Document:

Exhibit 10.2

 

EQUITY

 

IRADIMED CORPORATION
 STOCK OPTION AGREEMENT

 

Introduction

 

This Stock Option Agreement (the “Agreement”) made and entered into as of the            day of         , 20     (hereinafter called “Effective Date”), between Iradimed Corporation, an Oklahoma corporation (hereinafter called the “Corporation”), and        (hereinafter called the “Optionee”), pursuant to the Incentive Stock Plan (hereinafter called the “Plan”) of the Corporation, which reserves for issuance to persons serving the Corporation and its subsidiaries as employees or consultants certain shares of the Corporation’s no par value Common Stock (hereinafter called the “Common Stock”). As used herein, the term “subsidiary” shall mean any present or future corporation which would be a “subsidiary corporation” of the corporation, as that term is defined in Sections 425(f) and (g) of the Internal Revenue Code of 1986 (the “Code”).

 

Background

 

The Corporation desires to carry out the purposes of the Plan by affording the Optionee, who is an employee of the Corporation, an opportunity to purchase shares of Common Stock by means of the grant of an incentive stock option, as hereinafter provided.

 

Agreement

 

Based upon the facts and premises contained in the above Recital and the mutual covenants below, the parties hereto have agreed and do hereby agree as follows:

 

1.                                      Grant of Option

 

The Corporation hereby grants to the Optionee the right and option (hereinafter called the “Option”) to purchase all or any part of an aggregate of                      shares of the Common Stock (such number being subject to adjustment as provided in Section 7 hereof and hereinafter called the “Option Shares”) on the terms and conditions herein set forth. The Option is intended to qualify as an “incentive stock option” within the meaning of Section 422A of the Code.

 

2.                                      Purchase Price

 

The purchase price of the Option Shares shall be $                 per share, which price has been determined by the Stock Option Committee (hereinafter called the “Committee”) appointed by the Board of Directors to be not less than the fair market value of said shares as of this date.

 

 

3.                                      Terms of Option

 

The Option shall terminate upon the date ten (10) years subsequent to the Effective Date, subject to earlier termination as provided in Sections 5, 6, and 7 hereof, or when all of the Option Shares have been acquired. Subject to the provisions of Section 8, the Option is exercisable as follows:

 

a.                                      Prior to the date one year subsequent to              (the “Vesting Start Date”), the Option shall not be exercisable;

 

b.                                      On or after the date one year subsequent to the Vesting Start Date, the Option shall become exercisable as to twenty-five percent (25%) of the total number of Option Shares;

 

c.                                       On or after the date two years subsequent to the Vesting Start Date, the Option shall become exercisable as to an additional twenty-five percent (25%) of the total number of Option Shares;

 

d.                                      On or after the date three years subsequent to the Vesting Start Date, the Option shall become exercisable as to an additional twenty-five percent (25%) of the total number of Option Shares;

 

e.                                       On or after the date four years subsequent to the Vesting Start Date, the Option shall be exercisable as to all of the Option Shares at any time, but not later than ten (10) years from the Effective Date.

 

The Option may be exercised as to any or all of the available Option Shares; provided, however, that if the Option is exercised for less than all of the available Option Shares, at any time prior to the occurrence of a “Qualifying IPO” as defined in Section 10 below, it cannot be exercised for less than twenty-five percent (25%) of the Option Shares. The purchase price of the shares as to which the Option shall be exercised shall be paid in full at time of exercise in cash, by check, or in certain circumstances as provided in Section 8 below, with outstanding stock of the Corporation. If outstanding stock is used as payment and such stock was acquired upon prior exercise of an option granted under the Plan, then such stock must have been held by the Optionee for at least one year subsequent to such prior exercise and two years subsequent to the grant of the prior exercised option. Except as provided in Sections 5 and 6 hereof, the Option may not be exercised at any time unless the Optionee is then in the service of the Corporation or a subsidiary and shall have been continuously employed by the Corporation or by a subsidiary since the Effective Date. The holder of the Option shall not have any of the rights of a shareholder with respect to the Option Shares as to which there has been no exercise of the Option.

 

In addition, the Committee and/or the Board may not shorten the term of any individual outstanding option so that such option terminates early. The Committee and/or the Board may not so shorten the term of any individual outstanding option(s)

 

 

4.                                      Nontransferability

 

The Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised, during the lifetime of the Optionee, only by the Optionee. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above), pledged, or hypothecated in any way, shall not be assignable by operation of law, 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 the provisions hereof, and the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect.

 

5.                                      Termination of Employment

 

In the event that the Optionee’s employment with the Corporation and its subsidiaries is terminated for any reason, with or without cause, and whether at the initiative of the Optionee or the Corporation, the Option may be exercised by the Optionee, to the extent that the Optionee shall have been entitled to do so at the date of such termination, at any time within ninety (90) days after such termination, but not after ten (10) years from the Effective Date, at the end of which time the Option shall terminate. Nothing in this Agreement shall confer upon the Optionee any right to continue in the employ of the Corporation or any of its subsidiaries or interfere in any way with the right of the Corporation or any such subsidiary to terminate the Optionee’s employment at any time.

 

6.                                      Death or Disability of Optionee

 

If prior to ten (10) years from the Effective Date the Optionee shall die or become disabled (as defined in Code Section 22(e) (3)) while employed by the Corporation or one or more of its subsidiaries or within ninety (90) days after the termination of such employment, the Option may be exercised (to the extent that the Optionee shall have been entitled to do so at the date of the Optionee’s death or disability) by the Optionee (or by the Optionee’s personal representatives, heirs, or legatees) at any time within one (1) year after his death or disability, but not after ten (10) years from the Effective Date, at the expiration of which time the Option shall terminate.

 

If prior to ten (10) years from the Effective Date the Optionee shall become disabled (as defined in the Americans with Disabilities Act, but not as defined in Code Section 22(e) (3)) while in the service of the Corporation or one or more of its subsidiaries or within ninety (90) days after the termination of such service, the Option may be exercised (to the extent that the Optionee shall have been entitled to do so at the date of the Optionee’s disability) by the Optionee (or by the Optionee’s personal representatives, heirs, or legatees) at any time within one (1) year after his disability, but not after ten (10) years from the Effective Date, at the expiration of which time the Option shall terminate. The fact that the company permits the Optionee to exercise the option subsequent to ninety (90) days after the termination of such employment shall not give rise to any implication (or be admissible as evidence in any proceeding as an admission or evidence) that the Optionee was disabled as defined by state law or the Americans with Disabilities Act, that the Optionee was unable to perform the Optionee’s job functions, that the Optionee’s employment was terminated because the Optionee could not perform the Optionee’s job functions, or that the Company has not made reasonable efforts to accommodate any disability which Optionee may have had. If the Optionee and the Company can not agree as to whether the Optionee is disabled, they shall both appear before the Committee which shall make such determination which shall be final, binding, and conclusive on

 

 

the Optionee and the Company. Optionee understands that if Optionee is disabled but not as defined in Code Section 22 (e) (3), then ninety (90) days after termination of employment any incentive stock option converts to a non-statutory stock option and upon any exercise of the Option thereafter Federal (and possibly state) income tax will be due and on any difference between the then fair market value of the option shares and their exercise price.

 

7.                                      Adjustments Upon Changes in Capital Structure

 

a.                                      Stock Splits and Like Events.

 

If a stock dividend, stock split or reverse stock split, reclassification, or recapitalization were to occur, then the aggregate number and/or class of shares subject to this Option and the exercise price prior to such occurrence shall be appropriately adjusted by the Committee in accordance with the terms of the Plan, and such adjustment shall be conclusive. Notwithstanding the foregoing, such adjustment shall have the result that if the Optionee was to exercise a portion of the Option subsequent to such occurrence, then Optionee would pay the same aggregate exercise price to exercise such portion of the Option and would then hold the same class and aggregate number of shares as if the Optionee would have exercised such portion of the Option immediately prior to such occurrence.

 

b.                                      Recapitalizations; Assumption of Options.

 

The effect of the following “Events” upon the Option are described below:

 

(i)                                     a merger or consolidation in which the Corporation is the surviving corporation if Corporation shareholders as a result of the merger or consolidation receive stock of another corporation and/or property in exchange for their Corporation shares or any merger or consolidation in which the Corporation is not the surviving corporation (other than a merger or consolidation with a wholly owned subsidiary, a reincorporation of the Corporation in a different jurisdiction, or other transaction in which there is no substantial change in the shareholders of the Corporation and the options granted under this Plan are assumed by the successor corporation, which assumption shall be binding on all optionees);

 

(ii)                                  a dissolution or liquidation of the Corporation;

 

(iii)                               the sale of substantially all of the assets of the Corporation; or

 

(iv)                              any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the shareholders of the Corporation give up all of their equity interest in the Corporation (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the Corporation).

