Document:

exv10w2

 

Exhibit 10.2

Topspin Medical, Inc.

(the “Corporation”)

2003 Stock Option Plan-Israel

	1.	 	Name. This plan, as amended from time to time, shall be known as the
“Topspin Medical Inc. 2003 Israeli Stock Option Plan” (the “Plan”).
	 
	2.	 	Definitions. As used in this Plan, the following words and phrases shall
have the meanings indicated:

	 	2.1.	 	“Affiliate” shall mean an affiliate of the Corporation which is an “employing
company” within the meaning of Section 102(a) of the Ordinance.
	 
	 	2.2.	 	“Board” shall mean the Board of Directors of the Corporation.
	 
	 	2.3.	 	“Cause” shall mean any of the following resulting from an act or omission of
Grantee: (a) fraud, embezzlement or felony or similar act; (b) failure to substantially
perform duties as an employee or to abide by the general policies of the Corporation
applicable to all employees (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (c) an act of moral turpitude, or
any similar act, to the extent that such act causes injury to the reputation of the
Corporation; (d) any act or omission which in the reasonable opinion of the Corporation
could be financially injurious to the Corporation or injurious to the business
reputation of the Corporation; or (e) any other act constituting cause under any
employment agreement between the Grantee and the Corporation.
	 
	 	2.4.	 	“Committee” shall mean a committee, pursuant to Section 4 hereinafter,
established or authorized by the Board to administer the Plan.
	 
	 	2.5.	 	“Controlling Shareholder” shall have the meaning ascribed to it in Section
32(9) of the Ordinance.
	 
	 	2.6.	 	“Date of Grant” shall mean as determined by the Committee, (i) the date as of
which the Committee approves a grant or (ii) such other date as may be specified by the
Committee in the Option Agreement.
	 
	 	2.7.	 	“Disability” shall mean a Grantee’s inability to perform his duties with the
Corporation or any Affiliate by reason of any medically determinable physical or mental
impairment, as determined by a physician selected by the Grantee and acceptable to the
Corporation.
	 
	 	2.8.	 	“Employee” shall mean a person who is employed by the Corporation or an
Affiliate, including an individual who is serving as a director or an Office Holder,
but excluding a Controlling Shareholder.
	 
	 	2.9.	 	“Exchange Act” shall mean the US Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
	 
	 	2.10.	 	“Exercise Price” shall mean the exercise price for each share of Common
Stock covered by an Option.
	 
	 	2.11.	 	“Expiration Date” shall mean the date upon which an Option shall expire as
set forth in Section 7.5 of the Plan.
	 
	 	2.12.	 	“Fair Market Value” shall mean as of any date, the value of a share of Stock
determined as follows: (i) if the Stock is listed on any established stock exchange or
a national market system, including without limitation the NASDAQ National Market
system, or the NASDAQ SmallCap Market of the NASDAQ Stock Market,

 

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	 	 	 	the Fair Market Value shall be the closing sales price for such Stock (or the
closing bid, if no sales were reported), as quoted on such exchange or system
for the last market trading day prior to time of determination, as reported
in the Wall Street Journal, or such other source as the Committee deems
reliable. Without derogating from the foregoing and solely for the purpose of
determining the tax liability pursuant to Section 102(b)(3) of the Ordinance,
if at the Date of Grant the Stock is listed on any established stock exchange
or a national market system or if the Stock will be registered for trading
within ninety (90) days following the Date of Grant, the Fair Market Value of
a share of Stock at the Date of Grant shall be determined in accordance with
the average value of the Stock over the thirty (30) trading day period
preceding the Date of Grant or over the thirty (30) trading day period
following the date of registration for trading, as the case may be; (ii) if
the Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value shall be the mean between the
high bid and low asked prices for the Stock on the last market trading day
prior to the date of determination; or (iii) in the absence of an established
market for the Stock, the Fair Market Value thereof shall be determined in
good faith by the Committee.
	 
	 	2.13.	 	“Grantee” shall mean a person who receives a grant of Options under the
Plan.
	 
	 	2.14.	 	“Initial Public Offering” or “IPO” shall mean the underwritten initial
public offering of the Stock.
	 
