ROCHESTER MEDICAL CORPORATION 2010 STOCK INCENTIVE PLAN NON-INCENTIVE STOCK OPTION AGREEMENT
Exhibit 10.3
ROCHESTER MEDICAL CORPORATION
2010 STOCK INCENTIVE PLAN
2010 STOCK INCENTIVE PLAN
This NON-INCENTIVE STOCK OPTION AGREEMENT (the “Agreement”) is made effective this
day of , , by and between Rochester Medical Corporation, a Minnesota corporation (the
“Company”) and , an individual resident of , (“Employee”).
1. Grant of Option. The Company hereby grants Employee the option (the “Option”) to
purchase all or any part of an aggregate of [ ] shares (the “Shares”) of Common Stock of the
Company at the exercise price of $[ ] per share according to the terms and conditions set forth
in this Agreement and in the Rochester Medical Corporation 2010 Stock Incentive Plan (the “Plan”).
The Option will not be treated as an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”). The Option is issued under the Plan
and is subject to its terms and conditions. Words and phrases not otherwise defined herein shall
have the meanings ascribed to them, respectively, in the Plan. A copy of the Plan will be
furnished upon request of Employee.
The Option shall terminate at the close of business [ten] years from the date hereof.
2. Vesting of Option Rights.
(a) Except as otherwise provided in this Agreement, the Option may be exercised by Employee in
accordance with the following schedule:
| Number of Shares | ||||
| On or after each of | with respect to which | Cumulative | ||
| the following dates | the Option is exercisable | Total | ||
(b) During the lifetime of Employee, the Option shall be exercisable only by Employee and
shall not be assignable or transferable by Employee, other than by will or the laws of descent and
distribution. More particularly, the Option may not be assigned, transferred, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to these provisions, or the levy of an
execution, attachment or similar process upon the Option, shall be void.
Employee may designate a beneficiary or beneficiaries to exercise Employee’s rights with
respect to the Option upon Employee’s death. In the absence of any such designation, benefits
remaining unpaid at death shall be paid to Employee’s estate.
[Employee — Non-ISO]
3. Exercise of Option after Termination of Employment, Retirement, Death or
Disability. The Option shall terminate and may no longer be exercised if Employee ceases to be
employed by the Company or its Affiliates, except that:
(a) If Employee’s employment shall be terminated for any reason, voluntary or involuntary,
other than for (i) “Cause” (as defined in Section 3(f)) as provided in Section 3(b) below,
(ii) Employee’s retirement as provided in Section 3(c) below, or (iii) Employee’s death or
disability (within the meaning of Section 22(e)(3) of the Code) as provided in Section 3(d) below,
Employee may at any time within a period of three (3) months after such termination exercise the
Option to the extent the Option was exercisable by Employee on the date of the termination of
Employee’s employment.
(b) If Employee’s employment is terminated for Cause, the Option shall be terminated as of the
date of the act giving rise to such termination.
(c) If Employee’s employment is terminated because Employee has retired from the Company at
age 60 or older (or pursuant to early retirement with the consent of the Committee) and has
completed 10 or more years of service with the Company or an Affiliate, and Employee shall not have
fully exercised the Option, the Option shall continue to vest in accordance with the schedule set
forth in Section 2(a) hereof, and such Option may be exercised in accordance with its terms as
though such termination had never occurred, except as otherwise provided in Section 3(d) and
Section 3(e) below.
(d) If Employee shall die while the Option is still exercisable according to its terms or if
employment is terminated because Employee has become disabled (within the meaning of
Section 22(e)(3) of the Code) while in the employ of the Company and Employee shall not have fully
exercised the Option, such Option may be exercised at any time within twelve (12) months after
Employee’s death or date of termination of employment for disability by Employee, personal
representatives or administrators or guardians of Employee, as applicable or by any person or
persons to whom the Option is transferred by will or the applicable laws of descent and
distribution, to the extent of the full number of Shares Employee was entitled to purchase under
the Option on (i) the date of death or (ii) the date of termination for such disability, as
applicable.