 

Upon the occurrence of an Event, the Board of Directors shall at its complete discretion make arrangements (the “Arrangements”) which shall be binding upon the Optionee as to any portion of the Option, for the substitution of new options for such portion or for the assumption of such portion by any successor to the Corporation or its affiliate, for the acceleration of the expiration date of such portion to a date not earlier than thirty (30) days after

 

 

notice to the Optionee, or for the cancellation of such portion in exchange for payment by any successor to the Corporation or its affiliate of deferred compensation to the Optionee. Such deferred compensation may, but need not, be in an amount equal to the difference between the fair market value of the Option Shares subject to such unexpired portion and the aggregate exercise price of the Option Shares under the terms of such unexpired portion on the date of the Event, and may, but need not, be paid in installments which correspond with the vesting schedule of the Option. Any such substitution or assumption of any portion of the Option need not comply with Section 425(a) of the Code nor in the event of the acceleration of the expiration date of any portion of the Option need the exercisability of such portion be accelerated.

 

8.                                      Method of Exercising Option; Investment Representation

 

Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Corporation at its main office. Such notice shall be in a form reasonably satisfactory to the Corporation and shall state the election to exercise the Option and the number of shares in respect of which it is being exercised and shall be signed by the person or persons so exercising the Option. Optionee understands that if the Option is disqualified as an incentive option the Corporation may withhold applicable taxes, if any, upon exercise and/or subsequent sale of the Option and the Optionee may be required to pay said withholding as a condition to the exercise of the Option or the delivery of the Option Shares. The written notice to the Corporation shall be accompanied by payment of the full purchase price of such shares, and any withholding if required by the Corporation, in cash, by check, or if subsequent to the occurrence of a Qualifying IPO as defined in Section 10(a) below, with outstanding stock of the Corporation or by reduction of the number of shares to be issued upon exercise of the option. If the Corporation accepts shares of its outstanding stock or reduces the number of shares to be issued upon exercise as payment for the exercise price and any withholding, the shares of the Company’s stock transferred to the Company and/or retained by the Company in such payment shall be valued at their fair market value in accordance with the valuation methods described in Section 20.2031-2 of the Treasury Regulations for the purposes of such transaction. In general, such valuation methods are based on the price per share as reported by the market upon which the stock trades as of the close of trading on the date of the transaction. The Corporation shall deliver a certificate or certificates representing the shares to be received by Optionee pursuant to the exercise of the Option as soon as practicable after the notice shall be received. The certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name of the Optionee and shall be delivered as provided above to or upon the written order of the person or persons exercising the Option. In the event the Option shall be exercised pursuant to Section 6 hereof after the death of the Optionee, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. All shares that shall be purchased upon the exercise of the Option as provided herein shall be fully paid and nonassessable.

 

Unless the Option Shares are neither offered nor sold in Oklahoma or Florida, as defined in the Oklahoma and Florida code sections, respectively, the options, and the shares purchasable upon the exercise of options, granted under the Plan are exempt from qualification under the Oklahoma corporate securities law by Section [ ] and by the Florida corporate securities law by Section [ ], and are exempt under the securities laws of certain but not all states. The Option shall not be exercisable unless the Option Shares have been qualified and/or

 

 

registered under the securities laws of the state in which Optionee resides or are exempt therefrom. (The Corporation may, if permitted by such laws, permit the exercise of the Option but postpone delivery of the Option Shares and/or payment of the purchase price thereof or may set up an escrow pending such qualification and/or registration.) The qualification and/or registration can typically, but not always, be effected within thirty (30) days; therefore, the Optionee is advised to periodically check with the Corporation to verify the procedure the Corporation needs to follow in order to qualify and/or register the Option Shares in the state in which Optionee resides and to give the Corporation at least thirty (30) days prior written notice of Optionee’s intent to exercise the Option. Upon Optionee’s agreement to exercise the Option, the Corporation hereby agrees to use its best efforts to promptly register and/or qualify the Option Shares so that the Option may be exercisable but the Corporation shall have no liability to Optionee if despite such efforts such registration and/or qualification is not obtained as promptly as desired by Optionee. The certificates for the shares shall be subject to any legend condition imposed by the securities law of the state in which Optionee resides.

 

The shares purchasable upon the exercise of options granted under the Plan have not been registered under the Federal Securities Act of 1933, as amended (the “Act”). Therefore, unless the Option Shares are so registered prior to Optionee acquiring them by exercising the Option, the Option Shares shall be subject to the following restrictions and all certificates representing the Option Shares shall bear a conspicuous legend containing said restrictions:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) IN RELIANCE IN PART ON THE EXEMPTION PROVIDED BY RULE 701, OR QUALIFIED UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968, AS AMENDED (THE “LAW”) IN RELIANCE ON THE EXEMPTION PROVIDED BY SECTION 25102(0), OR REGISTERED UNDER THE SECURITIES STATUTES OF ANY STATE OTHER THAN CALIFORNIA (THE “STATUTES”). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND CONSTITUTE RESTRICTED SECURITIES FOR PURPOSES OF RULE 144. NEITHER SAID SHARES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED, SOLD OR OFFERED FOR SALE (1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR A “NO-ACTION” LETTER OF THE SECURITIES AND EXCHANGE COMMISSION AS TO SAID TRANSFER, SALE OR OFFER AND (2) IN THE ABSENCE OF QUALIFICATION OR REGISTRATION UNDER THE LAW AND STATUTES, WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION AND/OR QUALIFICATION IS NOT REQUIRED AS TO SAID TRANSFER, SALE OR OFFER AS A RESULT OF COMPLIANCE WITH RULE 144 OR OTHERWISE.

 

Until registration of the Option Shares under the Act, the notice of exercise shall require the Optionee to represent that the Optionee is acquiring the Option Shares for the Optionee’s own account, for investment, and not for purposes of resale or distribution and each subsequent purchaser shall be required to so represent until such registration. The Corporation

 

 

may prohibit any sale or transfer of any interest in the Option Shares by a person so representing for one year (or such longer time as the Corporation reasonably deems appropriate) if such person does not convince the Corporation that such sale or transfer was due to changed circumstances from when such person made such representation and that such representation was therefore truthfully made.

 

9.                                      Disposition of Shares

 

Without limiting the restriction in Sections 10 and 11, the Optionee agrees to notify the Corporation in writing of any sale or transfer of any Option Shares which takes place either within two years from the Effective Date or within one year from the transfer of Option Shares to the Optionee pursuant to exercise of the Option. Such notice shall set forth the price and terms of any such sale or transfer. If the Corporation, in good faith, believes it is required to withhold taxes, social security, or other amounts as a result of such disqualifying disposition, the Optionee shall upon request promptly pay to the Corporation the amount so required to be withheld and the Corporation may refuse to effect any transfer of the Option Shares on its books and records until Optionee has made such payment. The Corporation may accept payment in cash, by check, or if the disposition is subsequent to a “Qualifying IPO” as defined in Section 10 below, with shares of the outstanding stock of the Corporation which shall be valued at their fair market value as provided in Section 8 above for the purposes of such transaction.

 

10.                               Right of First Refusal

 

a.                                      Initiation of Right of First Refusal.

 

Until a public offering of the Corporation’s Common Stock has occurred with proceeds to the Corporation of at least Twenty Million Dollars ($20,000,000) (a “Qualifying IPO”), the Optionee (which for purposes of this Section 10 shall include the Optionee’s heirs, executors, administrators and transferees, and shall be referred to as the “Shareholder”) shall not sell pledge, assign, or otherwise transfer any of the Shareholder’s interest in any of the Option Shares acquired upon exercise of the Option without first offering to the Corporation or its designees (which may include some or all of the shareholders of the Corporation) the right and option to purchase said shares as provided hereinafter in this Section 10 and in conformity with Article 9 of the Corporation’s Bylaws (the “Right of First Refusal”). Notwithstanding the above, the Optionee may sell or transfer any interest in any of said Option Shares to the Optionee’s spouse or children, or to a trustee or custodian for the benefit of the Optionee or Optionee’s spouse or children (collectively, “Permitted Transferees”) without first offering said Option Shares to the Corporation or its designees, provided such buyer or transferee agrees in writing to be bound by the restrictions set forth in this Section 10 and Section 8 of this Agreement, by the Repurchase Option specified in Section 11 and by the Market Stand-Off specified in Section 13 of this Agreement.

