Document:

exv10w2

 

Exhibit 10.2

ST. FRANCIS MEDICAL TECHNOLOGIES, INC.

AMENDED AND RESTATED

1999 STOCK OPTION PLAN

     1. Purpose. The purpose of this Amended and Restated Stock Option Plan (the “PLAN”)
is to attract and retain the best available personnel, to provide additional incentive to the
EMPLOYEES and CONSULTANTS, as defined below, of St. Francis Medical Technologies, Inc., a Nevada
corporation (the “COMPANY”), and to promote the success of the COMPANY’s business.

     2. Definitions. As used herein, the following definitions shall apply:

          2.1 “BOARD” shall mean the COMMITTEE, as defined below, if one has been appointed, or
the Board of Directors of the COMPANY, if no COMMITTEE has been appointed.

          2.2 “COMMITTEE” shall mean the COMMITTEE appointed by the BOARD in accordance with
Section 4.2 of this PLAN, if one has been appointed.

          2.3 “CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT” shall mean the absence of any
interruption or termination of service as an EMPLOYEE or CONSULTANT. CONTINUOUS STATUS AS AN
EMPLOYEE OR CONSULTANT shall not be considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the BOARD; provided, that such leave is for a
period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by
contract or statute.

          2.4 “EMPLOYEE” shall mean any person, including officers and directors, employed by
the COMPANY or any PARENT or SUBSIDIARY of the COMPANY, as such terms are defined below. The
payment of a director’s fee by the COMPANY shall not be sufficient to constitute “employment” by
the COMPANY.

          2.5 “CONSULTANT” shall mean any person who is engaged by the COMPANY or any PARENT or
SUBSIDIARY to render consulting services to the COMPANY and is compensated for such consulting
services, or any director of the COMPANY whether compensated for such services or not; provided,
that if and in the event the COMPANY registers any class of any equity security pursuant to Section
12 of the Security Exchange Act of 1934, as amended (the “EXCHANGE ACT”), the term “CONSULTANT”
shall thereafter not include directors who are not compensated for their services or are paid only
a director’s fee by the COMPANY.

          2.6 “INCENTIVE STOCK OPTION” shall mean an OPTION, as defined below, intended to
qualify as an incentive stock option within the meaning of Section 422A of the Internal Revenue
Code of 1976, as amended (the “CODE”).

          2.7 “OPTION” shall mean a stock option granted pursuant to this PLAN.

 

 

          2.8 “OPTIONEE” shall mean an EMPLOYEE or CONSULTANT who receives an option pursuant to
this PLAN.

          2.9 “PARENT” shall mean a “parent corporation”, whether now or hereafter existing, as
defined in Section 425(e) of the CODE.

          2.10 “PLAN” shall mean this 1999 Stock Option Plan.

          2.11 “SHARE” shall mean a share of STOCK, as adjusted in accordance with Section 13 of
this PLAN.

          2.12 “STOCK” shall mean the Common Stock of the COMPANY.

          2.13 “SUBSIDIARY” shall mean a “subsidiary corporation”, whether now or hereafter
existing, as defined in Section 425(f) of the CODE.

          2.14 “CHANGE IN CONTROL” shall mean the occurrence, after the date hereof, of any of
the following events:

                    a. The COMPANY is merged, or consolidated, or reorganized into or with another corporation or
other legal person, and as a result of such merger, consolidation or reorganization less than 50%
of the combined voting power of the then outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of voting securities of
the COMPANY immediately prior to such transaction;

                    b. The COMPANY sells all or substantially all of its assets to any other corporation or other
legal person and thereafter, less than 50% of the combined voting power of the then outstanding
voting securities of the acquiring or consolidated entity are held in the aggregate by the holders
of voting securities of the COMPANY immediately prior to such sale; or

                    c. Any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act of 1934, as amended (the “Exchange Act”)) has become the beneficial owner (as the term
“beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated
under the Exchange Act) representing 50% or more of the combined voting power of the
then-outstanding voting securities of the COMPANY.

     3. SHARES Subject to PLAN. Subject to the provisions of Section 13 of this PLAN,
there shall be reserved for sale upon the exercise of OPTIONS to be granted from time to time under
this PLAN, an aggregate of 1,335,000 shares (post the effectiveness of a three for one stock split
on May 3, 1999) of STOCK of the COMPANY, which SHARES may be authorized but unissued STOCK or
issued STOCK which shall have been reacquired by the COMPANY. If an OPTION shall expire or
terminate for any reason without having been exercised in full, the unpurchased SHARES covered
thereby shall (unless this PLAN shall have been terminated) become available for future grant under
this PLAN.

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     4. Administration of PLAN.

          4.1 Board of Directors. This PLAN shall be administered by the Board of Directors of
the COMPANY.

          4.2 Creation of COMMITTEE. Subject to Section 4.3, the Board of Directors may appoint
a COMMITTEE consisting of not less than two members of the Board of Directors to administer this
PLAN on behalf of the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. Once appointed, the COMMITTEE shall continue to serve unless otherwise
directed by the Board of Directors. From time to time, the Board of Directors may increase the
size of the COMMITTEE and appoint additional members, remove members (with or without cause),
replace members, fill vacancies however caused, or remove all members of the COMMITTEE and
thereafter directly administer this PLAN.

          4.3 Issuances and Grants to BOARD Members and Officers.

                    a. Members of the BOARD who are eligible for OPTIONS or have been granted OPTIONS may vote on
any matters affecting the administration of this PLAN or grant of OPTIONS pursuant to this PLAN,
except that no such member shall act upon the granting of an OPTION to him or herself, but any such
member may be counted in determining the existence of a quorum at any meeting of the BOARD during
which action is taken with respect to the granting of OPTIONS to him or her.

                    b. Notwithstanding the foregoing subparagraph (i), if the COMPANY registers any class of any
equity security pursuant to Section 12 of the EXCHANGE ACT, from the effective date of such
registration until six months after the termination of such registration, any grant of OPTIONS to
officers or directors shall only be made by the Board of Directors; provided, however, that if the
majority of the Board of Directors is eligible to participate in this PLAN or any other stock
issuance, stock option, or any other stock plan of the COMPANY or any of its affiliates, or has
been eligible to participate in any such plan at any time within the preceding year, any grants of
OPTIONS to directors or officers must be made by or only in accordance with a recommendation of a
COMMITTEE consisting of two or more persons who may, but need not, be directors or employees of the
COMPANY, appointed by the Board of Directors and having full authority to act in the matter, none
of whom is eligible to participate in this PLAN or any other stock issuance, stock option, or other
stock plan of the COMPANY or any of its affiliates, or has been eligible to participate at any time
within the preceding year. Once appointed, such COMMITTEE shall continue to serve with respect to
the issuance of all STOCK and granting of all OPTIONS under this PLAN unless otherwise directed by
the Board of Directors.

          4.4 Powers of the BOARD. Subject to the provisions of this PLAN, the BOARD shall have
complete and sole authority to: (i) determine whether to grant INCENTIVE STOCK OPTIONS in
accordance with Section 422A of the CODE to the EMPLOYEES of the COMPANY or “non-statutory stock
options” to the EMPLOYEES and CONSULTANTS of the COMPANY; (ii) determine, subject to Section 8.1 of
this PLAN, the fair market value of the STOCK; (iii) fix the number of SHARES to be covered by each
of the OPTIONS; (iv) determine the time or times at which OPTIONS shall be granted; (v) prescribe
the terms and provisions of the respective

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agreements governing each OPTION, which agreements need not be identical and, with the consent
of the holder thereof, the modification or amendment of each OPTION; (vi) interpret this PLAN;
(vii) prescribe, amend and rescind the rules and regulations relating to this PLAN; and (viii) make
all other determinations deemed necessary or advisable for the administration of this PLAN.

          4.5 Effect of all BOARD’s Decisions. All decisions, determinations, and
interpretations of the BOARD shall be final and binding on all OPTIONEES or any other holders of
STOCK or OPTIONS granted under this PLAN.

     5. Eligibility.

          5.1 EMPLOYEES and CONSULTANTS. Following the adoption of this PLAN by the BOARD or
approval of this PLAN by shareholders of the COMPANY in accordance with Section 20 of this PLAN,
whichever occurs first, OPTIONS may be granted only to EMPLOYEES and CONSULTANTS of the COMPANY on
terms as established by the BOARD, provided that such terms are not inconsistent with this PLAN.
OPTIONS may be granted from time to time to any EMPLOYEE or CONSULTANT of the COMPANY selected by
the BOARD, whether or not such individual shall have previously received one or more OPTIONS
hereunder. INCENTIVE STOCK OPTIONS may be granted only to EMPLOYEES.

          5.2 Factors. In making any determination as to persons to whom OPTIONS shall be
granted and as to the number of SHARES to be covered by such OPTIONS, the BOARD shall take into
account the duties of the respective individuals, their present and potential contributions to the
success of the COMPANY, and such other factors as the BOARD shall deem relevant in connection with
accomplishing the purpose of this PLAN.

     6. Not an Employment AGREEMENT. Neither this PLAN nor any document signed by the
OPTIONEE shall confer upon any OPTIONEE any right with respect to continuation of employment or
consulting relationship with the COMPANY, nor shall it interfere in any way with his right or the
COMPANY’s right to terminate his or her employment or consulting relationship at any time.

     7. Limitation on INCENTIVE STOCK OPTIONS. The aggregate fair market value (determined
as of the time an OPTION is granted) of the SHARES with respect to which the EMPLOYEE’s INCENTIVE
STOCK OPTIONS are exercisable for the first time by the EMPLOYEE during any calendar year (under
this PLAN or other incentive stock option plans, if any, of the COMPANY and any PARENT or
SUBSIDIARY, shall not exceed the sum of One Hundred Thousand Dollars ($100,000).

     8. Exercise Price and Consideration.

          8.1 Exercise Price. The per SHARE exercise price for the SHARES to be issued shall be
such price as is determined by the BOARD, but shall be subject to the following:

                    a. The per SHARE exercise price shall be no less than 85% of the fair market value per SHARE
on the date of grant.

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                    b. In the case of an INCENTIVE STOCK OPTION the per SHARE exercise price shall be no less than
One Hundred Percent (100%) of the fair market value per SHARE on the date of grant.

                    c. If the OPTIONEE, immediately prior to the grant, owns stock representing more than Ten
Percent (10%) of the voting power of all classes of stock of the COMPANY or any PARENT or
SUBSIDIARY (a “TEN PERCENT SHAREHOLDER”), the per SHARE exercise price shall be no less than One
Hundred Ten Percent (110%) of the fair market value per SHARE on the date of grant.

                    d. In the case of an OPTION granted on or after the effective date of registration of any
class of equity security of the COMPANY pursuant to Section 12 of the EXCHANGE ACT and prior to six
months after the termination of such registration, the per SHARE issue or exercise price shall be
no less than One Hundred Percent (100%) of the fair market value per share on the date of grant.
The fair market value shall be determined by the BOARD in its discretion; provided, however, that
if there is a public market for the STOCK, the fair market value per SHARE shall be the mean of the
bid and asked prices of the STOCK for the date of grant, as reported in the Wall Street Journal,
or, if not so reported, as otherwise reported by the National Association of Securities Dealers
Automated Quotation System (NASDAQ).

          8.2 Consideration. The consideration to be paid upon exercise of an OPTION, including
the method of payment, shall be determined by the BOARD and may consist entirely of cash, check,
promissory note, other SHARES of STOCK having a fair market value on the date of surrender equal to
the aggregate issue or exercise price of the SHARES being purchased, or any combination of such
methods of payment, or such other consideration and method of payment for the issuance of the
SHARES to the extent permitted under Sections 408 and 409 of the California General Corporation
Law. In making this determination as to the type of consideration to accept, the BOARD shall
consider if acceptance of such consideration may be reasonably expected to benefit the COMPANY
(Section 315 of the California General Corporation Law).

     9. Terms of OPTIONS. The term of each OPTION shall be ten years from the date of its
grant or such shorter term as may be provided in the STOCK OPTION AGREEMENT. However, in the case
of any OPTION granted to an OPTIONEE who, at the time the OPTION is granted, is a TEN PERCENT
SHAREHOLDER, the term of the OPTION shall be five years from the date of grant thereof or such
shorter term as may be provided in the STOCK OPTION AGREEMENT. Notwithstanding the foregoing, the
OPTION term may be subject to earlier termination as provided in Section 18 below.

     10. Exercise of OPTIONS.

          10.1 Exercisability. Any OPTION granted hereunder shall be exercisable at such times
and under such conditions as determined by the BOARD; provided, however, that each OPTION shall
become exercisable at a rate no less than twenty percent (20%) of the total number of SHARES
subject to the OPTION per year. Even if otherwise exercisable, an OPTION shall not be exercisable
if such exercise would do any of the following:

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                    a. violate any federal or state law or regulation including, without limitation, any rule
under Part 207 of Title 12 of the Federal Code of Regulations, often referred to as “Regulation G,”
as promulgated by the Federal Reserve Board;

                    b. violate any of the requirements of any stock exchange upon which the SHARES may then be
listed; or

                    c. violate any statute, regulation, or other requirement under which the OPTION or the SHARES
were registered, qualified, or exempted from such registration or qualification requirements.

          10.2 Date of Exercise. The date of exercise of each OPTION shall be deemed to be the
date on which written notice of such exercise, executed by the OPTIONEE, together with full payment
of the purchase price for the SHARES being purchased, are received by the COMPANY (the “DELIVERY
DATE”). Each OPTION may be exercised only in the manner set forth in the respective OPTION
AGREEMENT and consistent with this PLAN. Full payment may, as authorized by the BOARD, consist of
any consideration and method of payment allowable under Section 8.2 of this PLAN. On the DELIVERY
DATE the OPTIONEE shall become a shareholder of the COMPANY with the right to vote and receive
dividends and exercise any other right as a shareholder.

          10.3 Effect of Exercise. Exercise of an OPTION shall result in the decrease in the
number of SHARES which thereafter may be available for sale under the OPTION by the number of
SHARES for which the OPTION is exercised.