(e) Notwithstanding the above, in no case may the Option be exercised to any extent by anyone
after the termination date of the Option.
(f) “Cause” shall mean (i) the willful and continued failure by Employee substantially to
perform his or her duties and obligations (other than any such failure resulting from his or her
incapacity due to physical or mental illness), (ii) Employee’s conviction or plea bargain of any
felony or gross misdemeanor involving moral turpitude, fraud or misappropriation of funds or
(iii) the willful engaging by Employee in misconduct which causes substantial injury to the Company
or its Affiliates, its other employees or the employees of its Affiliates or its clients or the
clients of its Affiliates, whether monetarily or otherwise. For purposes of this paragraph, no
action or failure to act on Employee’s part shall be considered “willful” unless done or omitted to
be done, by Employee in bad faith and without reasonable belief that his or her action or omission
was in the best interests of the Company.
2
4. Acceleration of Exercisability Upon Change in Control.
(a) Notwithstanding any other provision in this Agreement, the Option may be exercised as to
100% of the Shares on the date of a “Change in Control.” A “Change in Control” shall mean any of
the following: (i) the consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than 50% of the combined voting power
of the continuing or surviving entity’s securities outstanding immediately after such merger,
consolidation or other corporate reorganization are owned by persons who were not shareholders of
the Company immediately prior to such merger, consolidation or other corporate reorganization,
(ii) a public announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) that any person or group has acquired beneficial ownership of more
than 50% of the then outstanding shares of Common Stock and, for this purpose, the terms “person,”
“group” and “beneficial ownership” shall have the meanings provided in Section 13(d) of the
Exchange Act or related rules promulgated by the Securities and Exchange Commission; (iii) the
Continuing Directors (as defined below) cease to constitute a majority of the Company’s Board of
Directors; (iv) a sale of all or substantially all of the assets of the Company or the dissolution
of the Company; (v) the commencement of or public announcement of an intention to make a tender or
exchange offer for more than 50% of the then outstanding shares of the Common Stock; or (vi) the
majority of Continuing Directors, in their sole and absolute discretion, determine that there has
been a change in control of the Company. “Continuing Director” shall mean any person who is a
member of the Board of Directors of the Company, who (A) was a member of the Board of Directors on
the date of this Agreement or (B) subsequently becomes a member of the Board of Directors, if such
person’s initial nomination for election or initial election to the Board of Directors is
recommended or approved by a majority of the Continuing Directors.
(b) If a Change in Control shall occur, the Continuing Directors in their sole discretion, and
without the consent of Employee, may determine that Employee shall receive, in lieu of some or all
of the shares of Common Stock subject to this Option, as of the effective date of any such Change
in Control, cash in an amount equal to the excess, if any, of the Fair Market Value of such shares
on the effective date of such Change in Control over the exercise price per share of this Option,
subject to any applicable withholding for income or payroll taxes.
5. Method of Exercise of Option. Subject to the foregoing, the Option may be
exercised in whole or in part from time to time by serving written notice of exercise on the
Company at its principal office within the Option period. The notice shall state the number of
Shares as to which the Option is being exercised and the manner of payment, and shall be
accompanied by payment in full of the exercise price for all Shares designated in the notice.
Payment of the exercise price shall be made (i) in cash (including bank check, personal check or
money order payable to the Company), (ii) with the approval of the Company (which may be given in
its sole discretion), by delivering to the Company for cancellation shares of the Company’s Common
Stock already owned by Employee having a Fair Market Value equal to the full exercise price of the
Shares being acquired, or (iii) with the approval of the Company (which may be given in its sole
discretion), by delivering to the Company a combination thereof. Employee shall represent and
warrant in writing that Employee is the owner of any shares so delivered, free and clear of all
liens, encumbrances, security interests and restrictions. In
3
addition, the Option may be exercised by instructing the Company to deliver a number of Shares
having an aggregate Fair Market Value (determined as of the date of exercise) equal to the excess,
if positive, of the Fair Market Value of the Shares underlying the Option being exercised, on the
date of exercise, over the exercise price of the Option for such Shares.