 

In the event of a pledge or other hypothecation of the Option Shares, or the granting of any option or other right to purchase the Option Shares, then the Right of First Refusal shall come into existence at the time of any sale or transfer of ownership of the Option Shares pursuant to the foreclosure under such pledge or hypothecation or exercise of such option or right, as the case may be; provided, however, that Optionee may not pledge or hypothecate the

 

 

Option Shares or grant an option or right to purchase the Option Shares unless the pledge holder or option or right holder, as the case may be, agrees in writing at the time of the pledge or grant of the option or right to be bound by the Right of First Refusal as contained in this Section 10 and to cause any proposed assignee or transferee of such pledge or right or option to execute and deliver to the Corporation a similar writing prior to such assignment or transfer.

 

b.                                      Mechanics.

 

Any Shareholder desiring to sell any or all of the Option Shares during such time period shall give written notice to the Corporation of the Shareholder’s bona fide intention to sell the Option Shares pursuant to a bona fide written offer of a third parry other than the Corporation (the “Proposed Purchaser”). The notice shall include a photocopy of such written offer which shall specify the identity of the Proposed Purchaser, the number of such Option Shares proposed to be sold (hereinafter the “Offered Shares”), and the price and payment terms of the proposed offer to buy the Offered Shares. The payment terms of the Proposed Purchaser to the Shareholder (and of the Shareholder to the Corporation) must be cash, cash equivalent (a certificate of deposit, shares of stock in a publicly traded Corporation, and the like), or a promissory note of the Proposed Purchaser payable on date(s) specified by passage of time. The Corporation or its designees shall have the right and option to purchase any or all of the Offered Shares, at the price and on the payment terms specified in the Shareholder’s notice, for a period of sixty (60) days from receipt of said notice from the Shareholder. That is, such notice by the Shareholder constitutes an irrevocable offer by the Shareholder to sell all of the Offered Shares to the Corporation or its designees at the price and payment terms specified in such notice for sixty (60) days from the Corporation’s receipt of such notice.

 

The Corporation shall exercise its option by giving written notice (the “Original Notice”) to the Shareholder stating that the number of Offered Shares as to which it is exercising its option. The Shareholder shall deliver certificates representing the number of Offered Shares purchased by the Corporation or its designees against payment for the account of the Shareholder of the purchase price in compliance with the terms of the bona fide offer within thirty (30) days of the option exercise notice.

 

In the event both the Corporation and its designees fail to exercise their option as provided in this Section as to all of the Offered Shares, the remaining Offered Shares may be sold by the Shareholder to the Proposed Purchaser within a period of sixty (60) days following the end of the Corporation’s sixty (60)-day option period specified above, provided that (1) such sale is made at a price and on terms no more favorable to the Proposed Purchaser than those made available to the Corporation and its designees under this section, (2) the Proposed Purchaser delivers a written undertaking to the Corporation to be bound by the restrictions on the Option Shares set forth in this Section 10 and Section 8 of this Agreement and the Market Stand-Off specified in Section 13 of this Agreement, and (3) the Corporation receives a statement from the Optionee and Proposed Purchaser detailing the circumstances surrounding the propose transfer such that in the opinion of counsel to the Corporation the sale to the Proposed Purchaser complies with applicable federal and state corporate securities laws. If the statement is inadequate for such counsel to so conclude, the Optionee and Proposed Purchaser shall provide such additional information as such counsel shall reasonably request. If such counsel is then unable to so conclude, then the transfer shall be prohibited and shall not occur.

 

 

Upon receipt of a writing from Shareholder and Proposed Purchaser that the foregoing conditions have been satisfied and the purchase price paid to the Shareholder by the Proposed Purchasers, the Corporation shall transfer the ownership of record to the Proposed Purchaser (and reissue the certificate).

 

If within this sixty (60)-day period the Shareholder does not enter into an agreement for such a sale of the remaining Offered Shares to the Proposed Purchaser which is consummated within thirty (30) days of the execution thereof, the Right of First Refusal shall be revived as to such Offered Shares which shall not be sold or transferred unless the Shareholder first offers the Corporation the right and option to repurchase all such Offered Shares in accordance with this Section.

 

Any transfer or purported transfer of the Option Shares or any interest therein shall be null and void unless the terms and conditions of this Section 10 are strictly observed and followed, or such terms and conditions are waived by the Corporation’s Board of Directors.

 

11.                               Repurchase Option.

 

In the event that the Optionee’s employment with the Corporation and its subsidiaries is terminated for any reason, with or without cause, and whether at the initiative of the Optionee or the Corporation, or by death, disability, retirement or otherwise, the Corporation or its designees (which may include some or all of the shareholders of the Corporation) shall have the option to purchase all Option Shares held by the Optionee at the date of such termination and acquired thereafter pursuant to Section 5 (the “Repurchase Option”). The Repurchase Option is exercisable by the payment not later than one hundred twenty (120) days after such termination of the following amount:

 

The greater of :

 

(x) the cumulative monthly profit or loss of the Corporation, calculated in accordance with generally the Corporation’s customary accounting principles as consistently applied by the Corporation, beginning with the last month ended prior to the Effective Date and ending with the last month prior to such termination date, divided by the total number of shares of the Corporation’s Common Stock which, as of the date of repurchase, are then outstanding, are issuable upon exercise of any then exercisable options or warrants including options granted under the Corporation’s Incentive Stock Plan, and are issuable upon conversion of any then convertible securities, including, without limitation, the Corporation’s Series A Preferred Stock; and,

 

(y) the net worth of the Corporation (total assets minus total liabilities), calculated in accordance with the Corporation’s customary accounting principles as consistently applied by the Corporation as of the end of the last month prior to such termination date, divided by the total number of shares of the Corporation’s Common Stock which, as of the date of repurchase are then outstanding, are issuable upon exercise of any then exercisable options or warrants including options granted under the Corporation’s Incentive Stock Plan, and are issuable upon conversion of any then convertible securities, including, without limitation, the Corporation’s Series A Preferred Stock.

 

 

In addition to the other legends described in this Agreement, all certificates representing the Option Shares shall bear the following legend:

 

THESE SHARES ARE ALSO SUBJECT TO CERTAIN TRANSFER RESTRICTIONS, INCLUDING A RIGHT OF FIRST REFUSAL, AND ARE SUBJECT TO A REPURCHASE OPTION, ALL AS SET FORTH IN AN INCENTIVE STOCK OPTION AGREEMENT DATED February 22, 2005 ON FILE WITH THE SECRETARY.

 

12.                               Escrow.

 

Any share certificates issued upon the exercise of Option Shares shall be deposited with an escrow holder designated by the Corporation (the “Escrow Holder”), together with a stock power executed in blank as security for the Right of First Refusal and the Repurchase Option. Accordingly, said shares shall not be sold, pledged, or otherwise transferred so long as they remain subject to either or both of the Right of First Refusal and the Repurchase Option except as provided in Section 10 and Section 11, respectively, and any transfer or purported transfer in violation thereof shall be null and void, except that Optionee may transfer the Option Shares to a Permitted Transferee, provided the Permitted Transferees agrees in writing to be bound by the Right of First Refusal, the Repurchase Option, the Market Stand Off, and all other restrictions against transfer of the Option Shares as set forth in this Agreement.

 

The Corporation, by written resolution adopted by its board of directors, may terminate the escrow and direct the Escrow Holder to deliver the certificate(s) representing the Option Shares to Optionee and/or Permitted Transferees, as appropriate, provided, however, that the Escrow Holder shall not be required to deliver such certificate(s) unless, at its discretion, it has received satisfactory releases, indemnity, and security against claims. Shares so delivered free of escrow shall nevertheless remain subject to the Repurchase Option, the Right of First Refusal, the Market Stand Off, and all other restrictions against transfer of the Option Shares as set forth in this Agreement.

 

The Escrow Holder may resign at any time, provided that (i) its duties are undertaken by a successor escrow holder, or (ii) the certificate(s) representing the Option Shares are deposited with any court of competent jurisdiction. Any bank doing business in California is deemed to be such a suitable successor, in which case there shall be applied such additional terms of escrow as such successor escrow holder may at its discretion require as a condition to its assuming the duties of escrow holder and the original escrow holder is authorized to execute as agent for each party an escrow agreement or instructions containing such additional terms.