          10.4 Purchased for Investment. As a condition to the exercise of any OPTION, the
COMPANY may require the person exercising such OPTION to represent and warrant at the time of any
such exercise that the SHARES are being purchased only for investment and without any present
intention to sell or distribute any SHARES if, in the opinion of counsel for the COMPANY, such a
representation is required by any relevant provision of law.

          10.5 Termination of Status as EMPLOYEE or CONSULTANT. If an EMPLOYEE or a CONSULTANT
ceases to serve as an EMPLOYEE or a CONSULTANT (as the case may be), OPTIONEE may, but only within
30 days (or such other period of time not exceeding three months as is determined by the BOARD at
the time of the granting of the OPTION) after the date OPTIONEE ceases to be an EMPLOYEE or a
CONSULTANT (as the case may be) of the COMPANY, exercise the OPTION to the extent that OPTIONEE was
entitled to exercise it at the date of such termination. To the extent that OPTIONEE was not
entitled to exercise the OPTION as of the date of such termination or if OPTIONEE does not exercise
the OPTION (which OPTIONEE was entitled to exercise) within the time specified herein, the OPTION
shall terminate.

          10.6 Disability of an OPTIONEE. Notwithstanding the provisions of Section 10.5 above,
in the event an EMPLOYEE or a CONSULTANT is unable to continue OPTIONEE’s employment or consulting
relationship (as the case may be) with the COMPANY as a result of his or her disability, OPTIONEE
may, but only within six months (or such other period of time not exceeding twelve months as is
determined by the BOARD at the time of grant of the OPTION) from

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the date of termination, exercise the OPTION to the extent that OPTIONEE was entitled to
exercise it at the date of such termination. To the extent that OPTIONEE was not entitled to
exercise the OPTION at the date of termination or if OPTIONEE does not exercise the OPTION (which
OPTIONEE was entitled to exercise) within the time specified herein, the OPTION shall terminate.

          10.7 Death of an OPTIONEE. Notwithstanding the provisions of Section 10.5 above, in
the event of the death of the OPTIONEE during or within 30 days (or such other period of time not
exceeding three months as is determined by the BOARD at the time of grant of the OPTION) after the
termination of OPTIONEE’s continuous status as an EMPLOYEE or CONSULTANT, the OPTION may be
exercised at any time within six months (or such other period of time not exceeding twelve months
as is determined by the BOARD at the time of the grant of the OPTION) following the date of death,
by the OPTIONEE’s estate or by a person who acquired the right to exercise the OPTION by bequest or
inheritance, but only to the extent OPTIONEE would have been entitled to exercise the OPTION as of
the date of death. To the extent that OPTIONEE was not entitled to exercise the OPTION as of the
date of death or if OPTIONEE does not exercise the OPTION (which he was entitled to exercise)
within the time specified herein, the OPTION shall terminate.

     11. Non-Transferability of OPTIONS. An OPTION shall not be sold, pledged, assigned,
hypothecated, or otherwise transferred other than by will or the laws of descent and distribution,
and during the lifetime of the OPTIONEE, only shall be exercisable by the OPTIONEE.

     12. Issuance of SHARES.

          12.1 Compliance with Laws. No ISSUANCES shall be made under this PLAN if such
ISSUANCE would do any of the following:

                    a. violate any federal or state law or regulation;

                    b. violate any of the requirements of any stock exchange upon which the SHARES may then be
listed; or

                    c. violate any statute, regulation, or other requirement under which the OPTION or the SHARES
were registered, qualified, or exempted from such registration or qualification requirements.

          12.2 Purchased for Investment. As a condition to the issuance of SHARES, the COMPANY
may require the ISSUEE to represent and warrant that the SHARES are being purchased only for
investment and without any present intention to sell or distribute any SHARES.

     13. Adjustments Upon Changes in Capitalization. Subject to any required action by the
shareholders of the COMPANY, the number of SHARES covered by each outstanding OPTION, and the
number of shares of all STOCK which have been authorized for issuance under this PLAN but which
have not been issued and as to which no OPTIONS have yet been granted, or which have been returned
to this PLAN upon cancellation or expiration of an OPTION, as well as the price per share of STOCK
covered by each such outstanding OPTION, shall be proportionately adjusted for

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any increase or decrease in the number of issued shares of all STOCK resulting from a stock
split, reverse stock split, stock dividend, combination or classification of the STOCK, or any
other increase or decrease in the number of issued shares of all STOCK effected without receipt of
consideration by the COMPANY; provided, however, that conversion of any convertible securities of
the COMPANY shall not be deemed to have been “effected without receipt of consideration.” Such
adjustment shall be made by the BOARD, whose determination in that respect shall be final, binding,
and conclusive. Except as expressly provided herein, no issuance by the COMPANY of shares of stock
of any class or securities convertible into shares or stock of any class shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of shares of STOCK
subject to an OPTION.

     14. Dissolution or Reorganization; Change in Control.

          14.2 Dissolution or Reorganization. In the event of a dissolution or liquidation of
the COMPANY, all OPTIONS will terminate immediately prior to the consummation of such action. In
the event that the COMPANY is a party to a merger or consolidation, outstanding OPTIONS shall be
subject to the agreement of merger or consolidation. Such agreement may provide for the assumption
of outstanding OPTIONS by the surviving corporation or its parent or for their continuation by the
COMPANY (if the COMPANY is the surviving corporation). In the event the COMPANY is not the
surviving corporation and the surviving corporation will not assume the outstanding options, the
agreement of merger or consolidation may provide for payment of a cash settlement for exercisable
options equal to the difference between the amount to be paid for one SHARE under such agreement
and the exercise price for one SHARE under the OPTION and for the cancellation of OPTIONS not
exercised or settled, in either case without the OPTIONEES’ consent.

          14.3 Effect of Change in Control. The COMMITTEE may determine, at the time of
granting of OPTIONS or SHARES or thereafter, that such OPTIONS or SHARES shall become fully vested
on an accelerated basis in the event that a CHANGE IN CONTROL occurs with respect to the COMPANY.
If the COMMITTEE finds that there is a reasonable possibility that, within the succeeding six
months, a CHANGE IN CONTROL will occur with respect to the SHARES, then the COMMITTEE may determine
that all OPTIONS or SHARES shall be fully vested on an accelerated basis.

     15. Effective Date of this PLAN. This PLAN shall be effective as of the date on
which: (a) the shareholders of the COMPANY approve this PLAN as provided in Section 20, or (b) the
adoption of this PLAN by the BOARD, whichever is earlier.

     16. [intentionally omitted].

     17. Term. This PLAN shall terminate on the tenth anniversary of the earlier of either
the adoption of this PLAN by the BOARD or approval of this PLAN by the shareholders of the COMPANY
in accordance with Section 20 and no ISSUANCE shall be made nor shall any OPTION be granted under
this PLAN after that date.

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     18. Amendment and Termination of this PLAN.

          18.1 Limitations on BOARD. The BOARD may amend or terminate this PLAN from time to
time in such respects as the BOARD may deem it advisable provided that, the following revisions or
amendments shall require the approval of the shareholders of the COMPANY in the manner described in
Section 20:

                    a. An increase in the number of SHARES subject to this PLAN, other than in connection with an
adjustment under Section 13;

                    b. Any change in the designation of employees or consultants eligible to be issued STOCK or
granted an OPTION; or

                    c. If the COMPANY has a class of equity securities registered under Section 12 of the EXCHANGE
ACT at the time of such revision or amendment, any material increase in the benefits accruing to
participants under this PLAN.

          18.2 Shareholder Approval. If any amendment requiring shareholder approval under
Section 18.1 of this PLAN is made subsequent to the first registration of any class of equity
securities by the COMPANY under Section 12 of the EXCHANGE ACT, such shareholder approval shall be
solicited as described in Section 20(a) of this PLAN.

          18.3 Effect of Amendment or Termination. Any such amendment or termination of this
PLAN shall not affect any OPTIONS already granted and all outstanding OPTIONS shall remain in full
force and effect as if this PLAN had not been amended or terminated, unless mutually agreed
otherwise between the OPTIONEE and the BOARD, which agreement must be in writing and signed by the
OPTIONEE and the COMPANY.

     19. Reservation of SHARES. The COMPANY, during the term of this PLAN, shall at all
times reserve and keep available such number of SHARES as shall be sufficient to satisfy the
requirements of this PLAN. The inability of the COMPANY to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the COMPANY’s counsel to be necessary to the
lawful issuance and sale of any SHARES, shall relieve the COMPANY of any liability in respect to
the failure to issue or sell SHARES as to which such requisite authority shall have not been
obtained.

     20. Shareholder Approval. The Plan was approved by action by written consent of the
shareholders effective as of January 20, 1999 and its amendment effective as of May 3, 1999. As
provided in Section 18 above, shareholder approval may be required to certain amendments to the
Plan. If such shareholder approval is obtained at a duly held shareholders meeting, it may be
obtained by the affirmative vote of the holders of the majority of the outstanding shares of the
COMPANY present or represented and entitled to vote. If such shareholder approval is obtained by
written consent, it must be obtained by the written consent of the majority of the outstanding
shares of the COMPANY entitled to vote thereon. If and in the event that the COMPANY registers any
class of equity securities pursuant to Section 12 of the EXCHANGE ACT, the approval of such
shareholders of the company shall be:

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                    a. (i) solicited substantially in accordance with Section 14(a) of the EXCHANGE ACT and the
rules and regulations promulgated thereunder, or (ii) solicited after the COMPANY has furnished in
writing to the holders entitled to vote substantially the same information concerning this PLAN as
that which would be required by the rules and regulations in effect under Section 14(a) of the
EXCHANGE ACT at the time such information is furnished; and

                    b. obtained at or prior to the first annual meeting of the shareholders held subsequent to the
first registration of any class of equity securities of the COMPANY under Section 12(a) of the
EXCHANGE ACT.

     21. Information to OPTIONEES. The COMPANY shall provide financial statements to each
OPTIONEE at least annually during the period for which such OPTIONEE is a shareholder or has one or
more OPTIONS outstanding. The COMPANY shall not be required to provide such information if the
issuance of OPTIONS and SHARES under this PLAN is limited to key employees whose duties in
connection with the COMPANY assure their access to equivalent information.

     22. Establishment; Execution. The PLAN was adopted effective as of January 20, 1999.
The PLAN was amended and restated effective April 29, 1999. To record the amendment and
restatement of the Plan by the Board of Directors effective April 29, 1999, the Company has caused
its authorized officer to execute the same.

	 	 	 	 	 	 	 
	 	 	ST. FRANCIS MEDICAL TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Henry 	 	 
	 

	 	 	 	 

Henry A. Klyce

President and Chief Executive Officer
	 	 

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EXHIBIT B

St. Francis Medical Technologies, Inc.

1900 Bates Avenue, Suites L&M

Concord, CA 94520

Dear Sir or Madam:

     1. Exercise of OPTION. Pursuant to the St. Francis Medical Technologies, Inc. Stock
Option Agreement dated___, between St. Francis Medical Technologies, Inc. (the “COMPANY”)
and                                        , I hereby elect to purchase                                     
shares of the Common Stock of the
COMPANY (the “SHARES”) at the price of $                 
     per share.

     2. Payments. Payment for my shares is hereby being made as follows:

	 
	 	 	 	 

	 
	 	 	 	 

     3. Certificates. The shares are to be issued in                     certificate(s) and
registered in the name(s) of:

	 
	 	 	 	 

	 
	 	 	 	 

     4. Binding Effects. I hereby agree to be bound by all of the terms and conditions set
forth in the Stock Option Plan and the Stock Option Agreement referred to in Paragraph 1 of this
letter. Proof of my right to purchase stock pursuant to that Agreement is enclosed.

     5. Securities Laws Compliance.

          5.1 Representations. I represent and warrant that I am acquiring the SHARES for my
own account and for investment only, and not with a view to the sale, distribution, or disposition
thereof. I also represent that I have been provided with financial information regarding the
present financial position and the past financial performance of the COMPANY and that I have been
afforded ample opportunity to discuss the potential benefits and risks inherent in purchasing the
SHARES with the officers and shareholders of the COMPANY.

          5.2 Transfer.

                    (a) The issuance of the SHARES will not be registered under the Securities Act of 1933 (the
“ACT”) on the grounds that the offering and sale of the SHARES is exempt from registration as a
private placement under Section 4(2) of the ACT. The COMPANY’s reliance on this exemption is
based, in part, on my representations contained herein. I understand that, in the absence of the
application of an exemption from the registration requirements of the

 

 

ACT, the SHARES may not be sold without registration thereunder. I will not transfer such
SHARES unless registered or, in the opinion of counsel for the COMPANY, such exemption is
available.

                    (b) I also understand that any sale of SHARES that might be made by me in reliance upon Rule
144 under the ACT may be made only in limited amounts in accordance with the terms and conditions
of that rule.

                    (c) The COMPANY is under no obligation to register the SHARES under the ACT. If, under the
ACT, a registration statement covering the SHARES is not in effect or an exemption from
registration is not then available, I may be required to hold the SHARES for an indeterminate
period.

     6. Legends. I further understand that all certificates for the SHARES shall bear the
following legends:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND May NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

THESE SECURITIES ARE SUBJECT TO RIGHTS OF FIRST REFUSAL, RIGHTS OF REPURCHASE, AND OTHER
RESTRICTIONS UPON TRANSFER, AS SET FORTH IN ONE OR MORE AGREEMENTS BETWEEN THE REGISTERED
HOLDER, THE CORPORATION, CERTAIN OF THE OTHER SHAREHOLDERS, AND/OR THEIR RESPECTIVE
SUCCESSORS IN INTEREST, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION.

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     I understand the COMPANY will enforce these legend conditions.

	 	 	 	 	 	 	 
	 	 	Yours very truly,	 	 
	 
	 	 	 	 	 
	 	 	(Signature)	 	 
	 
	 	 	 	 	 
	 	 	(Printed name)	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	(Signature)	 	 
	 
	 	 	 	 	 
	 	 	(Printed name)	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	 	 	 

A-3exv10w3

 

Exhibit 10.3

St. Francis Medical Technologies, Inc.

