Document:

EX-10.3 2002 STOCK OPTION PLAN

 

Exhibit 10.3

HOME DIAGNOSTICS, INC.

2002 STOCK OPTION PLAN

Home Diagnostics, Inc.

2400 NW 55th Court

Ft. Lauderdale, FL 33309-2676

 

 

HOME DIAGNOSTICS, INC.

2002 STOCK OPTION PLAN

Table of Contents

	 	 	 	 	 
	 	 	 	 	Page
	Section
	 	 	 	 
	 
	 	 	 	 
	1.
	 	Purpose	 	1
	 
	 	 	 	 
	2.
	 	Definitions	 	1
	 
	 	 	 	 
	3.
	 	Shares Subject to the Plan	 	3
	 
	 	 	 	 
	4.
	 	Grant of Stock Options	 	3
	 
	 	 	 	 
	5.
	 	Certificates for Stock	 	6
	 
	 	 	 	 
	6.
	 	Beneficiary	 	7
	 
	 	 	 	 
	7.
	 	Administration of the Plan	 	7
	 
	 	 	 	 
	8.
	 	Amendment or Discontinuance	 	7
	 
	 	 	 	 
	9.
	 	Adjustment in Event of Change in Common Stock	 	8
	 
	 	 	 	 
	10.
	 	Miscellaneous	 	8
	 
	 	 	 	 
	11.
	 	Effective Date and Stockholder Approval	 	11

 

 

HOME DIAGNOSTICS, INC.

2002 STOCK OPTION PLAN

1. Purpose

     The purpose of the Home Diagnostics, Inc. 2002 Stock Option Plan is to attract and retain
persons of ability as employees, directors, and consultants of Home Diagnostics, Inc. and its
subsidiaries and affiliates, and encourage such employees, directors, and consultants to continue
to exert their best efforts on behalf of the Company and its subsidiaries and affiliates.

2. Definitions

     When used herein, the following terms shall have the following meanings:

     “Beneficiary” means the beneficiary or beneficiaries designated pursuant to Section 6 who
shall be entitled to exercise any Options held by the Optionee at the time of his or her death.

     “Board” means the Board of Directors of the Company.

     “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All
citations to sections of the Code are to such sections as they may from time to time be amended or
renumbered.

     “Committee” means any committee (including, without limitation, any Compensation Committee of
the Board) that may be appointed by the Board to grant Options hereunder and/or to administer the
Plan pursuant to Section 7 hereof.

     “Company” means Home Diagnostics, Inc. and its successors and assigns.

     “Consultant” means any person who is engaged by the Company or any Participating Company to
render consulting or advisory services to such entity.

     “Director” means any member of the Board.

     “Employee” means an employee of any Participating Company who, in the judgment of the Board or
the Committee, is responsible for or contributes to the growth or profitability of the business of
any Participating Company.

     “Exchange” means the principal exchange on which the Stock is listed or, if the Stock is not
listed on an exchange, the Nasdaq Stock Market of the National Association of Securities Dealers.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Fair Market Value” means, as of any date in issue, the closing sales price on the Exchange of
one share of Stock on such date or, if no sales of Stock have taken place on such

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date, the closing sales price of one share of Stock on the most recent date on which sales prices
were reported on the Exchange. In the event that the Company’s shares are not publicly traded on
the Exchange, the Board shall determine the fair market value for all purposes.

     “Immediate Family Members” means children, grandchildren, spouse or common law spouse,
siblings or parents of the Optionee, or bona fide trusts, partnerships or other entities controlled
by and of which the beneficiaries are Immediate Family Members of the Optionee.

     “Option” means an option to purchase Stock subject to the applicable provisions of Section 4
and granted in accordance with the terms of the Plan and which, in the case of an Option granted to
an Employee, may be an incentive stock option qualified under Section 422 of the Code or a
nonqualified stock option and which, in the case of an Option granted to an Optionee that is not an
Employee, shall be a nonqualified stock option.

     “Option Agreement” means any written agreement evidencing the terms and conditions of an
Option granted under the Plan. Each Option Agreement shall be subject to the terms and conditions
of the Plan.

     “Optionee” means a Employee, Director or Consultant who has been granted an Option under the
Plan.

     “Participating Company” means the Company or any subsidiary or other affiliate of the Company
which at the time such option is granted under the plan qualifies as a “subsidiary corporation” of
the Company under the definition of such term contained in Section 424(f) of the Code.