 

The Escrow Holder shall in no event be liable for damages to any party resulting from the exercise of its duties hereunder, or for any other reason, except gross negligence or willful misconduct. The Corporation shall pay all fees and expenses of the Escrow Holder and shall hold the Escrow Holder harmless against all claims arising out of its performance as escrow holder hereunder except to the extent that a court of competent jurisdiction has made a final determination that they arose from the gross negligence or willful misconduct of the Escrow Holder.

 

 

Optionee and/or Permitted Transferees shall have full voting rights and shall be entitled to dividends, if any, with respect to the escrowed shares.

 

13.                               Market Stand-Off

 

In conformity with Article 10 of the Corporation’s Bylaws, the Optionee shall not, to the extent requested by the Corporation, sell or otherwise transfer or dispose of any Option Shares during a period of up to six (6) months following the effective date of a registration statement of the Corporation filed under the Act; provided however, that such prohibition shall only be applicable to the Corporation’s initial registration statement (the “First Registration Statement”) and registration statements filed within three (3) years after the effective date of the First Registration Statement and if all officers and directors of the Corporation are similarly prohibited. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to the Option Shares until the end of such six-month period and place an appropriate legend on any share certificate representing the Option Shares.

 

14.                               Notices

 

Any notice required to be given pursuant to this Agreement shall be deemed effectively given: (i) upon personal delivery, or delivery by Fed Ex or other national overnight service, or delivery by fax or e-mail, to the President of the Corporation, or to the Optionee; or (ii) three (3) days after it is deposited in the U.S. mail, by registered or certified mail, postage prepaid, addressed to the President of the Corporation at the Corporation’s principal executive office, or to the Optionee addressed to his/her address appearing on the records of the Corporation. Either party may designate another address for purposes of receiving notice under this Section by giving written notice to the other party thereof in accordance with, and referring specifically to, this Section 14.

 

15.                               Delivery of Plan

 

Optionee acknowledges that Optionee has received from the Corporation a copy of the Plan pursuant to which this Agreement is made and entered into.

 

16.                               Tax Advice

 

Optionee represents that he/she has not relied upon any tax advice from the Corporation or its counsel with respect to this Agreement.

 

 

17.                               Confidentiality and Financial Information

 

a.                                      Confidentiality

 

The Corporation has a general policy of maintaining the confidentiality of certain Corporation records as described in Article 8 of the Corporation’s Bylaws. The Option Shares shall be subject to such Article 8 and all certificates representing the Option Shares shall bear the following legend:

 

THE HOLDER OF RECORD OF THESE SHARES, AND SUCH HOLDER’S AGENTS AND ATTORNEYS, MAY BE REQUIRED TO EXECUTE NONDISCLOSURE STATEMENTS PRIOR TO BEING PERMITTED TO INSPECT CERTAIN RECORDS OF THE CORPORATION.

 

b.                                      Financial Information.

 

Whenever the Corporation provides financial statements, whether audited or unaudited, to all of its shareholders as a group, the Corporation shall concurrently provide the Optionee with a copy of such financial statements. Notwithstanding the foregoing, the Corporation shall upon request provide the Optionee at the end of its fiscal year with a copy of its financial statements, either audited or unaudited, for such fiscal year, within ninety (90) days after the end of such fiscal year, if Optionee is then an optionee of the Corporation.

 

Optionee acknowledges that such financial statements are confidential information of the Corporation and are being provided solely in order to assist Optionee in the decision of whether and when to exercise the Option. Notwithstanding Article 8 of the Bylaws, Optionee agrees (1) to maintain the confidentiality of all such financial statements and not to disclose the contents of such financial statements to any third party without the prior written consent of an officer of the Corporation and (2) not to use such financial statements for any other purpose.

 

18.                               Payment of Taxes

 

To the extent the Corporation requires taxes to be paid to the Corporation concurrently with the exercise of an Option and/or with a subsequent disposition of the Option Shares as a condition to the exercise of the Option or delivery of the Option Shares, if such exercise or disposition is subsequent to a Qualifying IPO, the Corporation may permit Optionee to pay some or all of the taxes by tendering to the Corporation outstanding shares of the Corporation’s stock held by Optionee, or by reducing the number of shares to be issued upon exercise of the Option. The shares tendered to or retained by the Corporation as payment of taxes shall be valued at their fair market value, as provided in Section 8 above, for the purposes of such transaction.

 

19.                               Entire Agreement

 

This Agreement, which is governed by California law, constitutes the entire agreement between the Corporation and Optionee relating to the Option, superseding all prior understandings and agreements, whether written or oral. If this Agreement concerns Optionee’s initial option under the Plan, then this Agreement specifically supersedes any prior agreements or understandings, whether written or oral, concerning Corporation equity, including without limitation, those contained in any offer letter.Exhibit 10.3

 

IRADIMED CORPORATION

 

2014 EQUITY INCENTIVE PLAN

 

Iradimed Corporation, a Delaware corporation (the “Company”), sets forth herein the terms of its 2104 Equity Incentive Plan (the “Plan”), as follows:

 

1.                                      PURPOSE

 

The Plan is intended to enhance the ability of the Company and its Affiliates (as defined herein) ability to attract and retain highly qualified officers, non-employee members of the Board, key employees, consultants and advisors, and to motivate such officers, non-employee members of the Board, key employees, consultants and advisors to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company.  To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, other stock-based awards and cash awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of performance goals in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein.

 

2.                                      DEFINITIONS

 

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

 

2.1.                            “Acquiror” shall have the meaning set forth in Section 15.2.1.

 

2.2.                            “Affiliate” means any company or other trade or business that “controls,” is “controlled by” or is “under common control” with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.

 

2.3.                            “Award” means a grant of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-based Award or cash award under the Plan.

 

2.4.                            “Award Agreement” means a written agreement between the Company and a Grantee, or notice from the Company or an Affiliate to a Grantee that evidences and sets out the terms and conditions of an Award.

 

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

 

2.6.                            “Business Combination” shall have the meaning set forth in Section 15.2.2.

 

 

2.7.                            “Cause” shall be defined as that term is defined in the Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Cause” means, as determined by the Company and unless otherwise provided in an applicable Award Agreement: (i) the commission of any act by a Grantee constituting financial dishonesty against the Company or its Affiliates (which act would be chargeable as a crime under applicable law); (ii) a Grantee’s engaging in any other act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or harassment which, as determined in good faith by the Board, would: (A) materially adversely affect the business or the reputation of the Company or any of its Affiliates with their respective current or prospective customers, suppliers, lenders and/or other third parties with whom such entity does or might do business; or (B) expose the Company or any of its Affiliates to a risk of civil or criminal legal damages, liabilities or penalties; (iii) the repeated failure by a Grantee to follow the directives of the chief executive officer of the Company or any of its Affiliates or the Board, or (iv) any material misconduct, violation of the Company’s or Affiliates’ policies, or willful and deliberate non-performance of duty by the Grantee in connection with the business affairs of the Company or its Affiliates.

 

2.8.                            “Change in Control” shall have the meaning set forth in Section 15.2.2.

 

2.9.                            “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. References to the Code shall include the valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder.

 

2.10.                     “Committee” means the Compensation Committee of the Board, or such other committee as determined by the Board.  The Compensation Committee of the Board may, in its discretion, designate a subcommittee of its members to serve as the Committee (to the extent the Board has not designated another person, committee or entity as the Committee).  Following the Initial Public Offering, (i) the Board will cause the Committee to satisfy the applicable requirements of any stock exchange on which the Common Stock may then be listed; (ii) for purposes of Awards to Covered Employees intended to constitute Performance Awards, to the extent required by Code Section 162(m), Committee means all of the members of the Compensation Committee who are “outside directors” within the meaning of Section 162(m) of the Code; and (iii) for purposes of Awards to Grantees who are subject to Section 16 of the Exchange Act, Committee means all of the members of the Compensation Committee who are “non-employee directors” within the meaning of Rule 16b-3 adopted under the Exchange Act.

 

2.11.                     “Company” shall have the meaning set forth in the preamble.

 

2.12.                     “Common Stock” or “Stock” means a share of common stock of the Company, par value $0.0001 per share.

 

2.13.                     “Consultant” means a consultant or advisor that provides bona fide services to the Company or any Affiliate and who qualifies as a consultant or advisor under Rule 701 of the Securities Act (during any period in which the Company is not a public company subject to the reporting requirements of the Exchange Act) or Form S-8 (during any period in which the Company is a public company subject to the reporting requirements of the Exchange Act).