6. Adjustments. In the event that any dividend or other distribution (whether in the
form of cash, Shares, other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or
exchange of Shares or other securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is necessary in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the Option, then the
Committee shall, in such manner as it may deem equitable, adjust the number and type of Shares
subject to the Option and the exercise price with respect to the Option.
7. Forfeiture of Option and Option Gain Resulting From Certain Activities.
(a) If, at any time that (i) is two (2) years after the date that Employee has exercised the
Option or (ii) is two (2) years after the date of the termination of Employee’s employment with the
Company for any reason whatsoever while an option agreement under the Plan is in effect, whichever
is longer, Employee engages in any Forfeiture Activity (as defined below) then (i) the Option shall
immediately terminate effective as of the date any such activity first occurred, and (ii) any gain
received by Employee pursuant to the exercise of the Option granted hereunder must be paid to the
Company within thirty (30) days of demand by the Company. For purposes hereof, the gain on any
exercise of the Option shall be determined by multiplying the number of Shares purchased pursuant
to the Option times the excess of the Fair Market Value of a share of the Company’s Common Stock on
the date of exercise (without regard to any subsequent increase or decrease in the fair market
value) over the exercise price.
(b) As used herein, Employee shall be deemed to have engaged in a “Forfeiture Activity” if
Employee (i) directly or indirectly, engages in any business activity on his or her own behalf or
as a partner, stockholder, director, trustee, principal, agent, employee, consultant or otherwise
of any person or entity which is in any respect in competition with or competitive with the Company
or solicits, entices or induces any employee or representative of the Company to engage in any such
activity, (ii) directly or indirectly solicits, entices or induces (or assists any other person or
entity in soliciting, enticing or inducing) any customer or potential customer (or agent, employee
or consultant of any customer or potential customer) with whom Employee had contact in the course
of his or her employment with the Company to deal with a competitor of the Company or (iii) fails
to hold in a fiduciary capacity for the benefit of the Company all confidential information,
knowledge and data, including customer lists and information, business plans and business strategy
(“Confidential Data”) relating in any way to the business of the Company for so long as such
Confidential Data remains confidential.
(c) If any court of competent jurisdiction shall determine that the foregoing forfeiture
provision is invalid in any respect, the court so holding may limit such covenant either or both in
time, in area or in any other manner which the court determines such that the covenant shall be
enforceable against Employee. Employee shall acknowledge that the remedy of law for any
4
breach of the foregoing covenant not to compete will be inadequate, and that the Company shall
be entitled, in addition to any remedy of law, to preliminary and permanent injunctive relief.
Notwithstanding the foregoing, this Section 7 shall have no application following a Change in
Control.
8. Miscellaneous.
(a) Income Tax Matters.
(i) In order to comply with all applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure that all
applicable federal or state payroll, withholding, income or other taxes, which are the sole
and absolute responsibility of Employee, are withheld or collected from Employee.
(ii) In accordance with the terms of the Plan, and such rules as may be adopted under
the Plan, Employee may elect to satisfy Employee’s federal and state income tax withholding
obligations arising upon exercise of the Option by (i) delivering cash, check (bank check,
certified check or personal check) or money order payable to the Company, (ii) having the
Company withhold a portion of the Shares otherwise to be delivered having a Fair Market
Value equal to the amount of such taxes, or (iii) delivering to the Company shares of Common
Stock already owned by Employee having a Fair Market Value equal to the amount of such
taxes. Any such shares already owned by Employee shall have been owned by Employee for no
less than six months prior to the date delivered to the Company if such shares were acquired
upon the exercise of an option or upon the vesting of restricted stock units or other
restricted stock. Employee shall represent and warrant in writing that Employee is the
owner of the shares so delivered, free and clear of all liens, encumbrances, security
interests and restrictions. Employee’s election must be made on or before the date that the
amount of tax to be withheld is determined.