     “Plan” means the Home Diagnostics, Inc. 2002 Stock Option Plan, as the same may be amended,
administered or interpreted from time to time.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Stock” means the Class B nonvoting common stock, $0.01 par value, of the Company.

     “Ten Percent Stockholder” means an Employee who, at the time of grant of an Option to him or
her, owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
10 percent of the total combined voting power of all classes of stock of the Company.

     “Total Disability” means the inability of an Employee, as determined by the Board to perform
his or her duties as such by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve months. An individual shall not be considered Totally
Disabled unless such individual has furnished proof of the existence thereof in such form and
manner, and at such times, as the Board may require.

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3. Shares Subject to Plan

     (a) The aggregate number of shares of Stock which may be subject to purchase by exercising
Options granted under the Plan is 1,000,000 shares, subject to adjustment in accordance with
Section 9 below. Such shares of Stock shall be made available from either authorized and unissued
shares or shares held by the Company in its treasury. If, for any reason, any shares of Stock
subject to purchase by exercising an Option under the Plan are not delivered or are reacquired by
the Company, for reasons including, but not limited to, termination of employment or relationship
with the Company, or expiration or cancellation with the consent of an Optionee of an Option, such
shares of Stock shall again become available under the Plan; provided, however,
that for purposes of meeting the requirements of Section 162(m) of the Code, no Employee who is a
covered employee under Section 162(m) of the Code shall receive a grant of options in excess of the
amount specified under this Section 3, computed as if any Option which is canceled reduced the
maximum number of shares of Stock available under the Plan.

     (b) In the event that any Option granted hereunder (other than a Substitute Option) is
exercised through the delivery of shares of Stock, or in the event that withholding tax liabilities
arising from such Option are satisfied by the withholding of shares of Stock by the Company, the
number of shares of Stock subject to purchase by exercising an Option under the Plan shall be
increased by the number of shares of Stock so surrendered or withheld.

     (c) Any shares of Stock covered by a Substitute Option shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Stock available for delivery
under the Plan.

4. Grant of Stock Option

     (a) Subject to the provisions of the Plan, the Board shall (i) determine and designate from
time to time those Employees, Directors, or Consultants to whom Options are to be granted; (ii)
determine, with respect to options to be granted to Employees, whether such Options shall be
incentive stock options or nonqualified stock options or a combination of incentive stock options
and nonqualified stock options, (iii) determine, the number of shares of Stock subject to each
Option; and (iv) determine the time or times when and the manner in which each Option shall be
exercisable and the duration of the exercise period; provided, however, that (A) no
option which is an incentive stock option shall be granted after the expiration of ten years from
the effective date of the Plan, (B) the aggregate Fair Market Value (determined as of the date an
Option is granted) of the Stock for which incentive stock options (including incentive stock
options granted under any other plan of the Company) granted to any Optionee under this Plan that
may first become exercisable in any calendar year shall not exceed $100,000, and (C) the aggregate
number of shares of Stock for which Options are granted to any one participant in any one calendar
year shall not exceed 200,000.

     (b) The exercise period for an Option shall be no more than ten years from the date of grant,
provided, however, that, in the case of an incentive stock option granted to a Ten
Percent Stockholder, such period, including extensions, shall be no more than five years from the
date of grant.

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     (c) The Option exercise price per share shall be determined by the Board at the time the
Option is granted and shall be at least equal to the par value of one share of Stock if the stock
has a par value; provided, however, that the exercise price for an Option shall be
not less than the Fair Market Value of the Stock on the date of grant, or in the case of an
incentive stock option granted to a Ten Percent Stockholder, 110 percent of the Fair Market Value
on the date of grant, all as determined by the Board.

     (d) An Option granted hereunder shall become exercisable according to the terms hereof at such
time or times and under such conditions as determined by the Board and set forth in the Option
Agreement, but in no event at a rate of less than twenty percent (20%) per year over five (5) years
from the date the option is granted. The Board shall have the power to accelerate the time at which
an Option may first be exercised, notwithstanding the provisions of the Option Agreement stating
the time when the Option may first be exercised.