Stock Incentive Plan

(As Adopted and Effective July 26, 1999, as Amended)

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	SECTION 1. PURPOSE.
	 	 	1	 
	 
	 	 	 	 
	SECTION 2. DEFINITIONS.
	 	 	1	 
	 
	 	 	 	 
	(a) “Award”
	 	 	1	 
	(b) “Board of Directors”
	 	 	1	 
	(c) “Change in Control”
	 	 	1	 
	(d) “Code”
	 	 	2	 
	(e) “Committee”
	 	 	2	 
	(f) “Company”
	 	 	2	 
	(g) “Consultant”
	 	 	2	 
	(h) “Employee”
	 	 	2	 
	(i) “Exchange Act”
	 	 	2	 
	(j) “Exercise Price”
	 	 	2	 
	(k) “Fair Market Value”
	 	 	2	 
	(l) “Incentive Stock Option” or  “ISO”
	 	 	3	 
	(m) “Nonstatutory Option” or  “NSO”
	 	 	3	 
	(n) “Offeree”
	 	 	3	 
	(o) “Option”
	 	 	3	 
	(p) “Optionee”
	 	 	3	 
	(q) “Outside Director”
	 	 	3	 
	(r) “Parent”
	 	 	3	 
	(s) “Plan”
	 	 	3	 
	(t) “Purchase Price”
	 	 	3	 
	(u) “Purchaser”
	 	 	3	 
	(v) “Restricted Share”
	 	 	3	 
	(w) “Service”
	 	 	4	 
	(x) “Share”
	 	 	4	 
	(y) “Stock”
	 	 	4	 
	(z) “Stock Option Agreement”
	 	 	4	 
	(aa) “Stock Purchase Agreement”
	 	 	4	 
	(bb) “Subsidiary”
	 	 	4	 
	 
	 	 	 	 
	SECTION 3. ADMINISTRATION.
	 	 	4	 
	 
	 	 	 	 
	(a) Committees of the Board of Directors
	 	 	4	 
	(b) Board Responsibilities
	 	 	4	 
	(c) Board Liability
	 	 	5	 
	(d) Financial Reports
	 	 	5	 
	 
	 	 	 	 
	SECTION 4. ELIGIBILITY.
	 	 	5	 
	 
	 	 	 	 
	(a) General Rule
	 	 	5	 
	(b) Ten-Percent Stockholders
	 	 	5	 
	(c) Attribution Rules
	 	 	5	 
	(d) Outstanding Stock
	 	 	5	 

- i -

 

	 	 	 	 	 
	 	 	Page	 
	SECTION 5. STOCK SUBJECT TO PLAN.
	 	 	5	 
	 
	 	 	 	 
	(a) Basic Limitation
	 	 	5	 
	(b) Additional Shares
	 	 	6	 
	 
	 	 	 	 
	SECTION 6. TERMS AND CONDITIONS OF SALES AND AWARDS.
	 	 	6	 
	 
	 	 	 	 
	(a) Stock Purchase Agreement
	 	 	6	 
	(b) Duration of Offers
	 	 	6	 
	(c) Purchase Price
	 	 	6	 
	(d) Payment for Shares
	 	 	6	 
	(e) Restrictions on Transfer of Shares and Minimum Vesting
	 	 	7	 
	(f) Effect of Change in Control/Acceleration
	 	 	7	 
	(g) Voting Rights
	 	 	7	 
	 
	 	 	 	 
	SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
	 	 	7	 
	 
	 	 	 	 
	(a) Stock Option Agreement
	 	 	7	 
	(b) Number of Shares
	 	 	7	 
	(c) Exercise Price
	 	 	8	 
	(d) Exercisability
	 	 	8	 
	(e) Effect of Change in Control/Acceleration
	 	 	8	 
	(f) Term
	 	 	8	 
	(g) Exercise of Options on Termination of Service
	 	 	8	 
	(h) Payment of Option Shares
	 	 	8	 
	(i) No Rights as a Stockholder
	 	 	9	 
	(j) Modification, Extension and Assumption of Options
	 	 	9	 
	 
	 	 	 	 
	SECTION 8. ADJUSTMENT OF SHARES.
	 	 	9	 
	 
	 	 	 	 
	(a) General
	 	 	9	 
	(b) Reorganizations
	 	 	9	 
	(c) Reservation of Rights
	 	 	9	 
	 
	 	 	 	 
	SECTION 9. WITHHOLDING TAXES.
	 	 	10	 
	 
	 	 	 	 
	(a) General
	 	 	10	 
	(b) Share Withholding
	 	 	10	 
	(c) Cashless Exercise/Pledge
	 	 	10	 
	(d) Other Forms of Payment
	 	 	10	 
	 
	 	 	 	 
	SECTION 10. ASSIGNMENT OR TRANSFER OF OPTIONS OR SHARES.
	 	 	10	 
	 
	 	 	 	 
	(a) General
	 	 	10	 
	(b) Trusts
	 	 	10	 
	 
	 	 	 	 
	SECTION 11. LEGAL REQUIREMENTS.
	 	 	11	 
	 
	 	 	 	 
	SECTION 12. NO EMPLOYMENT RIGHTS.
	 	 	11	 
	 
	 	 	 	 
	SECTION 13. DURATION AND AMENDMENTS.
	 	 	11	 
	 
	 	 	 	 
	(a) Term of the Plan
	 	 	11	 
	(b) Right to Amend or Terminate the Plan
	 	 	11	 
	(c) Effect of Amendment or Termination
	 	 	11	 
	 
	 	 	 	 
	SECTION 14. EXECUTION.
	 	 	12	 

- ii -

 

St. Francis Medical Technologies, Inc.

Stock Incentive Plan

(As Adopted and Effective July 26, 1999, as Amended)

SECTION 1. PURPOSE.

     The purpose of the Plan is to offer selected employees, directors and consultants an
opportunity to acquire a proprietary interest in the success of the Company, or to increase such
interest, to encourage such selected persons to remain in the employ of the Company and to attract
new employees with outstanding qualifications. The Plan seeks to achieve this purpose by providing
for awards of Restricted Shares, grants of Options (which may constitute Incentive Stock Options or
Nonstatutory Stock Options), and sales of Shares of the Company’s Common Stock. While this Plan is
intended to satisfy Section 25102(o) of the California Corporations Code, awards, grants and sales
may be made under this Plan in reliance upon other state securities law exemptions and to the
extent another exemption is relied upon, the terms of this Plan which are required only because of
Section 25102(o) need not apply to the extent provided by the Board of Directors in the stock
option or purchase agreement.

SECTION 2. DEFINITIONS.

     (a) “Award” shall mean any award of Restricted Shares under the Plan.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as
constituted from time to time.

     (c) “Change in Control” shall mean the occurrence, after the date hereof, of any of
the following events:

     (i) The Company is merged, consolidated or reorganized into or with another
corporation of other legal person, and, as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the then outstanding
securities of such corporation or person immediately after such transaction are held
in the aggregate by the holders of voting securities of the Company immediately
prior to such transaction;

     (ii) The Company sells all or substantially all of its assets to any other
corporation or other legal person, and as a result of such merger, consolidation or
reorganization less than 50% of the combined voting power of the then outstanding
securities of such corporation or person immediately after such transaction are held
in the aggregate by the holders of voting securities of the Company immediately
prior to such sale; or

     (iii) Any person (as the term “person” is used in Section 13(d)(30 or Section
14(d)(2) of the Exchange Act) has become the beneficial owner (as the term
“beneficial owner” is defined under Rule 13d-3 or any successor rule or

-1-

 

regulation promulgated under the Exchange Act) representing 50% or more of the
combined voting power of the then-outstanding voting securities of the Company.

     The term “Change in Control” shall not include a transaction the sole purpose of which is to
change the state of the Company’s incorporation, to form a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s securities immediately
before such transaction, or the Company’s initial public offering.

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors which is authorized
to administer the Plan under Section 3.

     (f) “Company” shall mean St. Francis Medical Technologies, Inc., a Delaware
corporation.

     (g) “Consultant” shall mean a consultant, advisor or other independent contractor who
performs services for the Company, a Parent or a Subsidiary.

     (h) “Employee” means an individual paid from W-2 Payroll of the Company, Parent or a
Subsidiary. If, during any period, the Company (or Parent or Subsidiary, as applicable) has not
treated an individual as an Employee and, for that reason, has not paid such individual in a manner
which results in the issuance of a Form W-2 and withheld taxes with respect to him or her, then
that individual shall not be eligible to receive an Award or an Option, or to purchase Stock under
the Plan for that period, even if any person, court of law or government agency determines,
retroactively, that individual is or was a common-law employee during all or any portion of that
period. “W-2 Payroll” means whatever mechanism or procedure that the Company, Parent or a
Subsidiary uses to pay any individual which results in the issuance of Form W-2 to the individual.
“W-2 Payroll” does not include any mechanism or procedure which results in the issuance of any form
other than a Form W-2 to an individual, including, but not limited to, any Form 1099 which may be
issued to an independent contractor, an agency employee or a consultant. Whether a mechanism or
procedure qualifies as a “W-2 Payroll” shall be determined in the absolute discretion of the
Company (or Parent or Subsidiary, as applicable), and the Company’s, Parent’s or Subsidiary’s
determination shall be conclusive and binding on all persons.

     (i) “Exchange Act” means the Securities and Exchange Act of 1934, as amended.

     (j) “Exercise Price” shall mean the amount for which one Share may be purchased upon
exercise of an Option, as specified by the Board in the applicable Stock Option Agreement.

     (k) “Fair Market Value” means the market price of Shares, determined by the Board as
follows:

     (i) If the Shares were traded over-the-counter on the date in question but were
not traded on the Nasdaq Stock Market or the Nasdaq National Market System, then the
Fair Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted for such date by the principal automated
inter-dealer quotation system on which the Shares are quoted or, if the
Shares are not quoted on any such system, by the “Pink Sheets” published by the
National Quotation Bureau, Inc.;

-2-

 

     (ii) If the Shares were traded over-the-counter on the date in question and
were traded on the Nasdaq Stock Market or the Nasdaq National Market System, then
the Fair Market Value shall be equal to the last-transaction price quoted for such
date by the Nasdaq Stock Market or the Nasdaq National Market;

     (iii) If the Shares were traded on a stock exchange on the date in question,
then the Fair Market Value shall be equal to the closing price reported by the
applicable composite transactions report of that exchange for such date; and

     (iv) If none of the foregoing provisions is applicable, then the Fair Market
Value shall be determined by the Board of Directors in good faith on such basis as
it deems appropriate.

     In all cases, the determination of Fair Market Value by the Board of Directors shall be
conclusive and binding on all persons.

     (l) “Incentive Stock Option” or “ISO” shall mean an employee incentive stock
option described in Code section 422(b).

     (m) “Nonstatutory Option” or “NSO” shall mean a stock option that is not an
ISO.

     (n) “Offeree” shall mean an individual to whom the Board has offered the right to
acquire Shares under the Plan (other than upon exercise of an Option).

     (o) “Option” shall mean an Incentive Stock Option or Nonstatutory Option granted under
the Plan and entitling the holder to purchase Shares.

     (p) “Optionee” shall mean an individual or estate who holds an Option.

     (q) “Outside Director” shall mean a member of the Board of the Company, a Parent or a
Subsidiary who is not an Employee of the Company, Parent or a Subsidiary, or an affiliate of such
Director.

     (r) “Parent” shall mean any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company, if each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain. A corporation that attains the status of a Parent on a date
after the adoption of the Plan shall be considered a Parent commencing as of such date.

     (s) “Plan” shall mean this Stock Incentive Plan of St. Francis Medical Technologies,
Inc.

     (t) “Purchase Price” shall mean the consideration for which one Share may be acquired
under the Plan (other than upon exercise of an Option), as specified by the Board.

     (u) “Purchaser” shall mean an eligible individual or entity who has acquired Stock
under the Plan whether through an Award, exercise of an Option, or by purchase.

     (v) “Restricted Share” shall mean a Share sold or awarded to an eligible individual or
entity which is nontransferable and subject to substantial risk of forfeiture until restrictions
lapse.

-3-

 

     (w) “Service” shall mean service as an Employee, a Consultant or an Outside Director.

     (x) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8
(if applicable).

     (y) “Stock” shall mean the common stock of the Company.

     (z) “Stock Option Agreement” shall mean the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his or her Option.

     (aa) “Stock Purchase Agreement” shall mean the agreement between the Company and an
Offeree who purchases or is awarded Shares under the Plan which contains the terms, conditions and
restrictions pertaining to the acquisition of such Shares.

     (bb) “Subsidiary” means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date.

SECTION 3. ADMINISTRATION.

     (a) Committees of the Board of Directors. The Plan may be administered by the one or
more Committees appointed by the Board of Directors. Each Committee shall have such authority and
be responsible for such functions as the Board of Directors has assigned to it. If no Committee
has been appointed, the entire Board of Directors shall administer the Plan. If the Company’s
Stock becomes publicly traded, then any such Committee shall be comprised solely of two or more
Outside Directors (although Board or Committee functions may be delegated to officers to the extent
the awards, grants and sales relate to persons who are not subject to the reporting requirements of
Section 16 of the Exchange Act).

     (b) Board Responsibilities. Subject to the provisions of the Plan, the Board of
Directors shall have full authority and discretion to take any actions it deems necessary or
advisable for the administration of the Plan. All decisions, interpretations and other actions of
the Board of Directors shall be final and binding on all Offerees, Optionees and Purchasers and all
persons deriving their rights from an Offeree, Optionee or Purchaser. The Board has and may
exercise such power and authority as may be necessary or appropriate for the Board to carry out its
functions as described in the Plan. The Board has authority in its discretion to determine to whom
Options or Awards shall be granted, or who shall be eligible to purchase Shares, and the time or
times at which Awards, Options and sales shall be made, and the number of Shares
subject to each Award, Option or sale, subject to the express provisions of the respective
Stock Purchase or Stock Option Agreements (which need not be identical). The Board may make all
other determinations necessary or advisable for Plan administration and has authority to prescribe,
amend, and rescind rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Board will be final, conclusive, and binding upon all Offerees,
Optionees, Purchasers, and persons deriving rights therefrom.