 

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2.14.                     “Covered Employee” means a Grantee who is a “covered employee” within the meaning of Section 162(m)(3) of the Code as qualified by Section 12.4.

 

2.15.                     “Disability” shall be defined as that term is defined in the Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Disability” means, as determined by the Company and unless otherwise provided in an applicable Award Agreement, the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment which is potentially permanent in character or which can be expected to last for a continuous period of not less than 12 months; provided, however, that, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee’s Service, “Disability” means “permanent and total disability” as set forth in Section 22(e)(3) of the Code.

 

2.16.                     “Effective Date” means April 14, 2014, the date the Plan was approved by the Company’s stockholders.

 

2.17.                     “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

 

2.18.                     “Fair Market Value” of a share of Common Stock as of a particular date shall mean (1) if the Common Stock is listed on a national securities exchange, the closing or last price of the Common Stock on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, the trading day immediately preceding the applicable date, or (2) if the shares of Common Stock are not then listed on a national securities exchange, or the value of such shares is not otherwise determinable, such value as determined by the Board in good faith in its sole discretion.

 

2.19.                     “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive relationships, of the applicable individual, any person sharing the applicable individual’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the applicable individual) control the management of assets, and any other entity in which one or more of these persons (or the applicable individual) own more than fifty percent of the voting interests.

 

2.20.                     “Grant Date” means, as determined by the Board, the latest to occur of (i) the date as of which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6, or (iii) such other date as may be specified by the Board in the Award Agreement.

 

2.21.                     “Grantee” means a person who receives or holds an Award under the Plan.

 

2.22.                     “Holder” means, with respect to any Issued Shares, the person holding such Issued Shares, including the initial Grantee or any Permitted Transferee.

 

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2.23.                     “Incentive Stock Option” means an “incentive stock option” within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.

 

2.24.                     “Incumbent Directors” shall have the meaning set forth in Section 15.2.2.

 

2.25.                     “Initial Public Offering” means the initial public offering of shares of Common Stock pursuant to a registration statement (other than a Form S-8 or successor forms) filed with, and declared effective by, the SEC.

 

2.26.                     “Issued Shares” means, collectively, all outstanding shares of Stock issued pursuant to Awards (including without limitation, outstanding shares of Restricted Stock prior to or after vesting and shares issued in connection with the exercise of an Option or SAR).

 

2.27.                     “New Shares” shall have the meaning set forth in Section 15.1.

 

2.28.                     “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.

 

2.29.                     “Offered Shares” shall have the meaning set forth in Section 17.4.1.

 

2.30.                     “Offering” shall have the meaning set forth in Section 17.5.

 

2.31.                     “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.

 

2.32.                     “Option Price” means the exercise price for each share of Stock subject to an Option.

 

2.33.                     “Other Stock-based Awards” means Awards consisting of Stock units, or other Awards, valued in whole or in part by reference to, or otherwise based on, Common Stock.

 

2.34.                     “Performance Award” means an Award made subject to the attainment of performance goals (as described in Section 12) over a performance period of from one (1) to five (5) years.

 

2.35.                     “Permitted Transferee” means any of the following to whom a Holder may transfer Issued Shares hereunder (as set forth in Section 17.13.3): the Holder’s spouse, children (natural or adopted), stepchildren or a trust for their sole benefit of which the Holder is the settlor; provided however, that any such trust does not require or permit distribution of any Issued Shares during the term of this Agreement unless subject to its terms. Upon the death of the Holder, the term Permitted Transferees shall also include such deceased Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees, as the case may be.

 

2.36.                     “Plan” shall have the meaning set forth in the preamble.

 

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2.37.                     “Prior Plan” means the Iradimed Corporation (Oklahoma) 2005 Incentive Stock Plan.

 

2.38.                     “Purchase Price” means the purchase price for each share of Stock pursuant to a grant of Restricted Stock.

 

2.39.                     “Restricted Period” shall have the meaning set forth in Section 10.1.

 

2.40.                     “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 10.

 

2.41.                     “Restricted Stock Unit” means a bookkeeping entry representing the equivalent of shares of Stock, awarded to a Grantee pursuant to Section 10.

 

2.42.                     “SAR Exercise Price” means the per share exercise price of a SAR granted to a Grantee under Section 9.

 

2.43.                     “SEC” means the United States Securities and Exchange Commission.

 

2.44.                     “Section 409A” means Section 409A of the Code.

 

2.45.                     “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended.

 

2.46.                     “Separation from Service” means a termination of Service by a Service Provider, as determined by the Board, which determination shall be final, binding and conclusive; provided, however, that if any Award governed by Section 409A is to be distributed on a Separation from Service, then the definition of Separation from Service for such purposes shall comply with the definition provided in Section 409A.

 

2.47.                     “Service” means service as a Service Provider to the Company or an Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an Affiliate.

 

2.48.                     “Service Provider” means an employee, officer, non-employee member of the Board, or Consultant of the Company or an Affiliate.

 

2.49.                     “Stock Appreciation Right” or “SAR” means a right granted to a Grantee under Section 9.

 

2.50.                     “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code.

 

2.51.                     “Substitute Award” means any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or a Subsidiary or with which the Company or an Affiliate combines.

 

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2.52.                     “Ten Percent Stockholder” means an individual who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied.

 

2.53.                     “Termination Date” means the date that is ten (10) years after the Effective Date, unless the Plan is earlier terminated by the Board under Section 5.2.

 

2.54.                     “Transition Period” means the period beginning with the consummation of an Initial Public Offering and ending as of the earlier of (i) the date of the first annual meeting of shareholders of the Company at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Initial Public Offering occurs and (ii) the expiration of the “reliance period” under Treasury Regulation Section 1.162-27(f)(2).

 

2.55.                     “Voting Securities” shall have the meaning set forth in Section 15.2.2.

 

3.                                      ADMINISTRATION OF THE PLAN

 

3.1.                            General.

 

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation and bylaws and applicable law. The Board shall have the power and authority to delegate its responsibilities hereunder to the Committee, which shall have full authority to act in accordance with its charter (as in effect from time to time), and with respect to the authority of the Board to act hereunder, all references to the Board shall be deemed to include a reference to the Committee, to the extent such power or responsibilities have been delegated.  Except as specifically provided in Section 14 or as otherwise may be required by applicable law, regulatory requirement or the certificate of incorporation or the bylaws of the Company, the Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan.  Following the Initial Public Offering, the Committee shall administer the Plan; provided, however, the Board shall retain the right to exercise the authority of the Committee to the extent consistent with applicable law and the applicable requirements of any securities exchange on which the Common Stock may then be listed.  The interpretation and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive. Without limitation, the Board shall have full and final authority, subject to the other terms and conditions of the Plan, to:

 

(i)                                     designate Grantees;

 

(ii)                                  determine the type or types of Awards to be made to a Grantee;

 

(iii)                               determine the number of shares of Stock to be subject to an Award;

 

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(iv)                              establish the terms and conditions of each Award (including, but not limited to, the Option Price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options);

 

(v)                                 prescribe the form of each Award Agreement; and

 

(vi)                              amend, modify, or supplement the terms of any outstanding Award including the authority, in order to effectuate the purposes of the Plan, to modify Awards to foreign nationals or individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom.

 

3.2.                            Deferral Arrangement.

 

The Board may permit or require the deferral of any Award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish and in accordance with Section 409A, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock units.

 

3.3.                            No Liability.

 

No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award or Award Agreement.

 

3.4.                            Book Entry.

 

Notwithstanding any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the delivery of stock certificates through the use of book-entry.

 

4.                                      STOCK SUBJECT TO THE PLAN

 

4.1.                            Authorized Number of Shares.

 

Subject to adjustment under Section 15, the aggregate number of shares of Common Stock that may be initially issued pursuant to the Plan is 1,000,000.  The total number of shares of Common Stock described in the preceding sentence shall be available for issuance under Incentive Stock Options.  Shares of Common Stock underlying any outstanding stock option or other award granted under the Prior Plan or any other predecessor employee stock plan of the Company that is forfeited, terminated or cancelled for any reason without issuance of such shares, including an award that is settled in cash or shares underlying an award that are surrendered or tendered to the Company for payment of an exercise price or to cover taxes, shall be cancelled and will not be available for future grant under the Plan.  From and after the Effective Date, no new awards will be made under the Prior Plan.  Shares issued under the Plan may consist in whole or in part of authorized but unissued shares, treasury shares, or shares purchased on the open market or otherwise, all as determined by the Company from time to time.  No later than the end of the Transition Period, the maximum number of shares for each type of Stock-based Award, and the maximum amount of cash for any cash-based Award, intended to constitute “performance-based compensation” under Code Section 162(m) granted to any Grantee in any specified period shall be established by the Company and approved by the Company’s stockholders.