     (e) (i) If an Employee who has been granted an Option dies while an Employee of a
Participating Company, his or her Options may be exercised, to the extent that the Employee shall
have been entitled to do so on the date of his or her death, by his or her Beneficiary, including,
if applicable, his or her executors or administrators, at any time, or from time to time, within
twelve months after the date of the Employee’s death or within such other period, and subject to
such terms and conditions, as the Board may specify, but no later than the expiration date
specified in Section 4(b) above.

          (ii) If the Employee’s employment by a Participating Company terminates because of his or her
Total Disability, he or she may exercise his or her Options, to the extent that he or she shall
have been entitled to do so at the date of the termination of his or her employment, at any time,
or from time to time, within twelve months after the date of the termination of his or her
employment or within such other period, and subject to such terms and conditions, as the Board may
specify, but not later than the expiration date specified in Section 4(b) above.

          (iii) If an Employee’s employment by a Participating Company terminates because of
involuntary termination of employment by the Participating Company with cause (as determined by the
Board in its sole discretion), all outstanding Options shall be forfeited as of the date of
termination or at such later date, and subject to such terms and conditions, as the Board may
specify, but not later than the expiration date specified in Section 4(b) above.

          (iv) If an Employee’s employment terminates because of retirement from a Participating
Company after attaining age 65, he or she may exercise his or her Options to the extent that he or
she shall have been entitled to do so at the date of the termination of his or her employment, at
any time, or from time to time, within twelve months after the date of the termination of his or
her employment, or within such other period, and subject to such terms and conditions, as the Board
may specify, but not later than the expiration date specified in Section 4(b) above.

          (v) If an Employee’s employment terminates because of involuntary termination by the
Participating Company without cause (as determined by the Board in its sole discretion),

4

 

or by voluntary resignation by the Employee, other than retirement after attaining age 65, he or
she may exercise his or her Options to the extent that he or she would have been entitled to do so
at the date of the termination of his or her employment, at any time, or from time to time, within
three months after the date of the termination of his or her employment, or within such other
period, and subject to such terms and conditions, as the Board may specify, but not later than the
expiration date specified in Section 4(b) above.

          (vi) Options granted to Directors shall be governed by the provisions of this Section 4(e),
provided, however, that for this purpose references to Employee shall include
Directors, and references to termination of employment shall, in the case of a Director, refer to
termination of the Director’s service as a Director.

          (vii) Options granted to Consultants shall be governed by the provisions of this Section 4(e),
provided, however, that for this purpose references to Employees shall include
Consultants, and references to termination of employment shall, in the case of a Consultant, refer
to termination of the Consultant’s services as a Consultant.

     (f) No Option granted under the Plan shall be transferable other than by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations order, and during the
lifetime of the Optionee, an Option shall be exercisable only by him or her; provided,
however, that the Board in its discretion, may allow for transferability of non-qualified
stock options by an Optionee to Immediate Family Members, provided that such transfer of Options is
not for value (within the meaning of the General Instructions to Form S-8 of the Securities and
Exchange Commission).

     (g) With respect to an incentive stock option, the Board shall specify such terms and
provisions as the Board may determine to be necessary or desirable in order to qualify such Option
as an incentive stock option within the meaning of Section 422 of the Code.

     (h) Each Option granted under the Plan shall be evidenced by a written Option Agreement in a
form approved by the Board. Each Option granted under the Plan shall be subject to the express
terms and conditions, if any, required under the Plan or as required by the Board for the form of
Option granted and such other terms and conditions as the Board may specify. Further, each such
Option Agreement shall provide that unless at the time of exercise of the Option there shall be, in
the opinion of counsel for the Company, a valid and effective registration statement under the
Securities Act and appropriate qualification and registration under applicable state securities
laws relating to the Stock being acquired pursuant to the Option, the Optionee shall upon exercise
of the Option give a representation 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 resale or
distribution of any such shares. In the absence of such registration statement, the Optionee shall
be required to execute a written affirmation, in a form reasonably satisfactory to the Company, of
such investment intent and to further agree that he or she will not sell or transfer any Stock
acquired pursuant to the Option until he or she requests and receives an opinion of counsel
satisfactory to the Company to the effect that such proposed sale or transfer will not result in a
violation of the Securities Act, or a registration statement covering the sale or transfer of the
shares has been declared effective by the Securities and Exchange Commission, or

5

 

he or she obtains a no-action letter from the Securities and Exchange Commission with respect to
the proposed transfer.