-4-

 

     (c) Board Liability. No member of the Board or the Committee will be liable for any
action or determination made in good faith with respect to the Plan or any Award or Option granted
or sale made under the Plan.

     (d) Financial Reports. To the extent required by applicable law, and not less often
than annually, the Company shall furnish to Offerees, Optionees and Purchasers its financial
statements including a balance sheet regarding the Company’s financial condition and results of
operations, unless such Offerees, Optionees or Purchasers have duties with the Company that assure
them access to equivalent information. Such financial statements need not be audited.

SECTION 4. ELIGIBILITY.

     (a) General Rule. Only Employees, Consultants and Outside Directors shall be eligible
to receive Options or Awards, or to purchase Shares under the Plan. Only Employees shall be
eligible for the grant of ISOs.

     (b) Ten-Percent Stockholders. An Employee, Consultant or Outside Director who owns
more than ten percent (10%) of the total combined voting power of all classes of outstanding stock
of the Company, a Parent or Subsidiary shall not be eligible for an Award, a grant of an Option or
to purchase Shares unless (i) the Exercise Price for an ISO (and a NSO to the extent required by
applicable law) is at least one hundred ten percent (110%) of the Fair Market Value of a Share on
the date of grant, (ii) the Purchase Price of Shares is at least one hundred percent (100%) of the
Fair Market Value of a Share on the date of grant, and (iii) in the case of an ISO, such ISO by its
terms is not exercisable after the expiration of five years from the date of grant.

     (c) Attribution Rules. For purposes of Subsection (b) above, in determining stock
ownership, an Employee, Consultant or Outside Director shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and lineal descendants.
Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be
deemed to be owned proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee, Consultant or Outside Director holds an Option shall not be
counted.

     (d) Outstanding Stock. For purposes of Subsection (b) above, “outstanding stock”
shall include all stock actually issued and outstanding immediately after the grant. “Outstanding
stock” shall not include shares authorized for issuance under outstanding Options held by the
Employee, Consultant or Outside Director or by any other person.

SECTION 5. STOCK SUBJECT TO PLAN.

     (a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued
Shares. Subject to Sections 5(b) and 8 of the Plan, the aggregate number of Shares which may be
issued or transferred pursuant to an Award under the Plan shall not exceed 2,335,000 Shares. The
number of Shares available under this Plan shall be increased by Shares subject to unexercised or
expired options or forfeited Shares under the Company’s 1999 Stock Option Plan; provided, however,
that the total Shares available under the Plan shall not exceed 2,335,000.

-5-

 

     The number of shares that may be issued or transferred during a twelve-month period to any
Employee, Consultant or Outside Director pursuant to any Award, Option or purchase shall not exceed
600,000.

     In any event, (i) the number of Shares which are subject to Awards, Options or other rights
outstanding at any time under the Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan; and (ii) to the extent an Option is granted or an Award or
sale is made in reliance upon the exemption available under Section 25102(o) of the California
Corporations Code, the number of Shares which are subject to Awards, Options or other rights
outstanding at any time under the Plan or otherwise shall meet the limitation requirements of by
Section 260.140.45 of the Code of Regulations of the California Commissioner of Corporations. The
Company, during the term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.

     (b) Additional Shares. In the event that any outstanding Option or other right for
any reason expires or is canceled, the Shares allocable to the unexercised portion of such Option
or other right shall again be available for the purposes of the Plan. If a Restricted Share is
forfeited or repurchased, then such Restricted Share shall again become available for award under
the Plan.

SECTION 6. TERMS AND CONDITIONS OF SALES AND AWARDS.

     (a) Stock Purchase Agreement. Each Award or sale of Shares under the Plan shall be
evidenced by a Stock Purchase Agreement between the Offeree or Optionee and the Company. Such
Award or sale shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the Plan and which the
Board deems appropriate for inclusion in a Stock Purchase Agreement. The provisions of the various
Stock Purchase Agreements entered into under the Plan need not be identical.

     (b) Duration of Offers. Any right to acquire Shares under the Plan (other than an Option)
shall automatically expire if not exercised by the Offeree within 30 days after the grant of such
right was communicated to the Offeree by the Board.

     (c) Purchase Price. Unless otherwise permitted by applicable law, the Purchase Price
of Shares to be offered under the Plan shall not be less than eighty-five percent (85%) of the Fair
Market Value of a Share on the date of grant (100% for 10% stockholders), except as otherwise
provided in Section 4(b). Subject to the preceding sentence, the Purchase Price shall be
determined by the Board in its sole discretion. The Purchase Price shall be payable in a form
described in Subsection (d) below.

     (d) Payment for Shares. The entire Purchase Price of Shares issued under the Plan
shall be payable in lawful money of the United States of America at the time when such Shares are
purchased, except as provided below. Notwithstanding any other provision of the Plan, Shares may,
in the discretion of the Board, be awarded or sold under the Plan in consideration of Services
previously rendered to the Company, a Parent or a Subsidiary prior to the Award or sale.
Permissible forms of payment, in addition to cash, are:

     (i) Surrender of Stock. To the extent that a Stock Purchase Agreement
so provides, payment may be made all or in part with Shares which

-6-

 

have already been
owned by the Offeree or the Offeree’s representative for any time period specified
by the Board and which are surrendered to the Company in good form for transfer.
Such Shares shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.

     (ii) Promissory Notes. To the extent that a Stock Purchase Agreement
so provides, payment may be made all or in part with a full recourse promissory note
executed by the Offeree. The interest rate and other terms and conditions of such
note shall be determined by the Board. The Board may require that the Offeree
pledge his or her Shares to the Company for the purpose of securing the payment of
such note. In no event shall the stock certificate(s) representing such Shares be
released to the Offeree until such note is paid in full.

     (iii) Other Forms of Payment. To the extent provided in the Stock
Purchase Agreement, payment may be made in any other form that is consistent with
applicable laws, regulations and rules, including payment for past services.

     (e) Restrictions on Transfer of Shares and Minimum Vesting. Any Shares awarded or
sold under the Plan shall be subject to such special forfeiture conditions, rights of repurchase,
rights of first refusal and other transfer restrictions as the Board may determine. Such
restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in
addition to any restrictions that may apply to holder of Shares generally. In the case of a
Purchaser who is not an officer of the Company, an Outside Director, or a Consultant, any right to
repurchase the Purchaser’s Shares at the original Purchase Price upon termination of the
Purchaser’s Service shall lapse no less rapidly than 20% per year over the five-year period
commencing on the date of the sale of the Shares. Any such right may be exercised only within 90
days of the termination of the Purchaser’s Service for cash or for cancellation of indebtedness
incurred in purchasing the Shares.

     (f) Effect of Change in Control/Acceleration. The Board may determine at the time of
making an Award or sale or thereafter, that restrictions on the Restricted Shares shall lapse, in
whole or in part, in the event that a Change in Control occurs with respect to the Company or
otherwise.

     (g) Voting Rights. Holders of Restricted Shares awarded under the Plan shall have the
same voting, dividend and other rights a the Company’s other stockholders.

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

     (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced
by a Stock Option Agreement between the Optionee and the Company. Such Option shall be subject to
all applicable terms and conditions of the Plan and may be subject to any other terms and
conditions which are not inconsistent with the Plan and which the Board deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical.

     (b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares
that are subject to the Option and shall provide for the adjustment of such number in

-7-

 

accordance with Section 8. The Stock Option Agreement shall also specify whether the Option is an ISO or a
Nonstatutory Option.

     (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price.
The Exercise Price of an ISO shall not be less than one hundred percent (100%) of the Fair Market
Value of a Share on the date of grant, except as otherwise provided in Section 4(b). To the extent
required by applicable law and except as otherwise provided in Section 4(b), the Exercise Price of
a Nonstatutory Option shall not be less than eighty-five percent (85%) of the Fair Market Value of
a Share on the date of grant. Subject to the preceding two sentences, the Exercise Price under any
Option shall be determined by the Board in its sole discretion. The Exercise Price shall be
payable in a form described in Subsection (h) below.

     (d) Exercisability. Each Stock Option Agreement shall specify the date when all or
any installment of the Option is to become exercisable. To the extent required by applicable law,
an Option shall become exercisable no less rapidly than the rate of 20% per year for each of the
first five years from the date of grant. Subject to the preceding sentence, the exercisability of
any Option shall be determined by the Board in its sole discretion.

     (e) Effect of Change in Control/Acceleration. The Board may determine, at the time of
granting an Option or thereafter, whether, and under what circumstances, such Option shall become
fully exercisable as to all Shares subject to such Option in the event that a Change in Control
occurs with respect to the Company before the Optionee’s Service with the Company terminates or
otherwise.

     (f) Term. The Stock Option Agreement shall specify the term of the Option. The term
shall not exceed ten years from the date of grant (or five (5) years for ten percent (10%)
stockholders as provided in Section 4(b)). Subject to the preceding sentence, the Board at its
sole discretion shall determine when an Option is to expire.

     (g) Exercise of Options on Termination of Service. Each Option shall set forth the
extent to which the Optionee shall have the right to exercise the Option following termination of
the Optionee’s Service with the Company and its Subsidiaries. Such provisions shall be determined
in the sole discretion of the Board, need not be uniform among all Options issued pursuant to the
Plan, and may reflect distinctions based on the reasons for termination of employment.
Notwithstanding the foregoing, to the extent required by applicable law, each Option shall provide
that the Optionee shall have the right to exercise the vested portion of any Option held at
termination for at least 30 days following termination of Service with the
Company for any reason, and that the Optionee shall have the right to exercise the Option for
at least six months if the Optionee’s Service terminates due to death or Disability.

     (h) Payment of Option Shares. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the time when such Shares
are purchased, except as provided below:

     (i) Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with Shares which have already been
owned by the Optionee or the Optionee’s representative for any time period specified
by the Board and which are surrendered to the Company in good form for transfer.
Such Shares shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.

-8-

 

     (ii) Promissory Notes. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, payment may be made all or in part with a full
recourse promissory note executed by the Optionee or Offeree. The interest rate and
other terms and conditions of such note shall be determined by the Board. The Board
may require that the Optionee or Offeree pledge his or her Shares to the Company for
the purpose of securing the payment of such note. In no event shall the stock
certificate(s) representing such Shares be released to the Optionee or Offeree until
such note is paid in full.

     (iii) Cashless Exercise. To the extent that a Stock Option Agreement
so provides and a public market for the Shares exists, payment may be made all or in
part by delivery (on a form prescribed by the Board) of an irrevocable direction to
a securities broker to sell Shares and to deliver all or part of the sale proceeds
to the Company in payment of the aggregate Exercise Price.

     (iv) Other Forms of Payment. To the extent provided in the Stock
Option Agreement, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

     (i) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect
to any Shares covered by an Option until the date of the issuance of a stock certificate for such
Shares.

     (j) Modification, Extension and Assumption of Options. Within the limitations of the Plan,
the Board may modify, extend or assume outstanding Options or may accept the cancellation of
outstanding Options (whether granted by the Company or another issuer) in return for the grant of
new Options for the same or a different number of Shares and at the same or a different Exercise
Price or for other consideration.

SECTION 8.  ADJUSTMENT OF SHARES.

     (a) General. In the event of a subdivision of the outstanding Stock, a declaration of a
dividend payable in Shares, a combination or consolidation of the outstanding Stock into a lesser
number of Shares, a recapitalization, a reclassification or a similar occurrence, the Board shall
make appropriate adjustments in one or more of (i) the number of Shares available for future Awards
under Section 5, (ii) the number of Shares covered by each outstanding Option or Purchase Agreement
or (iii) the Exercise Price or Purchase Price under each outstanding Option or Stock Purchase
Agreement.

     (b) Reorganizations. In the event that the Company is a party to a merger or
reorganization, outstanding Options shall be subject to the agreement of merger or reorganization,
which may, without the Optionee’s consent, provide for the assumption, or substitution of
outstanding Options by the surviving corporation or its parent, the payment of a cash settlement
for exercisable options equal to the difference between the amount to be paid for one Share under
such agreement and the exercise price for one Share under the Option, and for the cancellation of
Options not exercised or settled.

     (c) Reservation of Rights. Except as provided in this Section 8, an Optionee, an Offeree,
or Purchaser shall have no rights by reason of (i) any subdivision or consolidation of

-9-

 

shares of
stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the
number of shares of stock of any class. Any issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of Shares, Exercise Price or Purchase
Price of Shares subject to an Option or Stock Purchase Agreement. The grant of an Award pursuant
to the Plan shall not affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

SECTION 9.  WITHHOLDING TAXES.

     (a) General . To the extent required by applicable federal, state, local or foreign law, a Purchaser or
Optionee or his or her successor shall make arrangements satisfactory to the Board for the
satisfaction of any withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Shares or make any cash payment under the Plan until
such obligations are satisfied.

     (b) Share Withholding. The Board may permit a Purchaser or Optionee to satisfy all or part
of his or her withholding or income tax obligations by having the Company withhold all or a portion
of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of
any Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash. Any payment of taxes by
assigning Shares to the Company may be subject to restrictions, including any restrictions required
by rules of any federal or state regulatory body or other authority.

     (c) Cashless Exercise/Pledge. The Board may provide that if Company Shares are publicly
traded at the time of exercise, arrangements may be made to meet the Optionee’s withholding
obligation by cashless exercise or pledge.

     (d) Other Forms of Payment. The Board may permit such other means of tax withholding as it
deems appropriate.

SECTION 10.  ASSIGNMENT OR TRANSFER OF OPTIONS OR SHARES.

     (a) General. An Option granted under the Plan or Shares acquired under the Plan shall not
be anticipated, assigned, attached, garnished, optioned, transferred or made subject to any
creditor’s process, whether voluntarily, involuntarily or by operation of law, except as approved
by the Board. ISOs shall not be transferable. While any Shares are subject to California
Corporations Code § 25102(o), Offerees and Optionees may not transfer their rights to purchase
Shares under the Plan except by will or the laws of descent and distribution.