 

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4.2.                            Share Counting.

 

Any Award settled in cash shall not be counted as shares of Common Stock for any purpose under this Plan.  If any Award under the Plan expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan.  If shares of Common Stock issued pursuant to the Plan are repurchased by, or are surrendered or forfeited to the Company at no more than cost, such shares of Common Stock shall again be available for the grant of Awards under the Plan. If shares of Common Stock issuable upon exercise, vesting or settlement of an Award, or shares of Common Stock owned by a Grantee (which are not subject to any pledge or other security interest), are surrendered or tendered to the Company in payment of the Option Price or Purchase Price of an Award or any taxes required to be withheld in respect of an Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award Agreement, such surrendered or tendered shares of Common Stock shall again become available for issuance under the Plan.  In addition, in the case of any Substitute Award, such Substitute Award shall not be counted against the number of shares reserved under the Plan.

 

5.                                      EFFECTIVE DATE, DURATION AND AMENDMENTS

 

5.1.                            Term.

 

The Plan shall be effective as of the Effective Date, provided that it has been approved by the Company’s stockholders.  The Plan shall terminate automatically on the ten (10) year anniversary of the Effective Date and may be terminated on any earlier date as provided in Section 5.2.

 

5.2.                            Amendment and Termination of the Plan.

 

The Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any Awards which have not been made. An amendment shall be contingent on approval of the Company’s stockholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements.  No Awards shall be made after the Termination Date. The applicable terms of the Plan, and any terms and conditions applicable to Awards granted prior to the Termination Date shall survive the termination of the Plan and continue to apply to such Awards.  No amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, materially impair rights or obligations under any Award theretofore awarded.

 

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6.                                      AWARD ELIGIBILITY AND LIMITATIONS

 

6.1.                            Service Providers.

 

Subject to this Section 6, Awards may be made to any Service Provider as the Board shall determine and designate from time to time in its discretion.

 

6.2.                            Successive Awards.

 

An eligible person may receive more than one Award, subject to such restrictions as are provided herein.

 

6.3.                            Stand-Alone, Additional, Tandem, and Substitute Awards.

 

Awards may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, the Board shall have the right to require the surrender of such other Award in consideration for the grant of the new Award.  Subject to the requirements of applicable law, the Board shall have the right, in its discretion, to make Awards in substitution or exchange for any other award under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the value of Stock subject to the Award is equivalent in value to the cash compensation (for example, Restricted Stock Units or Restricted Stock).

 

7.                                      AWARD AGREEMENT

 

Each Award shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine.  Without limiting the foregoing, an Award Agreement may be provided in the form of a notice which provides that acceptance of the Award constitutes acceptance of all terms of the Plan and the notice.  Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms of the Plan.  Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.

 

8.                                      TERMS AND CONDITIONS OF OPTIONS

 

8.1.                            Option Price.

 

The Option Price of each Option shall be fixed by the Board and stated in the related Award Agreement. The Option Price of each Option intended to be an Incentive Stock Option (except those that constitute Substitute Awards) shall be at least the Fair Market Value on the Grant Date of a share of Stock; provided, however, that in the event that a Grantee is a Ten Percent Stockholder as of the Grant Date, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than 110 percent of the Fair Market Value of a share of Stock on the Grant Date.  In no case shall the Option Price of any Option be less than the par value of a share of Stock.

 

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8.2.                            Vesting.

 

Subject to Section 8.3, each Option shall become exercisable at such times and under such conditions (including, without limitation, performance requirements) as shall be determined by the Board and stated in the Award Agreement.

 

8.3.                            Term.

 

Each Option shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of the Option term determined by the Board and stated in the Award Agreement not to exceed ten (10) years from the Grant Date, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the related Award Agreement; provided, however, that in the event that the Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option at the Grant Date shall not be exercisable after the expiration of five (5) years from its Grant Date.

 

8.4.                            Limitations on Exercise of Option.

 

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, (i) prior to the date the Plan is approved by the stockholders of the Company as provided herein or (ii) after the occurrence of an event which results in termination of the Option.

 

8.5.                            Method of Exercise.

 

An Option that is exercisable may be exercised by the Grantee’s delivery of a notice of exercise to the Company, setting forth the number of shares of Stock with respect to which the Option is to be exercised, accompanied by full payment for the shares.  To be effective, notice of exercise must be made in accordance with procedures established by the Company from time to time.

 

8.6.                            Rights of Holders of Options.

 

Unless otherwise stated in the related Award Agreement, an individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid and issued to him. Except as provided in Section 15 or the related Award Agreement, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

 

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8.7.                            Delivery of Stock Certificates.

 

Promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the shares of Stock subject to the Option.

 

8.8.                            Limitations on Incentive Stock Options.

 

An Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted.

 

9.                                      TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

 

9.1.                            Right to Payment.

 

A SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one share of Stock on the date of exercise over (ii) the SAR Exercise Price, as determined by the Board. The Award Agreement for an SAR shall specify the SAR Exercise Price.  SARs may be granted alone or in conjunction with all or part of an Option or at any subsequent time during the term of such Option or in conjunction with all or part of any other Award.

 

9.2.                            Other Terms.

 

The Board shall determine at the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following Separation from Service or upon other conditions, the method of exercise, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.

 

9.3.                            Term of SARs.

 

The term of a SAR granted under the Plan shall be determined by the Board, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.

 

9.4.                            Payment of SAR Amount.

 

Upon exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in cash or Stock, as determined by the Board) in an amount determined by multiplying:

 

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(i)             the difference between the Fair Market Value of a share of Stock on the date of exercise over the SAR Exercise Price; by

 

(ii)            the number of shares of Stock with respect to which the SAR is exercised.

 

10.                               TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

10.1.                     Restrictions.

 

At the time of grant, the Board may, in its sole discretion, establish a period of time (a “Restricted Period”) and any additional restrictions including the satisfaction of corporate or individual performance objectives applicable to an Award of Restricted Stock or Restricted Stock Units in accordance with Section 12.1 and 12.2. Each Award of Restricted Stock or Restricted Stock Units may be subject to a different Restricted Period and additional restrictions. Neither Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other applicable restrictions.

 

10.2.                     Restricted Stock Certificates.

 

The Company shall issue stock, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates or other evidence of ownership representing the total number of shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee; provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

 

10.3.                     Rights of Holders of Restricted Stock.

 

Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have rights as stockholders of the Company, including voting and dividend rights.

 

10.4.                     Rights of Holders of Restricted Stock Units.

 

10.4.1.                                   Settlement of Restricted Stock Units.

 

Restricted Stock Units may be settled in cash or Stock, as determined by the Board and set forth in the Award Agreement. The Award Agreement shall also set forth whether the Restricted Stock Units shall be settled (i) within the time period specified in Section 17.11 for short term deferrals or (ii) otherwise within the requirements of Section 409A, in which case the Award Agreement shall specify upon which events such Restricted Stock Units shall be settled.

 

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10.4.2.                                   Voting and Dividend Rights.

 

Unless otherwise stated in the applicable Award Agreement, holders of Restricted Stock Units shall not have rights as stockholders of the Company, including no voting or dividend or dividend equivalents rights.

 

10.4.3.                                   Creditor’s Rights.

 

A holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

 

10.5.                     Purchase of Restricted Stock.

 

The Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a form described in Section 11 or, in the discretion of the Board, in consideration for past Services rendered.

 

10.6.                     Delivery of Stock.

 

Upon the expiration or termination of any Restricted Period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or Restricted Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

 

11.                               FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

 

11.1.                     General Rule.

 

Payment of the Option Price for the shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company, except as provided in this Section 11.

 

11.2.                     Surrender of Stock.

 

To the extent the Award Agreement so provides, payment of the Option Price for shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be made all or in part through the tender to the Company of shares of Stock, which shares shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price for Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or surrender.  Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to make payment in the form of already owned shares of Stock may be authorized only at the time of grant.

 

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11.3.                     Cashless Exercise.