     (i) Except as otherwise provided in the Plan, the purchase price of the shares as to which an
Option shall be exercised shall be paid to the Company at the time of exercise either in cash or in
Stock already owned by the Optionee, or a combination of cash and Stock, or in such other
consideration acceptable to the Board (including, to the extent permitted by applicable law, the
relinquishment of a portion of the Option) as the Board deems appropriate, having a total Fair
Market Value equal to the purchase price. For purposes of this Section 4(i), the fair market value
of the portion of an Option that is relinquished shall be the excess of

	 	(x)	 	the Fair Market Value at the time of exercise of the number of shares of Stock subject to the portion of the Option that is relinquished over
	 
	 	(y)	 	the aggregate exercise price specified in the Option with
respect to such shares.

5. Certificates for Stock

     (a) Each Optionee, upon the exercise of an Option granted under the Plan, shall be issued a
certificate for the shares of Stock purchased through such exercise. Such certificate shall be
registered in the name designated by the Optionee.

     (b) The Company shall not be required to issue or deliver any certificates for shares of Stock
prior to (i) the listing of such shares on any Exchange on which the Stock may then be listed or
(ii) the completion of any registration or qualification of such shares under any federal or state
law, or any ruling or regulation of any governmental body, which the Board shall, in its sole
discretion, determine to be necessary or advisable.

     (c) All certificates for shares of Stock delivered under the Plan shall also be subject to
such stop-transfer orders and other restrictions as the Board may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Stock is then listed and any applicable federal or state securities laws, and the
Board may cause a legend or legends to be placed on any such certificates to make appropriate
reference to such restrictions. The foregoing provisions of this Section 5(c) shall not be
effective if and to the extent that the shares of Stock delivered under the Plan are covered by an
effective and current registration statement under the Securities Act, or if, and so long as, the
Board determines that application of such provisions is no longer required or desirable. In making
such determination, the Board may rely upon an opinion of counsel for the Company.

     (d) Each Optionee who receives shares of Stock upon exercise of an Option shall have all of
the rights of a stockholder, including the right to vote the shares and receive dividends and other
distributions, from the date of issuance to him or her of a certificate or certificates for such
shares. No Optionee granted an Option shall have any right as a stockholder with respect to any
shares subject to such Option prior to the date of issuance to him or her of a certificate or
certificates for such shares.

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     (e) Each Optionee who receives Stock upon exercise of an Option that is an incentive stock
option shall give the Company prompt notice of any sale of such Stock prior to the expiration of
any applicable holding period for incentive stock options prescribed by the Code, which holding
period is currently until the later of (i) two years after the grant of such Option or (ii) one
year after the date of such exercise.

6. Beneficiary

     (a) Each Optionee shall file with the Company a written designation of one or more persons as
the Beneficiary who shall be entitled to exercise any Options held by the Optionee at the time of
his or her death. An Optionee may from time to time revoke or change his or her Beneficiary
designation without the consent of any prior Beneficiary by filing a new designation with the
Company. The last such designation received by the Company shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be effective unless
received by the Company prior to the Optionee’s death, and in no event shall it be effective as of
a date prior to such receipt.

     (b) If no such Beneficiary designation is in effect at the time of an Optionee’s death, or if
no designated Beneficiary survives the Optionee, or if such designation conflicts with law, the
Optionee’s estate shall be entitled to exercise any Options held by the Optionee at the time of the
Optionee’s death. If the Company is in doubt as to the right of any person to exercise such
Options, the Company may suspend the right to exercise such Option, without liability, until the
Company determines the rights thereto, or the Company may transfer such Option into any court of
appropriate jurisdiction and such transfer shall be a complete discharge of the liability of the
Company therefor.

7. Administration of the Plan

     (a) The Plan shall be administered by the Board unless and until the Board delegates
administration to a Committee, as provided in Section 7(c).

     (b) The Board shall have full power, discretion and authority to interpret, construe and
administer the Plan and any part thereof, and its interpretations and constructions thereof, and
actions taken thereunder shall be, except as otherwise determined by the Board, final, conclusive
and binding on all persons for all purposes. All decisions, determinations or actions of the Board
made or taken pursuant to grants of authority under the Plan shall be made or taken in the sole
discretion of the Board and shall be final, conclusive and binding on all persons for all purposes.