	 	2.15.	 	“ Non-Employee” shall mean a consultant, adviser, service provider,
Controlling Shareholder or any other person providing services to the Corporation or an
Affiliate who is not an Employee.
	 
	 	2.16.	 	“Office Holder” shall have the meaning ascribed to it in the Israeli
Companies Law, 1999, as now in effect or as hereafter amended.
	 
	 	2.17.	 	“Option” shall mean an option to purchase one or more shares of the Stock,
pursuant to the Plan.
	 
	 	2.18.	 	“102 Option” shall mean an Option granted to an Employee pursuant to Section
102 of the Ordinance.
	 
	 	2.19.	 	“Approved 102 Option” shall mean a 102 Option granted pursuant to Section
102(b) of the Ordinance and held in trust by a Trustee.
	 
	 	2.20.	 	“Unapproved 102 Option” shall mean a 102 Option granted pursuant to Section
102(c) of the Ordinance and not held in trust by a Trustee.
	 
	 	2.21.	 	“Capital Gains Option (CGO)” shall mean an Approved 102 Option elected and
designated by the Corporation to qualify under the capital gain tax treatment in
accordance with the provisions of Section 102(b)(2) of the Ordinance.
	 
	 	2.22.	 	“Ordinary Income Option (OIO)” shall mean an Approved 102 Option elected and
designated by the Corporation to qualify under the ordinary income tax treatment in
accordance with the provisions of Section 102(b)(1) of the Ordinance.
	 
	 	2.23.	 	“3(9) Option” shall mean an Option granted to a Non-Employee pursuant to
Section 3(9) of the Ordinance.
	 
	 	2.24.	 	“Option Agreement” shall mean the stock option agreement between the
Corporation and a Grantee that evidences and sets out the terms and conditions of an
Option.
	 
	 	2.25.	 	“Ordinance” shall mean the Israeli Income Tax Ordinance [New Version], 1961,
as now in effect or as hereafter amended.
	 
	 	2.26.	 	“Person” shall mean an individual, corporation, partnership, joint venture,
trust or

 

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	 	 	 	unincorporated organization.
	 
	 	2.27.	 	“Retirement” shall mean a Grantee’s retirement pursuant to applicable law or
in accordance with the terms of any tax-qualified retirement plan maintained by the
Corporation or any Affiliate in which the Grantee participates.
	 
	 	2.28.	 	“Section 102” means section 102 of the Ordinance as now in effect or as
hereafter amended.
	 
	 	2.29.	 	“Stock” shall mean the Common Stock of the Corporation, bearing a nominal
value of US$ 0.001.
	 
	 	2.30.	 	“Trustee” shall mean a trustee nominated by the Committee and approved by
the Israeli Tax authorities pursuant to Section 102.
	 
	 	2.31.	 	“Underlying Shares” shall mean the shares of Stock received upon exercise of
an Option and any other shares of Stock received by virtue of the Stock received upon
exercise of an Option.

	3.	 	Purpose, Types of Options; Construction.

	 	3.1.	 	The purpose and intent of the Plan is to provide incentives to Employees, and
Non-Employees of the Corporation and the Affiliates, by providing them with
opportunities to purchase Stock of the Corporation, pursuant to the Plan approved by
the Board.
	 
	 	3.2.	 	The Plan is intended to enable the Corporation to issue Options pursuant and
subject to the provisions of Section 102 and any regulations, rules, orders or
procedures promulgated thereunder; and Section 3(9) of the Ordinance.
	 
	 	3.3.	 	To the extent any provision herein conflicts with the conditions of any
relevant tax law or regulation which are relied upon for tax relief in respect of a
particular Option granted to a Grantee, the provisions of said law or regulation shall
prevail over those of the Plan and the Committee is empowered hereunder to interpret
and enforce the said prevailing provisions.

	4.	 	Administration

	 	4.1.	 	The Plan will be administered by the Board or by a Committee, which, if
appointed, will consist of such number of Directors of the Corporation as may be fixed,
from time to time, by the Board. If a Committee is not appointed, the term Committee,
whenever used herein, shall mean the Board. The Board shall appoint the members of the
Committee and may, from time to time, remove members from, or add members to, the
Committee and shall fill vacancies in the Committee however caused.
	 