     (b) Trusts. Neither this Section 10 nor any other provision of the Plan shall preclude a
Stockholder from transferring or assigning Restricted Shares to (a) the trustee of a trust that is
revocable by such Stockholder alone, both at the time of the transfer or assignment and at all
times thereafter prior to such Stockholder’s death, or (b) the trustee of any other trust to the
extent approved by the Board in writing. A transfer or assignment of Restricted Shares from such
trustee to any other person than such Stockholder shall be permitted only to the extent approved in
advance by the Board in writing, and Restricted Shares held by such trustee shall be

-10-

 

subject to all
the conditions and restrictions set forth in the Plan and in the applicable Stock Purchase
Agreement, as if such trustee were a party to such Agreement.

SECTION 11.  LEGAL REQUIREMENTS.

     Shares shall not be issued under the Plan unless the issuance and delivery of such Shares
complies with (or is exempt from) all applicable requirements of law, including (without
limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations, and the regulations of any stock exchange on
which the Company’s securities may then be listed.

     To the extent required by applicable law, any rights of repurchase in favor of the Company
shall take into account the provisions of Department of Corporations Regulation Section 260.140.41
or 260.140.42, as applicable.

SECTION 12.  NO EMPLOYMENT RIGHTS.

     No provision of the Plan, nor any right or Option granted under the Plan, shall be construed
to give any person any right to become, to be treated as an Employee, or to remain in the Service
of the Company. The Company and its Subsidiaries reserve the right to terminate any person’s
Service at any time and for any reason.

SECTION 13.  DURATION AND AMENDMENTS.

     (a) Term of the Plan. The Plan, as set forth herein, shall become effective on the date of
its adoption by the Board of Directors, subject to the approval of the Company’s stockholders. In
the event that the stockholders fail to approve the Plan within twelve (12) months after its
adoption by the Board of Directors, any grants already made shall be null and void, and no
additional grants shall be made after such date. The Plan shall terminate automatically ten (10)
years after its adoption by the Board of Directors and may be terminated on any earlier date
pursuant to Subsection (b) below.

     (b) Right to Amend or Terminate the Plan. The Board of Directors may amend the Plan at any
time and from time to time. Rights and obligations under any right or Option granted before
amendment of the Plan shall not be materially altered, or impaired adversely, by such amendment,
except with consent of the person to whom the right or Option was granted. An amendment of the
Plan shall be subject to the approval of the Company’s stockholders only to the extent required by
applicable laws, regulations or rules including the rules of any applicable exchange.

     (c) Effect of Amendment or Termination. No Shares shall be issued or sold under the Plan
after the termination thereof, except upon exercise of an Option granted prior to such termination.
The termination of the Plan, or any amendment thereof, shall not affect any Shares previously
issued or any Option previously granted under the Plan.

-11-

 

SECTION 14.  EXECUTION.

     To record the adoption of the Plan by the Board of Directors on July 26, 1999, effective on
such date, and the amendment of the Plan effective on April 14, 2003, the Company has caused its
authorized officer to execute the same.

	 	 	 	 	 	 	 
	 	 	ST. FRANCIS MEDICAL	 	 
	 	 	TECHNOLOGIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Henry 	 	 
	 

	 	 	 	 

Henry A. Klyce
	 	 
	 

	 	 	 	President and Chief Executive Officer	 	 

-12-

 

Stock Incentive Plan

Rev. May 2003

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND
QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE
COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.

ST. FRANCIS MEDICAL TECHNOLOGIES, INC.

STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

     St. Francis Medical Technologies, Inc. (the “Company”), hereby grants an Option to purchase
shares of its common stock (“Shares”) to the Optionee named below. The terms and conditions of the
Option are set forth in this cover sheet, in the attachment and in the Company’s Stock Incentive
Plan (the “Plan”).

Date of Grant:   
               
               
               
                
               
               
               
                
               
               
               
                
 

Name of Optionee:    
               
                
               
               
               
                
               
               
               
                
               
      

Optionee’s Social Security Number:
                
               
                
               
               
               
                
               
               
          

Number of Shares Covered by Option:
                
               
               
                
               
               
               
                
               
     

Exercise Price per Share: $ 
                
               
               
                
               
               
               
                
               
               
           

[must be at least 100% fair market value on Date of Grant]

Vesting Start Date:
    
               
                
               
               
               
                
               
               
               
                
               
      

	 	 	 
	          

	 	Check here if Optionee is a 10% owner (so
that exercise price must be 110% of fair
market value and term will not exceed 5
years).
	 
	 	 
	          

	 	Check here if this is the first Option
grant made by the Company to an Optionee
(an “Initial Grant”).
	 
	 

	 	By signing this cover sheet, you agree to all of the terms and conditions described
in the attached Agreement and in the Plan, a copy of which is also attached.

	 	 	 
	Optionee:
	 	 
	 

	 	 
	 

	 	(Signature) 
	 
	 	 
	Company:
	 	 
	 

	 	 
	 

	 	(Signature) 
	 
	 	 
	Title:
	 	 
	 

	 	 

-1-

 

Stock Incentive Plan

Rev. May 2003

St. Francis Medical Technologies, Inc.

Stock Incentive Plan

INCENTIVE STOCK OPTION AGREEMENT

	 	 	 
	Incentive Stock 

Option

	 	This Option is intended to be an incentive stock option
under section 422 of the Internal Revenue Code and will
be interpreted accordingly.
	 
	 	 
	Vesting

	 	Your Option vests over a four-year period as follows:
	 

	 	Your Option will vest with respect to .0684462 percent
(.000684462) of the Shares (rounded to the nearest
whole share) subject to the Option for each full day of
Service from the Vesting Start Date as shown on the
cover sheet; however, if this is an Initial Grant as
indicated on the cover sheet, no part of your Option
will vest until you have performed twelve months of
Service from the Vesting Start Date and, upon completion
of twelve months of Service from the Vesting Start
Date, 25% of your Option will vest. If your Service
has terminated for any reason, vesting of your Option
immediately stops. Notwithstanding the foregoing,
immediately prior to a Change in Control, the Option
shall vest and become exercisable for all of the Shares
other than with respect to a number of Shares equal to
(x) if the Change in Control occurs within twelve months
of the Vesting Start Date, 50% of the total number of
Shares originally covered by your Option; (y) if the
Change in Control occurs on or after the first
anniversary of the Vesting Start Date, 25% of the total
number of Shares originally covered by your Option or
(z) if less than the number of shares determined under
clause (x) or (y), any remaining Shares for which the
Option is not yet exercisable (the “Holdback Shares”).
The Option will continue to vest with respect to any
Holdback Shares as if no Change in Control occurred;
provided; however, that, if your Service is terminated
without Cause following a Change in Control, the Option
shall vest and become exercisable as to all of the
Holdback Shares. “Cause” shall mean (A) a material
failure to perform your duties, other than a failure
resulting from complete or partial incapacity due to
physical or mental illness or impairment, which failure
is not corrected within 15 days after written notice to
you, (B) your gross misconduct or fraud, or (C) your
conviction or entry of a “guilty” plea or plea of “no
contest” to a felony.
	 
	 	 
	 

	 	If you are an exempt employee, you may exercise the
Option at any time prior to vesting. If you are a
non-exempt employee, you may not exercise the Option
until at least six months after the Date of Grant.

-2-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	In
the case of an early exercise prior to vesting, the
Shares that you purchase upon exercise of your Option
will vest according to the schedule described above and
will be subject to the Company’s right to repurchase any
unvested shares at the original exercise price if your
Service terminates. If you exercise before vesting, you
should consider making an 83(b) election. Please see
the attached Tax Summary. The 83(b) election must be
filed within 30 days of the date you exercise.
	 
	 	 
	Term

	 	Your Option will expire in any event at the close of
business at Company headquarters on the day before the
tenth anniversary (fifth anniversary for a 10% owner) of
the Date of Grant, as shown on the cover sheet. (It
will expire earlier if your Service terminates, as
described below.)
	 
	 	 
	Regular Termination

	 	If your Service terminates for any reason except death
or Disability, your Option will expire at the close of
business at Company headquarters on the 90th day after
your termination date. During that 90-day period, you
may exercise that portion of your Option that was vested
on your termination date.
	 
	 	 
	Death

	 	If you die while in Service with the Company, your
Option will expire at the close of business at Company
headquarters on the date six months after the date of
death. During that six-month period, your estate,
legatees or heirs may exercise that portion of your
Option that was vested on the date of death.
	 
	 	 
	Disability

	 	If your Service terminates because of your Disability,
your Option will expire at the close of business at
Company headquarters on the date six months after your
termination date. (However, if your Disability is not
expected to result in death or to last for a continuous
period of at least 12 months, your Option will be
eligible for ISO tax treatment only if it is exercised
within three months following the termination of your
Service.) During that six-month period, you may
exercise that portion of your Option that was vested on
the date of your Disability.
	 
	 	 
	 

	 	“Disability” means that you are unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment.
	 
	 	 
	Leaves of Absence

	 	For purposes of this Option, your Service does not
terminate when you go on a bona fide leave of absence
that was approved by the Company in writing, if the
terms of the leave provide for continued service
crediting, or when continued service crediting is
required by applicable law. However, your Service will
be treated as terminating
	 
	 	 

-3-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	90 days after you went on
leave, unless your right to return to active work is
guaranteed by law or by a contract. Your Service
terminates in any event when the approved leave ends
unless you return to active work immediately, or within
the time guaranteed by law or by a contract. The
Company determines which leaves count for this purpose,
and when your Service terminates for all purposes under
the Plan. The Company also determines the extent to
which you may exercise the vested portion of your Option
during a leave of absence.
	 
	 	 
	Notice of Exercise

	 	When you wish to exercise this Option, you must execute
Exhibit A (and, if exercise is prior to vesting, you
must also execute Exhibits B and D). Your exercise will
be effective when it is received by the Company. If
someone else wants to exercise this Option after your
death, that person must prove to the Company’s
satisfaction that he or she is entitled to do so.
	 
	 	 
	Form of Payment

	 	When you submit Exhibit A, you must include payment of
the Exercise Price for the Shares you are purchasing.
Payment may be made in one (or a combination) of the
following forms:

	 	•	 	Your personal check, a cashier’s check or a money
order.
	 
	 	•	 	Shares which you have owned for at least six months
and which are surrendered to the Company. The value of
the Shares, determined as of the effective date of the
Option exercise, will be applied to the Exercise Price.
	 
	 	•	 	To the extent that a public market for the Shares
exists as determined by the Company, by delivery (on a
form prescribed by the Board) of an irrevocable
direction to a securities broker to sell Shares and to
deliver all or part of the sale proceeds to the Company
in payment of the aggregate Exercise Price.
	 
	 	•	 	Any other form of legal consideration approved by the
Board.

	 	 	 
	Withholding Taxes

	 	You will not be allowed to exercise this Option unless
you make acceptable arrangements to pay any withholding
or other taxes that may be due as a result of the Option
exercise or the sale of Shares acquired upon exercise of
this Option.
	 
	 	 
	Restrictions on
Exercise and Resale

	 	By signing this Agreement, you agree not to exercise
this Option or sell any Shares acquired upon exercise of
this Option at a time when applicable laws, regulations
or Company or underwriter trading policies prohibit
exercise or sale. The Company shall have the right to
designate one or more periods of time, each of which
shall not

-4-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	exceed 180 days in length, during which this
Option shall not be exercisable if the Company
determines (in its sole discretion) that such limitation
on exercise could in any way facilitate a lessening of
any restriction on transfer pursuant to the Securities
Act or any state securities laws with respect to any
issuance of securities by the Company, facilitate the
registration or qualification of any securities by the
Company under the Securities Act or any state securities
laws, or facilitate the perfection of any exemption from
the registration or qualification requirements of the
Securities Act or any applicable state securities laws
for the issuance or transfer of any securities. Such
limitation on exercise shall not alter the vesting
schedule set forth in this Agreement other than to limit
the periods during which this Option shall be
exercisable.
	 
	 	 
	 

	 	If the sale of Shares under the Plan is not registered
under the Securities Act of 1933, as amended (the
“Securities Act”), but an exemption is available which
requires an investment or other representation, you
shall represent and agree at the time of exercise that
the Shares being acquired upon exercise of this Option
are being acquired for investment, and not with a view
to the sale or distribution thereof, and shall make such
other representations as are deemed necessary or
appropriate by the Company and its counsel.
	 
	 	 
	The Company’s
Right of First
Refusal

	 	In the event that you propose to sell, pledge or
otherwise transfer to a third party any Shares acquired
under this Agreement, or any interest in such Shares,
the Company shall have the “Right of First Refusal” with
respect to all (and not less than all) of such Shares.
If you desire to transfer Shares acquired under this
Agreement, you must give a written “Transfer Notice” to
the Company describing fully the proposed transfer,
including the number of Shares proposed to be
transferred, the proposed transfer price and the name
and address of the proposed transferee. The Transfer
Notice shall be signed both by you and by the proposed
transferee and must constitute a binding commitment of
the transferee to purchase the Shares.
	 
	 	 
	 

	 	The Company and its assignees shall have the right to
purchase all, and not less than all, of the Shares on
the terms described in the Transfer Notice (subject,
however, to any change in such terms permitted in the
next paragraph) by delivery of a Notice of Exercise of
the Right of First Refusal within 30 days after the date
when the Transfer Notice was received by the Company.
The Company’s Rights of First Refusal shall be freely
assignable, in whole or in part.
	 
	 	 
	 

	 	If the Company or its assignees fail to exercise its
Right of First Refusal within 30 days after the date
when it received the Transfer Notice, you may, not later
than 60 days following receipt of the

-5-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	Transfer Notice by
the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions
described in the Transfer Notice. Any proposed transfer
on terms and conditions different from those described
in the Transfer Notice, as well as any subsequent
proposed transfer by you, shall again be subject to the
Right of First Refusal and shall require compliance with
the procedure described in the paragraph above. If the
Company exercises its Right of First Refusal, you and
the Company (or its assignees) shall consummate the sale
of the Shares on the terms set forth in the Transfer
Notice.
	 