     (c) The Board may delegate administration of the Plan to a Committee. If administration is
delegated to a Committee, the Committee shall have, in connection with the administration of Plan,
the powers theretofore possessed by the Board (and references in the Plan to the Board shall
thereafter be to the Committee), subject, however to such resolutions, not inconsistent with the
Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any
time and revest in the Board administration of the Plan.

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8. Amendment or Discontinuance

     The Board may, at any time and for any reason, amend or terminate the Plan; provided,
however, that except as provided in Section 9 (relating to adjustments upon changes in the
stock), no amendments shall be effective unless approved by the stockholders of the Company to the
extent that such approval is required to satisfy Section 422 of the Code. No amendment or
termination shall retroactively impair the rights of any person with respect to an Option without
the consent of such person.

9. Adjustment in Event of Change in Common Stock

     (a) Subject to Section 9(b), if the outstanding shares of Stock of the Company are increased,
decreased, or exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed with respect to
such shares of Stock or other securities, through merger, consolidation, sale of all or
substantially all of the property of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Stock or other securities, an appropriate and proportionate adjustment
shall be made in (i) the maximum number and kind of shares provided in Section 3 and in clause C of
Section 4(a), (ii) the number and kind of shares or other securities subject to the outstanding
Options, and (iii) the price for each share or other unit of any other securities subject to
outstanding Options without change in the aggregate purchase price or value as to which such
Options remain exercisable or subject to restrictions. Any adjustment under this Section 9(a) will
be made by the Board, whose determination as to what adjustments will be made and the extent
thereof will be final, binding and conclusive. No fractional interests will be issued under the
Plan resulting from any such adjustment.

     (b) Notwithstanding anything else herein to the contrary, the Board, in its sole discretion at
the time of grant of an Option or otherwise may, in an Option Agreement, in a notice of the grant
of an Option or otherwise, provide that, with an Optionee’s consent, upon the occurrence of certain
events, including a change in control of the Company (as determined by the Board), any outstanding
Options not theretofore exercisable shall immediately become exercisable in their entirety and that
any such Option may be purchased by the Company for cash at a price to be determined by the Board.

8

 

     (c) In the event of a corporate merger, consolidation or similar transaction, or a sale
or disposition of all or substantially all of the assets of the Company or a Participating Company
or a sale of all substantially all of the outstanding securities of the Company or a Participating
Company, any surviving corporation or acquiring corporation may assume any or all of the Options
outstanding under the Plan or may substitute similar awards for Options outstanding under the Plan.

10. Miscellaneous

     (a) Nothing in this Plan or any Option Agreement entered into or notice of grant given
pursuant hereto shall confer upon any employee any right to continue in the employ of any
Participating Company or interfere in any way with the right of any Participating Company to
terminate his or her employment at any time.

     (b) No Option granted under the Plan shall be deemed salary or compensation for the purpose of
computing benefits under any employee benefit plan or other arrangement of any Participating
Company for the benefit of its employees unless the Company shall determine otherwise.

     (c) No person shall have any claim to an Option until it is actually granted under the Plan.
To the extent that any person acquires a right to receive payments from the Company under this
Plan, such right shall be no greater than the right of an unsecured general creditor of the
Company.

     (d) Absence on leave approved by a duly constituted officer of a Participating Company shall
not be considered interruption or termination of employment for any purposes of the Plan;
provided, however, that no Option that is an incentive stock option may be granted
to an employee while he or she is absent on leave.

     (e) If the Board shall find that any person to whom any Option, or portion thereof, is granted
under the Plan is unable to care for his or her affairs because of illness or accident, or is a
minor, then any payment due him or her (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Board so directs the Company, be paid to his or her
spouse, a child, a relative, an institution maintaining or having custody of such person deemed by
the Board to be a proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Company therefor.

     (f) The right of any Optionee or other person to any Option or Stock under the Plan may not be
assigned, transferred, pledged or encumbered, except as provided herein or as may otherwise be
required by law. If, by reason of any attempted assignment, transfer, pledge, or encumbrance or
any bankruptcy or other event happening at any time, any amount payable under the Plan would be
made subject to the debts or liabilities of the Optionee or his or her Beneficiary or would
otherwise devolve upon anyone else and not be enjoyed by the Optionee or his or her Beneficiary,
then the Board may terminate such person’s interest in any such payment and direct that the same be

9

 

held and applied to or for the benefit of the Optionee, his or her Beneficiary or any other persons
deemed to be the natural objects of his or her bounty, taking into account the expressed wishes of
the Optionee (or, in the event of his or her death, those of his or her Beneficiary) in such manner
as the Board may deem proper.