	 	4.2.	 	Subject to applicable law, the Committee shall have the authority in its
discretion to administer the Plan and to exercise all the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation:

	 	4.2.1.	 	the authority to grant Options;
	 
	 	4.2.2.	 	to designate the type of Option to be granted;
	 
	 	4.2.3.	 	to make an election as to the type of Approved 102 Option to
be granted
	 
	 	4.2.4.	 	to determine the Exercise Price of each Option;
	 
	 	4.2.5.	 	to determine the Persons to whom, and the time or times at
which Options shall be granted;

 

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	 	4.2.6.	 	to determine the number of shares of Common Stock to be
covered by each Option;
	 
	 	4.2.7.	 	subject to Section 2.12 above, to determine the Fair Market
Value of the Stock;
	 
	 	4.2.8.	 	to accelerate the right of a Grantee to exercise, in whole
or in part, any previously granted Option;
	 
	 	4.2.9.	 	to prescribe, amend and rescind rules and regulations
relating to the Plan;
	 
	 	4.2.10.	 	to determine the terms and provisions of the Option
Agreements (which need not be identical), and to cancel or suspend
Options, as necessary; and
	 
	 	4.2.11.	 	to make all other determinations deemed necessary or
advisable for the administration of the Plan, including to adjust the
terms of the Plan or any Option Agreement so as to reflect: (i) changes
in applicable laws; and (ii) the laws of other jurisdictions within
which the Corporation wishes to grant Options.

	 	4.3.	 	The Committee shall select one of its members as its Chairman and shall hold
its meetings at such times and places as it shall determine. Actions taken by a
majority of the members of the Committee, at a meeting at which a majority of its
members is present, or acts reduced to or approved in writing by all members of the
Committee, shall be the valid acts of the Committee.
	 
	 	4.4.	 	Any member of the Committee shall be eligible to receive Options under the
Plan while serving on the Committee, unless otherwise specified herein. No person shall
be eligible to be a member of the Committee if that person’s membership would prevent
the Plan from complying with exemptions from Section 16 set forth in Rule 16b-3
promulgated under the Exchange Act, if applicable to the Corporation. At such time as
any class of equity securities of the Corporation is registered pursuant to Section 12
of the Exchange Act, the Committee shall consist of at least two (2) individuals, each
of whom is a Non-Employee Director as that term is defined in said Rule 16b-3.
	 
	 	4.5.	 	No member of the Board or of the Committee shall be liable for any act or
determination made in good faith with respect to the Plan or any Option granted
thereunder.
	 
	 	4.6.	 	The interpretation and construction by the Committee of any provision of the
Plan or of any Option Agreement thereunder shall be final and conclusive unless
otherwise determined by the Board.
	 
	 	4.7.	 	Without limiting the foregoing, the Committee may, with the consent of the
Grantee and subject to the Board’s approval, from time to time cancel all or any
portion of any Option then subject to exercise, and the Corporation’s obligation in
respect of such Option may be discharged by (i) payment to the Grantee of an amount in
cash equal to the excess, if any, of the Fair Market Value of the canceled Stock at the
date of such cancellation over the aggregate Exercise Price of such Stock, (ii) the
issuance or transfer to the Grantee of Stock of the Corporation with a Fair Market
Value at the date of such transfer equal to any such excess, or (iii) a combination of
cash and shares with a combined value equal to any such excess, all as determined by
the Committee in its sole discretion.

	5.	 	Reserved Shares. The maximum number of shares of Stock reserved for the
grant of Options under the Plan shall be 9,012,810, subject to adjustments as provided in
Section 13 below. Such Stock may,

 

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	 	 	in whole or in part, be authorized but unissued Stock. Until termination of the Plan, the
Corporation shall at all times reserve a sufficient number of shares of Stock to meet the
requirements of the Plan. If any Options, for any reason, expire, are canceled or are
forfeited without having been exercised in full, the Stock allocable to the unexercised,
canceled or terminated portion of such Options shall (unless the Plan shall have been
terminated) become available for subsequent grants of Options under the Plan. Any of such
Stock which may remain unissued and which is not subject to outstanding Options at the
termination of the Plan shall cease to be reserved for the purpose of the Plan.
	6.	 	Eligible Grantees.