	 	 
	 

	 	The Company’s Right of First Refusal shall inure to the
benefit of its successors and assigns and shall be
binding upon any transferee of the Shares. The
Company’s Right of First Refusal shall terminate upon
the consummation of the initial public offering of the
Company’s Common Stock.
	 
	 	 
	Transfer of Option

	 	Prior to your death, only you may exercise this Option.
You cannot transfer or assign this Option. For
instance, you may not sell this Option or use it as
security for a loan. If you attempt to do any of these
things, this Option will immediately become invalid.
You may, however, dispose of this Option in your will.
	 
	 	 
	 

	 	
Regardless of any marital property settlement agreement,
the Company is not obligated to honor a Notice of
Exercise from your spouse or former spouse, nor is the
Company obligated to recognize such individual’s
interest in your Option in any other way.
	 
	 	 
	Retention Rights

	 	This Agreement does not give you the right to be
retained by the Company in any capacity. The Company
reserves the right to terminate your Service at any time
and for any reason.
	 
	 	 
	Stockholder Rights

	 	Neither you, nor your estate or heirs, have any rights
as a stockholder of the Company until a certificate for
the Shares acquired upon exercise of this Option has
been issued. No adjustments are made for dividends or
other rights if the applicable record date occurs before
your stock certificate is issued, except as described in
the Plan.
	 
	 	 
	Adjustments

	 	In the event of a stock split, a stock dividend or a
similar change in the Company’s Stock, the number of
Shares covered by this Option and the Exercise Price per
share may be adjusted pursuant to the Plan. Your Option
shall be subject to the terms of the agreement of
merger, liquidation or reorganization in the event the
Company is subject to

-6-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	such corporate activity.
	 
	 	 
	Legends

	 	All certificates representing the Shares issued upon
exercise of this Option shall, where applicable, have
endorsed thereon the following legends:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS
TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH
HOLDER’S PREDECESSOR IN INTEREST. SUCH AGREEMENT
IMPOSES CERTAIN TRANSFER RESTRICTIONS AND GRANTS CERTAIN
REPURCHASE RIGHTS AND RIGHTS OF FIRST REFUSAL TO THE
COMPANY (OR ITS ASSIGNS) UPON THE SALE OF THE SHARES OR
UPON TERMINATION OF SERVICE WITH THE COMPANY. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO
THE SECRETARY OF THE COMPANY BY THE HOLDER OF SHARES
REPRESENTED BY THIS CERTIFICATE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN OPINION
OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL AND
STATE SECURITIES LAWS IS NOT REQUIRED.”

	 	 	 
	Applicable Law

	 	This Agreement will be interpreted and enforced under
the laws of the State of California (without regard to
their choice of law provisions).
	 
	 	 
	The Plan and Other
Agreements

	 	The text of the Plan is incorporated in this Agreement
by reference. Certain capitalized terms used in this
Agreement are defined in the

-7-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	Plan.
	 
	 	 
	 

	 	This Agreement, including its attachments, and the Plan
constitute the entire understanding between you and the
Company regarding this Option. Any prior agreements,
commitments or negotiations concerning this Option are
superseded.

By signing the cover sheet of this Agreement, you agree to all of the terms and
conditions described above and in the Plan. You also acknowledge that you have read
Section 11, “Purchaser’s Investment Representations” of Exhibit A and that you can and
hereby do make the same representations with respect to the grant of this Option.

-8-

 

Stock Incentive Plan

Rev. May 2003

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND
QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE
COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.

ST. FRANCIS MEDICAL TECHNOLOGIES, INC.

STOCK INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

     St. Francis Medical Technologies, Inc. (the “Company”), hereby grants an Option to purchase
shares of its common stock (“Shares”) to the Optionee named below. The terms and conditions of the
Option are set forth in this cover sheet, in the attachment and in the Company’s Stock Incentive
Plan (the “Plan”).

Date of Grant:   
                
                
                
                
                
                
                
                
                
          

Name of Optionee:   
                
                
                
                
                
                
                
                
                

Optionee’s
Social Security Number:                 
                
                
                
                
                
                
    

Number of Shares Covered by Option: 
                
                
                
                
                
                
                

Exercise Price per Share: $ 
                
                
                
                
                
                
                
                
    

Vesting Start Date:   
                
                
                
                
                
                
                
                
                

	 	 	 
	         

	 	Check here if Optionee is a 10% owner (so that exercise
price must be 110% of fair market value and term will
not exceed 5 years).
	 
	 	 
	         

	 	Check here if this is the first Option grant made by
the Company to an Optionee (an “Initial Grant”).
	 
	 	 
	 

	 	By signing this cover sheet, you agree to all of the terms and conditions described
in the attached Agreement and in the Plan, a copy of which is also attached.

	 	 	 
	Optionee:
	 	 
	 

	 	 
	 

	 	 (Signature) 
	 
	 	 
	Company:
	 	 
	 

	 	 
	 

	 	 (Signature) 
	 
	 	 
	Title:
	 	 
	 

	 	 

-1-

 

Stock Incentive Plan

Rev. May 2003

ST. FRANCIS MEDICAL TECHNOLOGIES, INC.

STOCK INCENTIVE PLAN

NONSTATUTORY STOCK OPTION AGREEMENT

	 	 	 
	Nonstatutory Stock 

Option

	 	This Option is not intended to be an incentive stock option
under section 422 of the Internal Revenue Code and will be
interpreted accordingly.
	 
	 	 
	Vesting

	 	Your Option vests over a four-year period as follows: Your
Option will vest with respect to .0684462 percent
(.000684462) of the Shares (rounded to the nearest whole
share) subject to the Option for each full day of Service
from the Vesting Start Date as shown on the cover sheet;
however, if this is an Initial Grant as indicated on the
cover sheet, no part of your Option will vest until you have
performed twelve months of Service from the Vesting Start
Date and, upon completion of twelve months of Service from
the Vesting Start Date, 25% of your Option will vest. If
your Service has terminated for any reason, vesting of your
Option immediately stops. Notwithstanding the foregoing,
immediately prior to a Change in Control, the Option shall
vest and become exercisable for all of the Shares other than
with respect to a number of Shares equal to (x) if the
Change in Control occurs within twelve months of the Vesting
Start Date, 50% of the total number of Shares originally
covered by your Option; (y) if the Change in Control occurs
on or after the first anniversary of the Vesting Start Date,
25% of the total number of Shares originally covered by your
Option or (z) if less than the number of shares determined
under clause (x) or (y), any remaining Shares for which the
Option is not yet exercisable (the “Holdback Shares”). The
Option will continue to vest with respect to any Holdback
Shares as if no Change in Control occurred; provided;
however, that, if your Service is terminated without Cause
following a Change in Control, the Option shall vest and
become exercisable as to all of the Holdback Shares.
“Cause” shall mean (A) a material failure to perform your
duties, other than a failure resulting from complete or
partial incapacity due to physical or mental illness or
impairment, which failure is not corrected within 15 days
after written notice to you, (B) your gross misconduct or
fraud, or (C) your conviction or entry of a “guilty” plea or
plea of “no contest” to a felony.
	 
	 	 
	 

	 	You should note that you may exercise the Option prior to
vesting. In that case, the Shares that you purchase upon
exercise of your Option will be subject to the Company’s
right to repurchase any unvested

-2-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	shares at the original
exercise price if your Service terminates. The shares will
vest according to the schedule described above. Also, if
you exercise before vesting, you should consider making an
83(b) election. Please see the attached Tax Summary. The
83(b) election must be filed within 30 days of the date you
exercise.
	 
	 	 
	Term

	 	Your Option will expire in any event at the close of
business at Company headquarters on the day before the tenth
anniversary of the Date of Grant, as shown on the cover
sheet. (It will expire earlier if your Service terminates,
as described below.)
	 
	 	 
	Regular Termination

	 	If your Service terminates for any reason except death or
Disability, your Option will expire at the close of business
at Company headquarters on the 90th day after your
termination date. During such 90-day period, you may
exercise that portion of your Option that was vested on your
termination date.
	 
	 	 
	Death

	 	If you die while in Service with the Company, your Option
will expire at the close of business at Company headquarters
on the date six months after the date of death. During that
six-month period, your estate, legatees or heirs may
exercise that portion of your Option that was vested on your
date of death.
	 
	 	 
	Disability

	 	If your Service terminates because of your Disability, your
Option will expire at the close of business at Company
headquarters on the date six months after your termination
date. During that six-month period, you may exercise that
portion of your Option that was vested on your date of
Disability.
	 
	 	 
	 

	 	“Disability” means that you are unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment.
	 
	 	 
	Leaves of Absence

	 	For purposes of this Option, your Service does not terminate
when you go on a bona fide leave of absence that was
approved by the Company in writing, if the terms of the
leave provide for continued service crediting, or when
continued service crediting is required by applicable law.
However, your Service will be treated as terminating 90 days
after you went on leave, unless your right to return to work
is guaranteed by law or by a contract. Your service
terminates in any event when the approved leave ends unless
you return to Service immediately or within the time
guaranteed by law or by contract. The Company determines
which leaves count for this purpose, and when your Service
terminates for all purposes under the Plan. The Company
also determines the extent to which you may exercise the

-3-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	vested portion of your Option during a leave of absence.
	 
	 	 
	Notice of Exercise

	 	When you wish to exercise this Option, you must execute
Exhibit A (and if exercise is prior to vesting you must also
execute Exhibits B and D). Your Exercise will be effective
when it is received by the Company. If someone else wants
to exercise this Option after your death, that person must
prove to the Company’s satisfaction that he or she is
entitled to do so.
	 
	 	 
	Form of Payment

	 	When you submit Exhibit A, you must include payment of the
Exercise Price for the Shares you are purchasing. Payment
may be made in one (or a combination) of the following
forms:

	 	•	 	Your personal check, a cashier’s check or a money order.
	 
	 	•	 	Shares which you have owned for six months and which are
surrendered to the Company. The value of the Shares,
determined as of the effective date of the Option exercise,
will be applied to the Exercise Price.
	 
	 	•	 	To the extent that a public market for the Shares exists
as determined by the Company, by delivery (on a form
prescribed by the Board) of an irrevocable direction to a
securities broker to sell Shares and to deliver all or part
of the sale proceeds to the Company in payment of the
aggregate Exercise Price.
	 
	 	•	 	Any other form of legal consideration approved by the
Board.

	 	 	 
	Withholding Taxes

	 	You will not be allowed to exercise this Option unless you
make acceptable arrangements to pay any withholding or other
taxes that may be due as a result of the Option exercise or
the sale of Shares acquired upon exercise of this Option.
	 
	 	 
	Restrictions on
Exercise and Resale

	 	By signing this Agreement, you agree not to exercise this
Option or sell any Shares acquired upon exercise of this
Option at a time when applicable laws, regulations or
Company or underwriter trading policies prohibit exercise or
sale. The Company shall have the right to designate one or
more periods of time, each of which shall not exceed 180
days in length, during which this Option shall not be
exercisable if the Company determines (in its sole
discretion) that such limitation on exercise could in any
way facilitate a lessening of any restriction on transfer
pursuant to the Securities Act or any state securities laws
with respect to any issuance of securities by the Company,
facilitate the registration or qualification of any
securities by the Company under the Securities Act or any
state securities laws, or facilitate the perfection of any
exemption from the registration or

-4-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	qualification
requirements of the Securities Act or any applicable state
securities laws for the issuance or transfer of any
securities. Such limitation on exercise shall not alter the
vesting schedule set forth in this Agreement other than to
limit the periods during which this Option shall be
exercisable.
	 
	 	 
	 

	 	If the sale of Shares under the Plan is not registered under
the Securities Act of 1933, as amended (the “Securities
Act”), but an exemption is available which requires an
investment or other representation, you shall represent and
agree at the time of exercise that the Shares being acquired
upon exercise of this Option are being acquired for
investment, and not with a view to the sale or distribution
thereof, and shall make such other representations as are
deemed necessary or appropriate by the Company and its
counsel.
	 
	 	 
	The Company’s
Right of First
Refusal

	 	In the event that you propose to sell, pledge or otherwise
transfer to a third party any Shares acquired under this
Agreement, or any interest in such Shares, the Company shall
have the “Right of First Refusal” with respect to all (and
not less than all) of such Shares. If you desire to
transfer Shares acquired under this Agreement, you must give
a written “Transfer Notice” to the Company describing fully
the proposed transfer, including the number of Shares
proposed to be transferred, the proposed transfer price and
the name and address of the proposed transferee. The
Transfer Notice shall be signed both by you and by the
proposed transferee and must constitute a binding commitment
of both parties to the transfer of the Shares.
	 
	 	 
	 

	 	The Company and its assignees shall have the right to
purchase all, and not less than all, of the Shares on the
terms described in the Transfer Notice (subject, however, to
any change in such terms permitted in the next paragraph) by
delivery of a notice of exercise of the Right of First
Refusal within 30 days after the date when the Transfer
Notice was received by the Company. The Company’s Right of
First Refusal shall be freely assignable, in whole or in
part.
	 
	 	 
	 

	 	If the Company or its assignees fail to exercise its Right
of First Refusal within 30 days after the date when it
received the Transfer Notice, you may, not later than 60
days following receipt of the Transfer Notice by the
Company, conclude a transfer of the Shares subject to the
Transfer Notice on the terms and conditions described in the
Transfer Notice. Any proposed transfer on terms and
conditions different from those described in the Transfer
Notice, as well as any subsequent proposed transfer by you,
shall again be subject to the Right of First Refusal and
shall require compliance with the procedure described in the
paragraph above. If the Company

-5-

 

Stock Incentive Plan

Rev. May 2003

	 	 	 
	 

	 	exercises its Right of
First Refusal, you and the Company (or its assignees) shall
consummate the sale of the Shares on the terms set forth in
the Transfer Notice.
	 