     (g) Copies of the Plan and all amendments, administrative rules and procedures and
interpretations shall be made available to all Optionees at all reasonable times at the Company’s
headquarters.

     (h) The Board may require, as a condition precedent to the grant or exercise of any Option, or
otherwise, appropriate arrangements with the Optionee or his or her Beneficiary, for the
withholding of any federal, state, local or foreign taxes.

     (i) The Plan and the grant of Options 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.

     (j) All elections, designations, requests, notices, instructions and other communications from
an Optionee, Beneficiary or other person to the Board, required or permitted under the Plan, shall
be in such form as is prescribed from time to time by the Board and shall be mailed by first class
mail or delivered to such location as shall be specified by the Board in an Option Agreement, a
notice of grant or otherwise.

     (k) The terms of the Plan shall be binding upon the Company and its successors and assigns.

     (l) Captions preceding the sections hereof are inserted solely as a matter of convenience and
in no way define or limit the scope or intent of any provision hereof.

11. Effective Date and Stockholder Approval

     The original effective date of the Plan shall be October 1, 2002, subject to approval by the
Company’s stockholders. Notwithstanding anything in the Plan to the contrary, Options may be
granted as provided herein on the effective date of the Plan or at any time thereafter subject to
such subsequent stockholder approval. If the Plan is not approved by the Company’s stockholders
within the time required by Section 422(b)(1) of the Code, the Plan and all Options granted
hereunder shall thereupon become null and void.

10EX-10.4 FORM OF STOCK OPTION AGREEMENTS

 

Exhibit 10.4

HOME DIAGNOSTICS, INC.

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the 2002 Stock Option Plan (the “Plan”) shall
have the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

Name of Optionee:

Date of Grant:

Total Number of Shares Granted: Shares

Term/Expiration Date

The undersigned Optionee has been granted an Option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as follows:

A. Incentive Stock Option:

1. Grant of Incentive Stock Option. Pursuant to the provisions of the Plan, and in
compliance with the provisions of Section 422 of the Internal Revenue Code of 1986, as may
be amended from time to time, the Company hereby grants to the Employee Optionee, subject to
the terms and conditions of the Plan and subject further to the terms and conditions herein
set forth, an option (“Option”) to purchase            shares of the Company’s Class B nonvoting
common stock, par value $0.01 per share (“Stock”), at the
purchase price of
$         per share, which purchase price is not less than the Fair Market Value of a share of Stock on the Date
of Grant (110% of the Fair Market Value in the case of a grant to an Employee who is a Ten
Percent Stockholder). This Option shall be exercisable, and may be exercised, as
hereinafter provided.

2. Vesting Schedule. Subject to the other terms and conditions of this Option Agreement
regarding the exercisability of this Option, this Option shall become exercisable, in whole
or in part, according to the following vesting schedule:

 

 

	 	 	 	 	 
	 	 	 	 	Cumulative No.
	Vesting Date	 	No. Shares First Exercisable	 	Shares Exercisable
	Year one
	 	35%	 	 
	Year two
	 	35%	 	 
	Year three
	 	30%	 	 

II. AGREEMENT

     1. Grant of Option. The Company hereby grants to the Optionee named in the Notice of
Grant (the “Optionee”), an option (the “Option”) to purchase the number of Shares set forth in the
Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise
Price”), and subject to the terms and conditions of the Plan, which is incorporated herein by
reference. Subject to Section 8 of the Plan, in the event of a conflict between the terms and
conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall
prevail.

     If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is
intended to quality as an Incentive Stock Option as defined in Section 422 of the Code.
Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option
shall be treated as a Nonqualified Stock Option (“NQO”).

     2. Exercise of Option.

          (a) Right to Exercise. This Option shall be exercisable during its term in accordance
with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the
Plan and this Option Agreement. To the extent vested, this Option shall be exercisable for only
three (3) months after an Employee Optionee ceases to be an Employee, if the Employee’s termination
is the result of (i) termination by the Company without cause or (ii) voluntary termination by the
Employee prior to attaining age 65. This Option shall immediately cease to be exercisable if the
Employee Optionee ceases to be an Employee as a result of involuntary termination by the Company
for cause (as determined by the Board in its sole discretion). To the extent vested, this Option
shall be exercisable for only twelve (12) months after an Employee Optionee ceases to be an
Employee, if the Employee’s termination is the result of the Employee’s voluntary termination by
the Employee after
attaining age 65. To the extent vested, this Option shall be exercisable for only twelve (12)
months after an Employee

 

 

Optionee ceases to be an Employee, if the Employee’s termination is the
result of the Employee’s death or Total Disability. In no event may an Employee Optionee exercise
this Option after the Term/Expiration Date indicated in the Notice of Grant.