(b) Plan Provisions Control. In the event that any provision of this Agreement
conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan
shall control.
(c) No Rights of Shareholders. Neither Employee, Employee’s legal representative nor
a permissible assignee of this Option shall be, or have any of the rights and privileges of, a
shareholder of the Company with respect to the Shares issuable upon the exercise of this Option, in
whole or in part, unless and until such Shares have been issued in the name of Employee, Employee’s
legal representative or permissible assignee, as applicable.
(d) No Right to Employment. The grant of the Option shall not be construed as giving
Employee the right to be retained as an employee of the Company or any Affiliate, nor will it
affect in any way the right of the Company or an Affiliate to terminate such employment at any
time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss
Employee from employment free from any liability or any claim under the Plan or this Agreement,
unless otherwise expressly provided in the Plan. By participating in the Plan, Employee shall be
deemed to have accepted all the conditions of the Plan and the Agreement and
5
the terms and conditions of any rules and regulations adopted by the Committee and shall be
fully bound thereby.
(e) Governing Law. The internal law, and not the law of conflicts, of the State of
Minnesota shall govern all questions concerning the validity, construction and effect of the Plan
and this Agreement, and any rules and regulations relating to the Plan and this Agreement.
(f) Severability. If any provision of the Plan or this Agreement is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or
this Agreement under any law deemed applicable by the Committee, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the purpose or intent of the
Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement,
and the remainder of this Agreement shall remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor this Agreement shall create or be
construed to create a trust or separate fund of any kind or a fiduciary relationship between the
Company or any Affiliate and Employee or any other Person. To the extent that Employee acquires a
right to receive payments from the Company or any Affiliate pursuant to this Agreement, such right
shall be no greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(h) No Fractional Shares. No fractional shares shall be issued or delivered pursuant
to this Agreement. The Company will pay, in lieu thereof, the Fair Market Value of such fractional
share.
(i) Headings. Headings are given to the Sections and subsections of the Agreement
solely as a convenience to facilitate reference. Such headings shall not be deemed in any way
material or relevant to the construction or interpretation of this Agreement or any provision
hereof.
(j) Conditions Precedent to Issuance of Shares. Shares shall not be issued pursuant
to the exercise of the Option unless such exercise and the issuance and delivery of the applicable
Shares pursuant thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, the requirements of any applicable stock
exchange or the Nasdaq Stock Market and the Minnesota Business Corporation Act. As a condition to
the exercise of the purchase price relating to the Option, the Company may require that the person
exercising or paying the purchase price represent and warrant that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation and warranty is required by law.
(k) Consultation With Professional Tax and Investment Advisors. The holder of this
Award acknowledges that the grant, exercise, vesting or any payment with respect to this Award, and
the sale or other taxable disposition of the Shares acquired pursuant to the exercise thereof, may
have tax consequences pursuant to the Code or under local, state or international tax laws.
6
The holder further acknowledges that such holder is relying solely and exclusively on the
holder’s own professional tax and investment advisors with respect to any and all such matters (and
is not relying, in any manner, on the Company or any of its employees or representatives).
Finally, the holder understands and agrees that any and all tax consequences resulting from the
Award and its grant, exercise, vesting or any payment with respect thereto, and the sale or other
taxable disposition of the Shares acquired pursuant to the Plan, is solely and exclusively the
responsibility of the holder without any expectation or understanding that the Company or any of
its employees or representatives will pay or reimburse such holder for such taxes or other items.
{Signature page follows}
7
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement on the date set
forth in the first paragraph.
| ROCHESTER MEDICAL CORPORATION |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| [EMPLOYEE] |
||||
| |
||||
| Name: | ||||
{Signature Page to Non-Incentive Stock Option Agreement/
Rochester Medical Corporation 2010 Stock Incentive Plan}
Rochester Medical Corporation 2010 Stock Incentive Plan}
8