	 	 
	 

	 	The Company’s Right of First Refusal shall inure to the
benefit of its successors and assigns and shall be binding
upon any transferee of the Shares. The Company’s Right of
First Refusal shall terminate upon the consummation of the
initial public offering of the Company’s Common Stock.
	 
	 	 
	Transfer of Option

	 	Prior to your death, only you may exercise this Option. You
cannot transfer or assign this Option. For instance, you
may not sell this Option or use it as security for a loan.
If you attempt to do any of these things, this Option will
immediately become invalid. You may, however, dispose of
this Option in your will.
	 
	 	 
	 

	 	Regardless of any marital property settlement agreement, the
Company is not obligated to honor a Notice of Exercise from
your spouse or former spouse, nor is the Company obligated
to recognize such individual’s interest in your Option in
any other way.
	 
	 	 
	Retention Rights

	 	This Agreement does not give you the right to be retained by
the Company in any capacity. The Company reserves the right
to terminate your Service at any time and for any reason.
	 
	 	 
	Stockholder Rights

	 	Neither you, nor your estate or heirs, have any rights as a
stockholder of the Company until a certificate for the
Shares acquired upon exercise of this Option has been
issued. No adjustments are made for dividends or other
rights if the applicable record date occurs before your
stock certificate is issued, except as described in the
Plan.
	 
	 	 
	Adjustments

	 	In the event of a stock split, a stock dividend or a similar
change in the Company Stock, the number of Shares covered by
this Option and the Exercise Price per share may be adjusted
pursuant to the Plan. Your Option shall be subject to the
terms of the agreement of merger, liquidation or
reorganization in the event the Company is subject to such
corporate activity.
	 
	 	 
	Legends

	 	All certificates representing the Shares issued upon
exercise of this Option shall, where applicable, have
endorsed thereon the following legends:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE
SUCH SHARES SET FORTH IN AN

-6-

 

Stock Incentive Plan

Rev. May 2003

AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN
INTEREST. SUCH AGREEMENT IMPOSES CERTAIN TRANSFER
RESTRICTIONS AND GRANTS CERTAIN REPURCHASE RIGHTS AND RIGHTS
OF FIRST REFUSAL TO THE COMPANY (OR ITS ASSIGNS) UPON THE
SALE OF THE SHARES OR UPON TERMINATION OF SERVICE WITH THE
COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE
HOLDER OF SHARES REPRESENTED BY THIS CERTIFICATE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED AND
SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR
IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE
SECURITIES LAWS IS NOT REQUIRED.”

	 	 	 
	Applicable Law

	 	This Agreement will be interpreted and enforced under the
laws of the State of California (without regard to their
choice of law provisions).
	 
	 	 
	The Plan and Other
Agreements

	 	The text of the Plan is incorporated in this Agreement by
reference. Certain capitalized terms used in this Agreement
are defined in the Plan.
	 
	 	 
	 

	 	This Agreement and the Plan constitute the entire
understanding between you and the Company regarding this
Option. Any prior agreements, commitments or negotiations
concerning this Option are superseded.

By signing the cover sheet of this Agreement, you agree to all of the terms and
conditions described above and in the Plan. You also acknowledge that you have read
Section 11,

-7-

 

Stock Incentive Plan

Rev. May 2003

“Purchaser’s Investment Representations” of Exhibit A and that you can and hereby do make the
same representations with respect to the grant of this Option.

-8-

 

EXHIBIT A

(to be attached to an

option agreement,

either ISO or NSO)

St. Francis Medical Technologies, Inc. 

Notice of Exercise and

Common Stock Purchase Agreement 

     THIS AGREEMENT is dated as of ___, ___, between St. Francis Medical Technologies,
Inc., a Delaware corporation (the “Company”), and ___
 (“Purchaser”).

W I T N E S S E T H:

     WHEREAS, the Company and Purchaser are parties to that certain ___Incentive ___Nonstatutory
Stock Option Agreement dated as of ___, ___(the “Option Agreement”) pursuant to which the
Company has given to purchaser the right to purchase up to ___shares of its Common Stock
(the “Option Shares”)

     WHEREAS, the Option has vested (become exercisable) with respect to ___of the Option
Shares (the “Vested Shares”) as of the date hereof.

     WHEREAS, the Company desires to issue and Purchaser desires to purchase shares of the Company
as herein described, on the terms and conditions set forth in this Agreement, the Option Agreement
and the St. Francis Medical Technologies, Inc. Stock Incentive Plan (the “Plan”). Certain
capitalized terms used in this Agreement are defined in the Plan.

     NOW, THEREFORE, it is agreed between the parties as follows:

SECTION 1.  PURCHASE OF SHARES.

     (a) Pursuant to the terms of the Option Agreement, Purchaser hereby agrees to purchase from
the Company and the Company agrees to sell and issue to Purchaser ___shares of its common
stock (the “Stock”) for the Exercise Price per share specified in the Option Agreement payable by
personal check, cashier’s check or money order or, if permitted by the Option Agreement, as
follows: ___. At the Closing (as defined below),
payment will be delivered by Purchaser to the Company and in exchange therefor, except as provided
in Section 5 below, the Company will deliver to Purchaser a certificate representing the Stock.

     (b) The closing hereunder (the “Closing”) shall occur at the offices of the Company on
___, ___, or such other time and place as may be designated by the Company (the “Closing
Date”).

-1-

 

SECTION 2.  REPURCHASE OPTION.

     All unvested shares of the Stock purchased by the Purchaser pursuant to this Agreement
(sometimes referred to as the “Repurchase Option Stock”) shall be subject to the following option
(the “Repurchase Option”):

     (a) In the event the Purchaser ceases to be an employee of the Company for any reason, with or
without cause, the Company may exercise the Repurchase Option.

     (b) Purchaser understands that the Stock is being sold in order to induce Purchaser to become
and/or remain associated with the Company and to work diligently for the success of the Company and
that the Repurchase Option Stock will continue to vest in accordance with the schedule set forth in
the Option Agreement. Accordingly, the Company shall have the right at any time within 90 days
after the termination of Purchaser’s Services to purchase from the Purchaser all shares of
Repurchase Option Stock which have not vested in accordance with such schedule. The purchase price
for such unvested shares of Repurchase Option Stock shall be the Exercise Price per share paid by
Purchaser for such shares pursuant to this Agreement (the “Option Price”). The purchase price
shall be paid by certified or cashier’s check or by cancellation of any indebtedness of Purchaser
to the Company.

     (c) Nothing in this Agreement shall be construed as a right by Purchaser to be employed by
Company, or a parent or subsidiary of Company.

SECTION 3.  EXERCISE OF REPURCHASE OPTION.

     The Repurchase Option shall be exercised by written notice signed by an officer of the Company
and delivered or mailed as provided in Section 16 of this Agreement and to the Escrow Agent as
provided in Section 16 of the Joint Escrow Instructions attached as Exhibit B to the Option
Agreement.

SECTION 4.  WAIVER, ASSIGNMENT, EXPIRATION OF REPURCHASE OPTION.

     If the Company waives or fails to exercise the Repurchase Option as to all of the shares
subject thereto, the Company may, in the discretion of its Board of Directors, assign the
Repurchase Option to any other holder or holders of preferred or common stock of the Company in
such proportions as such Board of Directors may determine. In the event of such an assignment, the
assignee shall pay to the Company in cash an amount equal to the fair market value of the
Repurchase Option. The Company shall promptly, prior to the expiration of the 90-day period
referred to in Section 2 above, notify Purchaser of the number of shares subject to the Repurchase
Option assigned to such stockholders and shall notify both the Purchaser and the assignees of the
time, place and date for settlement of such purchase, which must be made within 90 days from the
date of cessation of continuous employment. In the event that the Company and/or such assignees do
not elect to exercise the Repurchase Option as to all or part of the shares subject to it, the
Repurchase Option shall expire as to all shares which the Company and/or such assignees have not
elected to purchase.

-2-

 

SECTION 5.  ESCROW OF SHARES.

     (a) As security for Purchaser’s faithful performance of the terms of this Agreement and to
ensure the availability for delivery of Purchaser’s shares upon exercise of the Repurchase Option
herein provided for, Purchaser agrees at the Closing hereunder, to deliver to and deposit with the
Escrow Agent named in the Joint Escrow Instructions attached to the Option Agreement as Exhibit B,
the certificate or certificates evidencing the Repurchase Option Stock subject to the Repurchase
Option and two Assignments Separate from Certificate duly executed (with date and number of shares
in blank) in the form attached to the Option Agreement as Exhibit D. Such documents are to be held
by the Escrow Agent and delivered by the Escrow Agent pursuant to the Joint Escrow Instructions,
which instructions shall also be delivered to the Escrow Agent at the Closing hereunder.

     (b) Within 30 days after the last day of each successive completed calendar quarter after the
Closing Date, if Purchaser so requests, the Escrow Agent will deliver to Purchaser certificates
representing so many shares of Stock as are no longer subject to the Repurchase Option (less such
shares as have been previously delivered). Ninety days after cessation of Purchaser’s employment
with the Company, the Company will direct the Escrow Agent to deliver to Purchaser a certificate or
certificates representing the number of shares not repurchased by the Company or its assignees
pursuant to exercise of the Repurchase Option (less such shares as have been previously delivered).

SECTION 6.  ADJUSTMENT OF SHARES.

     Subject to the provisions of the Certificate of Incorporation of the Company, if, from time to
time during the term of the Repurchase Option:

     (a) there is any stock dividend or liquidating dividend of cash and/or property, stock split
or other change in the character or amount of any of the outstanding securities of the Company, or

     (b) there is any consolidation, merger or sale of all or substantially all, of the assets of
the Company,

then, in such event, any and all new, substituted or additional securities or other property to
which Purchaser is entitled by reason of Purchaser’s ownership of the shares shall be immediately
subject to such Repurchase Option with the same force and effect as the shares of Repurchase Option
Stock from time to time subject to the Repurchase Option. While the total Option Price shall
remain the same after each such event, the Option Price per share of Repurchase Option Stock upon
exercise of the Repurchase Option shall be appropriately and equitably adjusted as determined by
the Board of Directors of the Company.

SECTION 7.  THE COMPANY’S RIGHT OF FIRST REFUSAL.

     Before any shares of Stock registered in the name of Purchaser and not subject to the
Repurchase Option may be sold or transferred, such shares shall first be offered to the Company as
set forth in the Option Agreement.

-3-

 

SECTION 8.  PURCHASER’S RIGHTS AFTER EXERCISE OF REPURCHASE OPTION OR RIGHT OF FIRST
REFUSAL.

     If the Company makes available, at the time and place and in the amount and form provided in
this Agreement, the consideration for the Stock to be repurchased in accordance with the provisions
of Sections 2 and 7 of this Agreement, then from and after such time the person from whom such
shares are to be repurchased shall no longer have any rights as a holder of such shares (other than
the right to receive payment of such consideration in accordance with this Agreement). Such shares
shall be deemed to have been repurchased in accordance with the applicable provisions hereof,
whether or not the certificate(s) therefor have been delivered as required by this Agreement.

SECTION 9.  TRANSFER BY PURCHASER TO CERTAIN TRUSTS.

     Purchaser shall have the right to transfer all or any portion of Purchaser’s interest in the
shares issued under this Agreement which have been delivered to Purchaser under the provisions of
Section 5 of this Agreement, to a trust established by Purchaser for the benefit of Purchaser,
Purchaser’s spouse or Purchaser’s children, without being subject to the provisions of Section 7
hereof, provided that the trustee on behalf of the trust shall agree in writing to be bound by the
terms and conditions of this Agreement. The transferee shall execute a copy of Exhibit C attached
to the Option Agreement and file the same with the Secretary of the Company.

SECTION 10.  LEGEND OF SHARES.

     All certificates representing the Stock purchased under this Agreement shall, where
applicable, have endorsed thereon the legends set forth in the Option Agreement and any other
legends required by applicable securities laws.

SECTION 11.  PURCHASER’S INVESTMENT REPRESENTATIONS.

     (a) This Agreement is made with Purchaser in reliance upon Purchaser’s representation to the
Company, which by Purchaser’s acceptance hereof Purchaser confirms, that the Stock which Purchaser
will receive will be acquired with Purchaser’s own funds for investment for an indefinite period
for Purchaser’s own account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that Purchaser has no present intention of selling, granting
participation in, or otherwise distributing the same, but subject, nevertheless, to any requirement
of law that the disposition of Purchaser’s property shall at all times be within Purchaser’s
control. By executing this Agreement, Purchaser further represents that Purchaser does not have
any contract, understanding or agreement with any person to sell, transfer, or grant participation,
to such person or to any third person, with respect to any of the Stock.

     (b) Purchaser understands that the Stock will not be registered or qualified under federal or
state securities laws on the ground that the sale provided for in this Agreement is exempt from
registration or qualification under federal or state securities laws and that the

-4-

 

Company’s reliance on such exemption is predicated on Purchaser’s representations set forth
herein.

     (c) Purchaser agrees that in no event will Purchaser make a disposition of any of the Stock
(including a disposition under Section 9 of this Agreement), unless and until (i) Purchaser shall
have notified the Company of the proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition and (ii) Purchaser shall have
furnished the Company with an opinion of counsel satisfactory to the Company to the effect that (A)
such disposition will not require registration or qualification of such Stock under federal or
state securities laws or (B) appropriate action necessary for compliance with the federal or state
securities laws has been taken or (iii) the Company shall have waived, expressly and in writing,
its rights under clauses (i) and (ii) of this section.

     (d) With respect to a transaction occurring prior to such date as the Plan and Stock
thereunder are covered by a valid Form S-8 or similar federal registration statement, this
subsection shall apply unless the transaction is covered by the exemption in California
Corporations Code §25102(o) or a similar broad based exemption. In connection with the investment
representations made herein, Purchaser represents that Purchaser is able to fend for himself or
herself in the transactions contemplated by this Agreement, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and risks of Purchaser’s
investment, has the ability to bear the economic risks of Purchaser’s investment and has been
furnished with and has had access to such information as would be made available in the form of a
registration statement together with such additional information as is necessary to verify the
accuracy of the information supplied and to have all questions answered by the Company.