          (b) Method of Exercise. This Option shall be exercisable by delivery of an exercise
notice in the form attached as Exhibit A (the “Exercise Notice”) which shall state the
election to exercise the Option, the number of Shares with respect to which the Option is being
exercised, and such other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.

          No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such
exercise complies with applicable laws relating to the administration of stock option plans and the
issuance of stock thereunder (“Applicable Law”). Assuming such compliance, for income tax purposes,
the Shares shall be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.

          (c) Payment of Tax. Optionee shall make such arrangements as the Company deems
necessary to satisfy any federal, state and local income or payroll tax withholding obligations
imposed on the Company with respect to this Option prior to the issuance of any Shares pursuant to
the exercise of the Option.

     3. Optionee’s Representations. In the event the Shares have not been registered under
the Securities Act of 1933, as amended, at the time this Option is exercised, the Optionee shall,
if required by the Company, concurrently with the exercise of all or any portion of this Option,
deliver to the Company his or her Investment Representation Statement in the form attached hereto
as Exhibit B.

     4. Lock-Up Period. Optionee hereby agrees that, if so requested by the Company or any
representative of the underwriters (the “Managing Underwriter”) in connection with any registration
of the offering of any securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during the 180-day period (or
such other period as may be requested in writing by the Managing Underwriter and agreed to in
writing by the Company) (the “Market Standoff Period”) following the effective date of a
registration statement of the Company filed under the Securities Act. Such restriction shall apply
only to the first registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public in an underwritten
public offering under the Securities Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of such Market Standoff
Period.

     5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

          (a) cash
or check;

 

 

          (b) consideration received by the Company under a formal cashless exercise program adopted by
the Company in connection with the Plan; or

          (c) surrender of other Shares which, (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

     6. Restrictions on Exercise. This Option may not be exercised until such time as the
Plan has been approved by the stockholders of the Company, or if the issuance of such Shares upon
such exercise or the method of payment of consideration for such Shares would constitute a
violation of any Applicable Law.

     7. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution, and during the lifetime of
Optionee, this Option shall be exercisable only by him or her; provided, however, that the Optionee
may designate a beneficiary, in such manner as the Board or the Committee may approve, who may
exercise the Option in the event of the Optionee’s death. Notwithstanding the foregoing, the Board
or the Committee, in its discretion, may allow for transferability of nonqualified stock options by
an Optionee to Immediate Family Members, provided that such transfer of Options is not for value
(within the meaning of the General Instructions to Form S-8 of the Securities and Exchange
Commission). The terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

     8. Term of Option. This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with the Plan and the
terms of this Option.

     9. Notice of Disqualifying Disposition of ISO Shares. If the Option granted to
Optionee herein is an ISO, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of
Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition.

     10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference.
The Plan and this Option Agreement (inclusive of the Exhibits hereto) constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect to the subject
matter hereof, and may not be modified adversely to the Optionee’s interest except by means of a
writing signed by the Company and Optionee. This Agreement is governed by the internal substantive
laws but not the choice of law rules of Delaware.

     11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS AN
EMPLOYEE OR OTHER SERVICE

 

 

PROVIDER (AS THE CASE MAY BE) AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS AN EMPLOYEE OR OTHER SERVICE PROVIDER (AS THE CASE MAY BE) FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS AN EMPLOYEE OR OTHER SERVICE PROVIDER (AS
THE CASE MAY BE) AT ANY TIME, WITH OR WITHOUT CAUSE.

Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with
the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option and fully understands
all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions arising under the Plan or
this Option. Optionee further agrees to notify the Company upon any change in the residence
address indicated below

	 	 	 	 	 	 	 	 	 
	OPTIONEE:	 	 	 	Home Diagnostics, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	Signature

	 	 	 	 	 	 
	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Title President/CEO	 	 
	 

Print Name

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Residence Address:

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