 

With respect to an Option only (and not with respect to Restricted Stock) following the Initial Public Offering, to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price may be made all or in part by delivery (on a form acceptable to the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 17.3.

 

11.4.                     Other Forms of Payment.

 

To the extent the Award Agreement so provides, payment of the Option Price or the Purchase Price for Restricted Stock may be made in any other form that is consistent with applicable laws, regulations and rules, including, but not limited to, the Company’s withholding of shares of Stock otherwise due to the exercising Grantee.

 

12.                               TERMS AND CONDITIONS OF PERFORMANCE AWARDS

 

12.1.                     Performance Conditions.

 

The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Board. The Board may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance conditions, except as limited under Section 12.2 in the case of a Performance Award intended to qualify under Code Section 162(m).

 

12.2.                     Performance Awards Granted to Designated Covered Employees.

 

If and to the extent that the Board determines that a Performance Award to be granted to a Grantee who is designated by the Board as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of pre-established performance goals and other terms set forth in this Section 12.2.

 

12.2.1.                                   Performance Goals Generally.

 

The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Board consistent with this Section 12.2.  Following the end of the Transition Period, performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Board result in the achievement of performance goals being “substantially uncertain.” The Board may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards.  Performance goals may, in the 

 

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discretion of the Board, be established on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or business segments, as applicable.  Performance goals may be absolute or relative (to the performance of one or more comparable companies or indices).  Measurement of performance goals may exclude (in the discretion of the Board) the impact of charges for restructuring, discontinued operations, extraordinary items, and other unusual non-recurring items, and the cumulative effects of tax or accounting changes (each as defined by generally accepted accounting principles and as identified in the Company’s financial statements or other SEC filings).  Performance goals may differ for Performance Awards granted to any one Grantee or to different Grantees.

 

12.2.2.                                   Business Criteria.

 

One or more of the following business criteria for the Company, on a consolidated basis, and/or specified subsidiaries or business units of the Company (except with respect to the total stockholder return and earnings per share criteria), shall be used exclusively by the Board in establishing performance goals for such Performance Awards: net sales; revenue; revenue growth or product revenue growth; operating income (before or after taxes); pre-or after-tax income (before or after allocation of corporate overhead and bonuses; net earnings; earnings per share; net income (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of, share price; market share; gross profits; earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reduction in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital; cash flow return on investment; improvement in or attainment of expense levels or working capital levels; operating margins; gross margins or cash margin; year-end cash; debt reductions; shareholder equity; regulatory performance; implementation, completion or attainment of measurable objectives with respect to research, development, products or projects and recruiting and maintaining personnel and any other business criteria established by the Board.

 

12.2.3.                                   Timing for Establishing Performance Goals.

 

Following the Transition Period, performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Code Section 162(m).

 

12.2.4.                                   Settlement of Performance Awards; Other Terms.

 

Settlement of Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Board. The Board may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards.

 

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12.3.                     Written Determinations.

 

All determinations by the Board as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards, shall be made in writing in the case of any Award intended to qualify under Code Section 162(m) to the extent required by Code Section 162(m). To the extent permitted by Code Section 162(m), the Board may delegate any responsibility relating to such Performance Awards.

 

12.4.                     Status of Section 12.2 Awards under Code Section 162(m).

 

The provisions of this Section 12.4 are applicable following the Transition Period.  It is the intent of the Company that Performance Awards under Section 12.2 granted to persons who are designated by the Board as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Board, constitute “qualified performance-based compensation” within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Section 12.2, including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Board cannot determine with certainty whether a given Grantee will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Board, at the time of grant of Performance Awards, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement relating to such Performance Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

 

13.                               OTHER STOCK-BASED AWARDS

 

13.1.                     Grant of Other Stock-based Awards.

 

Other Stock-based Awards may be granted either alone or in addition to or in conjunction with other Awards under the Plan.  Other Stock-based Awards may be granted in lieu of other cash or other compensation to which a Service Provider is entitled from the Company or may be used in the settlement of amounts payable in shares of Common Stock under any other compensation plan or arrangement of the Company, including without limitation, the Company’s incentive compensation plan.  Subject to the provisions of the Plan, the Board shall have the sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards, and all other conditions of such Awards.  Unless the Board determines otherwise, any such Award shall be confirmed by an Award Agreement, which shall contain such provisions as the Board determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award.

 

13.2.                     Terms of Other Stock-based Awards.

 

Any Common Stock subject to Awards made under this Section 13 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

 

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14.                               REQUIREMENTS OF LAW

 

14.1.                     General.

 

The Company shall not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such shares would constitute a violation by the Grantee, any other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award. Specifically, in connection with the Securities Act, upon the exercise of any Option or the delivery of any shares of Stock underlying an Award, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Award, the Company shall not be required to sell or issue such shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option shall not be exercisable until the shares of Stock covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

 

14.2.                     Rule 16b-3.

 

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards and the exercise of Options granted to officers and directors hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board or Committee does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

 

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15.                               EFFECT OF CHANGES IN CAPITALIZATION

 

15.1.                     Adjustments for Changes in Capital Structure.

 

Subject to any required action by the stockholders of the Company, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Awards, and in the Option Price, SAR Exercise Price or Purchase Price per share of any outstanding Awards in order to prevent dilution or enlargement of Grantees’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to a Change in Control) shares of another corporation (the “New Shares”), the Board may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the Option Price, SAR Exercise Price or Purchase Price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Board, in its discretion.  Any fractional share resulting from an adjustment pursuant to this Section 15.1 shall be rounded down to the nearest whole number and the Option Price, SAR Exercise Price or Purchase Price per share shall be rounded up to the nearest whole cent.  In no event may the exercise price of any Award be decreased to an amount less than the par value, if any, of the stock subject to the Award. The Board in its sole discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate. Adjustments determined by the Board pursuant to this Section 15.1 shall be made in accordance with Section 409A to the extent applicable.

 

15.2.                     Change in Control.

 

15.2.1.                                   Consequences of a Change in Control.

 

Subject to the requirements and limitations of Section 409A if applicable, the Board may provide for any one or more of the following in connection with a Change in Control:

 

(a) Accelerated Vesting. The Board may, in its discretion, provide in any Award Agreement or, in the event of a Change in Control, may take such actions as it deems appropriate to provide for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Grantee’s Service prior to, upon, or following such Change in Control, to such extent as the Board shall determine.

 

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(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Grantee, either assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable. For purposes of this Section 15.2.1, if so determined by the Board, in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Board may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Board may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Board’s good faith estimate of the present value of the probable future payment of such consideration. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

 

(c) Cash-Out of Awards. The Board may, in its discretion and without the consent of any Grantee, determine that, upon the occurrence of a Change in Control, each or any Award or a portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Board) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced by the exercise or purchase price per share, if any, under such Award. If any portion of such consideration may be received by holders of Stock pursuant to the Change in Control on a contingent or delayed basis, the Board may, in its sole discretion, determine such Fair Market Value per share as of the time of the Change in Control on the basis of the Board’s good faith estimate of the present value of the probable future payment of such consideration. In the event such determination is made by the Board, the amount of such payment (reduced by applicable withholding taxes, if any) shall be paid to Grantees in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.

 

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15.2.2.                                   Change in Control Defined.

 

Except as may otherwise be defined in an Award Agreement, a Change in Control shall mean the occurrence of any of the following events:

 

(a)                                 the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than the Company or any subsidiary, affiliate (within the meaning of Rule 144 promulgated under the Securities Act of 1933, as amended) or employee benefit plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Voting Securities”); or

 

(b)                                 a reorganization, merger, consolidation or recapitalization of the Company (a “Business Combination”), other than a Business Combination in which more than 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity immediately following the Business Combination is held by the persons who, immediately prior to the Business Combination, were the holders of the Voting Securities; or

 

(c)                                  a complete liquidation or dissolution of the Company, or a sale of all or substantially all of the assets of the Company; or

 

(d)                                 during any period of 24 consecutive months, the Incumbent Directors cease to constitute a majority of the Board of Directors; “Incumbent Directors” shall mean individuals who were members of the Board of Directors at the beginning of such period or individuals whose election or nomination for election to the Board of Directors by the Company’s stockholders was approved by a vote of at least a majority of the then Incumbent Directors (but excluding any individual whose initial election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors).

 

Notwithstanding the foregoing, if it is determined that an Award hereunder is subject to the requirements of Section 409A and payable upon a Change in Control, the Company will not be deemed to have undergone a Change in Control unless the Company is deemed to have undergone a “change in control event” pursuant to the definition of such term in Section 409A.