     (e) Purchaser understands that if the Company does not register with the Securities and
Exchange Commission pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) or if a registration statement covering the Stock (or a filing pursuant to the
exemption from registration under Regulation A of the Securities Act of 1933) under the Securities
Act of 1933 is not in effect when Purchaser desires to sell the Stock, Purchaser may be required to
hold the Stock for an indeterminate period. Purchaser also acknowledges that Purchaser understands
that any sale of the Stock which might be made by Purchaser in reliance upon Rule 144 under the
Securities Act of 1933 may be made only in limited amounts in accordance with the terms and
conditions of that Rule.

SECTION 12.  ASSISTANCE TO PURCHASER UNDER RULE 144.

     The Company covenants and agrees that (a) at all times after it first becomes subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, it will use its best efforts to
comply with the current public information requirements of Rule 144(c)(1) under the Securities Act
of 1933, and that if prior to becoming subject to such reporting requirements an over-the-counter
market develops for the Stock, it will make publicly available the information required by Rule
144(c)(2); (b) it will furnish Purchaser, upon request, with all information required for the
preparation and filing of Form 144; and (c) it will on a timely basis use its best efforts to file
all reports required to be filed and make all disclosures, including disclosures of materially
adverse information, required to permit Purchaser to make the required representations in Form 144.

-5-

 

SECTION 13.  NO DUTY TO TRANSFER IN VIOLATION HEREUNDER.

     The Company shall not be required (a) to transfer on its books any shares of Stock of the
Company which shall have been sold or transferred in violation of any of the provisions set forth
in this Agreement or (b) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been so transferred.

SECTION 14.  RIGHTS OF PURCHASER.

     Except as otherwise provided herein, Purchaser shall, during the term of this Agreement,
exercise all rights and privileges of a stockholder of the Company with respect to the Stock.

SECTION 15.  OTHER NECESSARY ACTIONS.

     The parties agree to execute such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this Agreement.

SECTION 16.  NOTICE.

     Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon the earliest of personal delivery, receipt or the third full day following
deposit in the United States Post Office with postage and fees prepaid, addressed to the other
party hereto at the address last known or at such other address as such party may designate by 10
days’ advance written notice to the other party hereto.

SECTION 17.  SUCCESSORS AND ASSIGNS.

     This Agreement shall inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon Purchaser and Purchaser’s
heirs, executors, administrators, successors and assigns. The failure of the Company in any
instance to exercise the Repurchase Option or rights of first offer described herein shall not
constitute a waiver of any other Repurchase Option or right of first offer that may subsequently
arise under the provisions of this Agreement. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of
a like or different nature.

SECTION 18.  APPLICABLE LAW.

     This Agreement shall be governed by, and construed in accordance with, the laws of the State
of California, as such laws are applied to contracts entered into and performed in such state.

-6-

 

SECTION 19.  NO STATE QUALIFICATION.

     THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR
25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.

SECTION 20.  NO ORAL MODIFICATION.

     No modification of this Agreement shall be valid unless made in writing and signed by the
parties hereto.

SECTION 21.  ENTIRE AGREEMENT.

     This Agreement and the Option Agreement constitute the entire complete and final agreement
between the parties hereto with regard to the subject matter hereof.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 	 	 
	St. Francis Medical Technologies, Inc.	 	PURCHASER	 	 
	 
	 	 	 	 	 	 
	By
	 	 	 	 	 	 
	 

	 	 

	 	 

	 	 
	Name:
	 	 	 	 	 	 
	 

	 	 

	 	 

	 	 
	 
	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 
	 

	 	 

	 	 

	 	 

-7-

 

EXHIBIT B

Joint Escrow Instructions 

___, ___

President

St. Francis Medical Technologies, Inc.

960 Atlantic Ave, Suite 102

Alameda, CA 94501

Dear Sir or Madam:

     As Escrow Agent for both St. Francis Medical Technologies, Inc. (the “Company”), and
___ (“Purchaser”), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Common Stock Purchase Agreement (the
“Agreement”) of even date herewith, to which a copy of these Joint Escrow Instructions is attached
as Exhibit B to a certain Stock Option Agreement dated as of
___, ___ (“Option
Agreement”), in accordance with the following instructions:

     1. In the event the Company shall elect to exercise the Repurchase Option set forth in the
Agreement, the Company shall give to Purchaser and you a written notice as provided in the
Agreement. Purchaser and the Company hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice, including prompt delivery of stock certificates.

     2. At the closing, you are directed (a) to date the stock assignment form or forms necessary
for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to
deliver same, together with the certificate or certificates evidencing the shares to be
transferred, to the Company against the simultaneous delivery to you of the purchase price (by
certified or bank cashier’s check) for the number of shares being purchased pursuant to the
exercise of the Repurchase Option.

     3. Purchaser irrevocably authorizes the Company to deposit with you any certificates
evidencing shares to be held by you hereunder and any additions and substitutions to said shares as
defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as
Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to such
securities all documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated. Subject to the provisions of this Section 3,
Purchaser shall exercise all rights and privileges, including but not limited to, the right to vote
and to receive dividends (if any), of a stockholder of the Company while the shares are held by
you.

     4. In accordance with the terms of Section 5 of the Agreement, you may from time to time
deliver to Purchaser a certificate or certificates representing so many shares as are no longer
subject to the Repurchase Option.

     5. This escrow shall terminate upon the release of all shares held under the terms and
provisions hereof.

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     6. If at the time of termination of this escrow you should have in your possession any
documents, securities or other property belonging to Purchaser, you shall deliver all of same to
Purchaser and shall be discharged from all further obligations hereunder.

     7. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed
by all of the parties hereto.

     8. You shall be obligated only for the performance of such duties as are specifically set
forth herein and may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed by you to be genuine and to have been signed or presented by the
proper party or parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact of Purchaser while acting in good faith and in the
exercise of your own good judgment, and any act done or omitted by you pursuant to the advice of
your own attorneys shall be conclusive evidence of such good faith.

     9. You are hereby expressly authorized to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation, excepting only orders or process of courts of
law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case you obey or comply with any such order, judgment or decree of any court, you
shall not be liable to any of the parties hereto or to any other person, firm or corporation by
reason of such compliance, notwithstanding any such order, judgment or decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.

     10. You shall not be liable in any respect on account of the identity, authority or rights of
the parties executing or delivering or purporting to execute or deliver the Agreement or any
documents or papers deposited or called for hereunder.

     11. You shall not be liable for the outlawing of any rights under any statute of limitations
with respect to these Joint Escrow Instructions or any documents deposited with you.

     12. You shall be entitled to employ such legal counsel and other experts as you may deem
necessary properly to advise you in connection with your obligations hereunder and may rely upon
the advice of such counsel.

     13. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be
President of the Company or if you shall resign by written notice of each party. In the event of
any such termination, the Company shall appoint any officer of the Company as successor Escrow
Agent.

     14. If you reasonably require other or further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in
furnishing such instruments.

     15. It is understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the securities held by you hereunder, you are authorized
and directed to retain in your possession without liability to anyone all or any part of said
securities until such dispute shall have been settled either by mutual written agreement of the
parties

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concerned or by a final order, decree or judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.

     16. Any notice required or permitted hereunder shall be given in writing and shall be deemed
effectively given upon personal delivery or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to each of the other parties
thereunto entitled.

     17. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose
of said Joint Escrow Instructions; you do not become a party to the Agreement.

     18. This instrument shall be governed by and construed in accordance with the laws of the
State of California (irrespective of its choice of law provisions).

     19. This instrument shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	St. Francis Medical Technologies, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 

	 	 
	ESCROW AGENT:	 	PURCHASER:	 	 
	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	Kevin Sidow
	 	 	 	 	 	 
	President
	 	 	 	 	 	 

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EXHIBIT C

Acknowledgment of and Agreement to be Bound

By the Stock Option Agreement and Common Stock Purchase Agreement of

St. Francis Medical Technologies, Inc. 

     The undersigned, as transferee of shares of St. Francis Medical Technologies, Inc., hereby
acknowledges that he or she has read and reviewed the terms of the Stock Option Agreement and
Common Stock Purchase Agreement of St. Francis Medical Technologies, Inc. and hereby agrees to be
bound by the terms and conditions thereof, as if the undersigned had executed said Agreement as an
original party thereto.

     Dated:                                         .

By                                         

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EXHIBIT D

ASSIGNMENT SEPARATE FROM CERTIFICATE

     FOR
VALUE RECEIVED ___ hereby sells, assigns and transfers unto
___
(___) shares of the Common Stock of St. Francis Medical Technologies, Inc., a Delaware
corporation (the “Company“), standing in ___ name on the books of the Company represented by
Certificate No. ___ herewith and hereby irrevocably constitutes and appoints
___ Attorney to transfer said stock on the books of the Company with full power of
substitution in the premises.

     Dated:                                         .

                                        

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NOTICE TO EMPLOYEES AND CONSULTANTS

WHO PURCHASE COMPANY STOCK

RE: INTERNAL REVENUE CODE SECTION 83(b) ELECTIONS

     This memorandum briefly describes certain aspects of Internal Revenue Code section 83 and
section 83(b) elections as they exist under current law. The following is a general summary of the
tax consequences of section 83(b) elections for your information. This summary does not cover the
income tax or alternative minimum tax consequences of the exercise of incentive stock options or
the sale of shares purchased upon exercise of an incentive stock option.

     The effect of making a section 83(b) election is that it permits the employee or consultant to
include in his or her gross income, in his or her taxable year in which unvested shares (shares
subject to a repurchase agreement) are transferred, the excess, if any, of (i) the fair market
value of such shares at the time of transfer (determined without regard to restrictions other than
those which will never lapse), over (ii) the amount (if any) paid for such shares. By making the
election, subsequent appreciation in the value of the shares generally will be taxed as a capital
gain, rather than as compensation, and thus taxed at a lower maximum tax rate. Also, appreciation
prior to vesting will not be taxed until the shares are sold. Finally, such subsequent
appreciation may be deferred if transfer occurs in a tax-free reorganization or may go untaxed
altogether if a stepped-up basis results from transfer by reason of death. However, if the shares
are forfeited, the employee or consultant who made the election can only deduct a loss to the
extent the amount received (if any) on forfeiture is less than the amount paid (if any) for such
shares. Such an employee or consultant will be precluded from recovering the tax paid with respect
to any reported compensation income. Moreover, any loss recognized will generally be a capital
loss which can only offset capital gains plus $3,000 of ordinary income ($1,500 in the case of
married individuals filing a separate return).

     In the absence of an election, the employee or consultant who receives unvested shares does
not recognize any income until such shares vest. In the taxable year in which any shares vest, the
employee or consultant will recognize compensation income equal to the excess, if any, of (i) the
fair market value of the vested shares on the vesting date, over (ii) the amount (if any) paid for
such shares. If the shares are forfeited the employee or consultant will recognize ordinary loss
to the extent the amount received on forfeiture is less than the amount paid for such shares.

     The election under section 83(b) must be made not later than 30 days after the date of
transfer of the shares to the employee or consultant. Elections are irrevocable, and the IRS
will not allow late elections. The election is to be filed with the Internal Revenue Service
Center with which the employee or consultant files his or her return. An election under section
83(b) for federal tax purposes is also deemed to cause a similar election for California tax
purposes. No filing is required to be made with the California Franchise Tax Board at the time of
the transfer if similar treatment under California and federal tax law is desired. Consultants or
employees located outside California should seek local tax advice.

     Each filing should be made by certified mail with the sender’s receipt postmarked at the time
of mailing. Also, one copy of the election must be filed with the Company. Finally, one copy of

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the election must be submitted with the employee’s federal and California income tax returns
for the taxable year in which the shares are transferred. Although the election must be made
within 30 days of the date of transfer of the shares pursuant to the purchaser’s purchase
agreement, the tax, if any, arising out of the election need not be paid until the employee or
consultant files his or her tax return for the tax year of transfer (except to the extent that
withholding taxes or estimated taxes are payable).

     Please note that item 8 of the 83(b) election is the per share fair market value which must be
determined by the Company’s board of directors.

          THE TAX LAWS ARE COMPLICATED AND SUBJECT TO FREQUENT CHANGE, AND EACH INDIVIDUAL’S FINANCIAL
SITUATION IS DIFFERENT. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR BEFORE EXERCISING YOUR OPTIONS AND
MAKING ANY 83(b) ELECTIONS.

Rev. April 2003

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	Internal Revenue Service Center

	 	Election Under Section 83(b) of the Internal Revenue Code of
1986

Gentlemen: I hereby elect under section 83(b) of the Internal Revenue Code of 1986 to include in
gross income any excess of fair market value over purchase price with respect to the transfer of
the property described below:

	 	 	 	 	 	 	 	 	 
	1.

	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	2.

	 	Address:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	3.	 	Social Security Number: ___-__-____	 	 
	 
	 	 	 	 	 	 	 	 
	4.	 	Tax Year of Election: Calendar Year of ______.	 	 
	 
	 	 	 	 	 	 	 	 
	5.	 	Description of Property:	 	_______________ shares of Common Stock in St. Francis Medical
Technologies, Inc., a Delaware corporation.
	 
	 	 	 	 	 	 	 	 
	6.	 	Date of Property Transfer: ___________________	 	 

7. Nature of Property Restrictions: Property is subject to St. Francis Medical Technologies,
Inc.’s right to repurchase the stock at the undersigned’s original purchase price if the
undersigned ceases to be associated with St. Francis Medical Technologies, Inc., which right will
generally lapse ratably over a four-year period.

8. Fair
Market Value at the Time of Transfer: $___ per share for an aggregate of
$___.
The Fair Market Value at the time of transfer was determined without regard to any lapse
restrictions as defined in section 1.83-3(i) of the Income Tax Regulations.

9. Amount
Paid for Property: $___ per share for an aggregate of $___.

10. A copy of this election has been furnished to St. Francis Medical Technologies, Inc., the
person for whom the services are performed.

Sincerely,

	 	 	 	 	 
	 

Name

	 	 

Date

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