment as an employee, so that for purposes of exercising this Option, a
Grantee shall not be considered to have terminated employment until the
Grantee ceases to be an employee, unless the Committee determines otherwise.
12. No Contract for Employment
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(a) Nothing contained in this Grant Letter shall be deemed to require
the Company to continue the Grantee's employment by the Company. Except as
may be provided in a written employment contract executed by a duly
authorized officer of the Company and approved by the board of directors of
the Company, the Grantee shall at all times be an employee-at-will of the
Company and the Company may discharge the Grantee at any time for any reason,
with or without cause, and with or without severance compensation.
(b) From time to time, the Company may distribute employee manuals or
handbooks, and officers or other representatives of the Company may make
written or oral statements relating to the Company's policies and procedures.
Such manuals, handbooks and statements are intended only for the general
guidance of employees. No policies, procedures or statements of any nature by
or on behalf of the Company (whether written or oral, and whether or not
contained in any formal employee manual or handbook) shall be construed to
modify this Grant Letter or to create express or implied obligations to the
Grantee of any nature.
13. Administration
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All questions of interpretation and application of the Option granted
hereunder shall be determined by the Committee in its discretion, and such
determination shall be final and binding upon all persons. The validity,
construction and effect of this Option shall be determined in accordance with
the laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof.
14. No Stockholder Rights
---------------------
Neither the Grantee, nor any person entitled to exercise the Grantee's
rights in the event of the Grantee's death, shall have any of the rights and
privileges of a stockholder with respect to the Shares subject to the Option,
except to the extent that certificates for such Shares shall have been issued
upon the exercise of the Option as provided herein.
15. Cancellation or Amendment
-------------------------
This Option may be canceled or amended by the Committee, in whole or in
part, at any time that the Committee determines, in its sole discretion, that
the cancellation or amendment is necessary or advisable in light of any
change after the Date of Grant in (a) the Code or the regulations issued
thereunder or (b) any federal or state securities law or other law or
regulation, which change by its terms is effective retroactively to a date on
or before the Date of Grant; provided, however, that no such cancellation or
amendment shall, without the Grantee's consent, apply to or affect
installments that matured on or before the date on which the Committee makes
such determination.
16. Notice
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Any notice to the Company provided for in this Grant Letter shall be
addressed to it in care of the Stock Option Administrator of the Company, at
00000 000xx Xxxxxxx, Xxxxxxxxx, XX 00000 and any notice to the Grantee shall
be addressed to such Grantee at the current address shown on the payroll of
the Company, or to such other address as the Grantee may designate to the
Company in writing. Any notice provided for hereunder shall be delivered by
hand, sent by telecopy or telex or enclosed in a properly sealed envelope
addressed as stated above, registered and deposited, postage and registry
being prepaid, in a post office or branch post office regularly maintained by
the United States Postal Service.
17. Grantee's Securities Law Representations
----------------------------------------
If the Committee shall deem it appropriate by reason of any securities
law, it may require that the Grantee upon exercise in whole or in part of the
Option, represent to the Company and agree in writing that the purchase of
the Shares is for investment only and not with a view to distribution. The
Committee may require that the Share certificates be inscribed with a legend
restricting transfer in accordance with applicable securities law
requirements.
MICRO VISION MEDICAL SYSTEMS, INC.
By: /s/ Xxxxxxx Xxxxxxxxxx
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Accepted By:
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