 

15.3.                     Adjustments.

 

Adjustments under this Section 15 related to shares of Stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.

 

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16.                               NO LIMITATIONS ON COMPANY

 

The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.

 

17.                               TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN

 

17.1.                     Disclaimer of Rights.

 

No provision in the Plan or in any Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or any Affiliate either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company or any Affiliate. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a Service Provider. The obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms of the Plan.

 

17.2.                     Nonexclusivity of the Plan.

 

Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals), including, without limitation, the granting of stock options as the Board in its discretion determines desirable.

 

17.3.                     Withholding Taxes.

 

The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to an Award, (ii) upon the issuance of any shares of Stock upon the exercise of an Option or SAR, or (iii) otherwise due in connection with an Award.  At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the Affiliate, which may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or 

 

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the Affiliate to withhold the minimum required number of shares of Stock otherwise issuable to the Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or the Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 17.3 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.

 

17.4.                     Right of First Refusal; Right to Repurchase.

 

17.4.1.                                   Right of First Refusal.

 

Except as otherwise expressly provided in an Award Agreement, stockholders’ agreement or other agreement to which a Holder is a party, at any time prior to registration by the Company of its Common Stock under Section 12 of the Exchange Act, in the event that the Holder desires at any time to sell or otherwise transfer all or any part of such Holder’s Issued Shares (to the extent vested), the Holder first shall give written notice to the Company of the Holder’s intention to make such transfer. Such notice shall state the number of Issued Shares which the Holder proposes to sell (the “Offered Shares”), the price and the terms at which the proposed sale is to be made and the name and address of the proposed transferee. At any time within 30 days after the receipt of such notice by the Company, the Company or its assigns may elect to purchase all or any portion of the Offered Shares at the price and on the terms offered by the proposed transferee and specified in the notice. The Company or its assigns shall exercise this right by mailing or delivering written notice to the Holder within the foregoing 30-day period. If the Company or its assigns elect to exercise its purchase rights under this Section17.4.1, the closing for such purchase shall, in any event, take place within 45 days after the receipt by the Company of the initial notice from the Holder. In the event that the Company or its assigns do not elect to exercise such purchase right, or in the event that the Company or its assigns do not pay the full purchase price within such 45-day period, the Holder may, within 60 days thereafter, sell the Offered Shares to the proposed transferee and at the same price and on the same terms as specified in the Holder’s notice. Any Issued Shares purchased by such proposed transferee shall no longer be subject to the terms of the Plan.  Any Issued Shares not sold to the proposed transferee shall remain subject to the Plan.

 

17.4.2.                                   Right of Repurchase.

 

Except as otherwise expressly provided in an Award Agreement, stockholders’ agreement or other agreement to which a Grantee is a party, at any time prior to registration by the Company of its Common Stock under Section 12 of the Exchange Act, in the case of any Grantee whose Separation from Service is for Cause, or where the Grantee has, in the Board’s reasonable determination, taken any action prior to or following his Separation of Service which would have constituted grounds for Cause, the Company shall have the right, exercisable at any time and from time to time thereafter, to repurchase from the Grantee (or any successor in interest by purchase, gift or other mode of transfer) any shares of Common Stock issued to such Grantee under the Plan for the purchase price paid by the Grantee for such shares of Common Stock (or the Fair Market Value of such Common Stock at the time of repurchase, if lower).

 

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17.5.                     Market Standoff Requirement.

 

Except as otherwise expressly provided in an Award Agreement, stockholders’ agreement or other agreement to which a Grantee is a party, in connection with any underwritten public offering of its Common Stock (“Offering”) and upon request of the Company or the underwriters managing the Offering, Grantees shall not be permitted to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise directly or indirectly dispose of any Common Stock delivered under the Plan (other than those shares of Common Stock included in the Offering) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of the registration statement with respect to such Offering as may be requested by the Company or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters in connection with such Offering.

 

17.6.                     Captions.

 

The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or any Award Agreement.

 

17.7.                     Other Provisions.

 

Each Award Agreement may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion.  In the event of any conflict between the terms of an employment agreement and the Plan, the terms of the employment agreement govern.

 

17.8.                     Number and Gender.

 

With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.

 

17.9.                     Severability.

 

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.

 

17.10.              Governing Law.

 

The Plan shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law.

 

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17.11.              Section 409A.

 

The Plan is intended to comply with Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Grantee’s Separation from Service shall instead be paid on the first payroll date after the six-month anniversary of the Grantee’s Separation from Service (or the Grantee’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Grantee under Section 409A and neither the Company nor the Committee will have any liability to any Grantee for such tax or penalty.

 

17.12.              Separation from Service.

 

The Board shall determine the effect of a Separation from Service upon Awards, and such effect shall be set forth in the appropriate Award Agreement.  Without limiting the foregoing, the Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, the actions that will be taken upon the occurrence of a Separation from Service, including, but not limited to, accelerated vesting or termination, depending upon the circumstances surrounding the Separation from Service.

 

17.13.              Transferability of Awards and Issued Shares.

 

17.13.1.                            Transfers in General.

 

Except as provided in Section 17.13.2, no Award shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution, and, during the lifetime of the Grantee, only the Grantee personally (or the Grantee’s personal representative) may exercise rights under the Plan.

 

17.13.2.                            Family Transfers.

 

If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Award (other than Incentive Stock Options) to any Family Member. For the purpose of this Section 17.13.2, a “not for value” transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 17.13.2, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Awards are prohibited except to Family Members of the original Grantee in accordance with this Section 17.13.2 or by will or the laws of descent and distribution.

 

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17.13.3.                            Issued Shares.

 

No Issued Shares shall be sold, assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of or encumbered, whether voluntarily or by operation of law, unless (i) such transfer is in compliance with the terms of the applicable Award, all applicable securities laws, and with the terms and conditions of the Plan (including Sections 17.4 and 17.5 and this Section 17.13.3), (ii) such transfer does not cause the Company to become subject to the reporting requirements of the Exchange Act, and (iii) the transferee consents in writing to be bound by the provisions of the Plan (including Sections 17.4 and 17.5 and this Section 17.13.3).  In connection with any proposed transfer, the Board may require the transferor to provide at the transferor’s own expense an opinion of counsel to the transferor, satisfactory to the Board, that such transfer is in compliance with all foreign, federal and state securities laws.  Any attempted disposition of Issued Shares not in accordance with the terms and conditions of this Section 17.13.3 shall be null and void, and the Company shall not reflect on its records any change in record ownership of any Issued Shares as a result of any such disposition, shall otherwise refuse to recognize any such disposition and shall not in any way give effect to any such disposition of Issued Shares. Subject to the foregoing general provisions, and unless otherwise provided in the agreement with respect to a particular Award, Issued Shares may be transferred pursuant to the following specific terms and conditions:

 

(i)                                     Transfers to Permitted Transferees. The Holder may sell, assign, transfer or give away any or all of the Issued Shares to Permitted Transferees; provided, however, that following such sale, assignment, or other transfer, such Issued Shares shall continue to be subject to the terms of this Plan (including Sections 17.4 and 17.5 and this Section 17.13.3) and such Permitted Transferee(s) shall, as a condition to any such transfer, deliver a written acknowledgment to that effect to the Company.

 

(ii)                                  Transfers Upon Death. Upon the death of the Holder, any Issued Shares then held by the Holder at the time of such death and any Issued Shares acquired thereafter by the Holder’s legal representative shall be subject to the provisions of this Plan, and the Holder’s estate, executors, administrators, personal representatives, heirs, legatees and distributees shall be obligated to convey such Issued Shares to the Company or its assigns under the terms contemplated hereby.

 

17.14.              Dividends and Dividend Equivalent Rights.

 

If specified in the Award Agreement, the recipient of an Award under this Plan may be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the Common Stock or other securities covered by an Award.  The terms and conditions of a dividend equivalent right may be set forth in the Award Agreement.  Dividend equivalents credited to a Grantee may be paid currently or may be deemed to be reinvested in additional shares of Stock or other securities of the Company at a price per unit equal to the Fair Market Value of a share of Stock on the date that such dividend was paid to shareholders, as determined in the sole discretion of the Board.

 

	
 
    	
Iradimed   Corporation 
    
	
 
    	
 
    
	
 
    	
/s/   Roger Susi
    
	
 
    	
By:   Roger Susi
    
	
 
    	
Title:   CEO and President
    

 

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