	 	6.1.	 	3(9) Options may be granted to Non-Employees of the Corporation and of any
Affiliate.
	 
	 	6.2.	 	102 Stock Options may be granted only to Employees of the Corporation or an
Affiliate.
	 
	 	6.3.	 	Anything in this Plan to the contrary notwithstanding, all grants of Options
to directors and Office Holders shall be authorized and implemented in accordance with
the provisions of applicable law, as in effect from time to time.
	 
	 	6.4.	 	The grant of an Option to a Grantee hereunder, shall neither entitle such
Grantee to participate, nor disqualify him from participating, in any other grant of
Options pursuant to this Plan or any other stock option plan of the Corporation.

	7.	 	Terms and Conditions of Options. Each Option granted pursuant to the Plan
shall be evidenced by an Option Agreement between the Corporation and the Grantee, in such
form and containing such terms and conditions as the Committee shall from time to time
approve, which Option Agreement shall comply with and be subject to the following terms and
conditions, unless otherwise specifically provided in such Option Agreement.

	 	7.1.	 	Number of Shares. Each Option Agreement shall state the number of
 shares of Stock to which the Option relates, subject to Section 13 below.
	 
	 	7.2.	 	Type of Option. Each Option Agreement shall specifically state the
type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(9)
Option).
	 
	 	7.3.	 	Exercise Price. Each Option Agreement shall state the Exercise Price.
The Exercise Price shall be determined by the Committee in its sole and absolute
discretion; provided, however, that such Exercise Price shall not be less than the par
value of the Stock into which such Option is exercisable. The Exercise Price shall be
subject to adjustment as provided in Section 13 hereof.
	 
	 	7.4.	 	Vesting of Options. Subject to Section 14 hereof, each Option
Agreement shall provide the vesting schedule for the Option as determined by the
Committee, provided, that, the Committee shall have the authority to accelerate or
otherwise change the vesting of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. Unless otherwise stated
in the Option Agreement, Options shall vest and become exercisable according to the
following schedule: twenty-five percent (25%) of the Stock covered by the Option on the
first anniversary of the Date of Grant of such Option and six and one-quarter percent
(6.25%) of the Stock covered by the Option at the end of each subsequent quarter over
the course of the following three years.; provided, however, that the Committee, in its
absolute discretion, may, on such terms and conditions as it may determine to be
appropriate, accelerate or otherwise change the time at which such Option or any
portion thereof shall vest and be exercised. The Option may contain

 

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	 	 	 	performance goals and measurements, and the provisions with respect to any
Option need not be the same as the provisions with respect to any other
Option.
	 
	 	7.5.	 	Expiration Date. The Options to the extent not previously exercised,
shall terminate forthwith upon the earlier of: (i) ten (10) years from the Date of
Grant of the Options; and (ii) the expiration of any extended period in any of the
events set forth in Sections 7.6, 7.7 and 7.8 below.
	 
	 	7.6.	 	Termination.

	 	7.6.1.	 	Except as provided in this Section 7.6 and in Section 7.7
hereunder, an Option may not be exercised unless the Grantee is then
employed by or providing services to the Corporation or an Affiliate
since the Date of Grant of the Option and until the date of exercise. In
the event that the employment or service of a Grantee shall terminate
(other than by reason of death, Disability or Retirement), all Options
of such Grantee that are vested and exercisable at the time of such
termination may, unless earlier terminated in accordance with their
terms, be exercised within ninety (90) days after the date of such
termination (or such different period as the Committee shall prescribe);
provided, however, that if the Corporation or an affiliate shall
terminate the Grantee’s employment or service for Cause, all Options
theretofore granted to such Grantee shall, to the extent not theretofore
exercised, terminate on the date of such termination unless otherwise
determined by the Committee.
	 
	 	7.6.2.	 	In addition, in the case of a Grantee whose principal
employer is an Affiliate, the Grantee’s employment or service shall be
deemed to be terminated for purposes of this Section 7.6 as of the date
on which such Affiliate ceases to be an affiliate of the Corporation.
	 
	 	7.6.3.	 	A notice of termination of employment or service shall be
deemed to constitute termination of employment or service.

	 	7.7.	 	Death or Disability of Grantee. If a Grantee shall die while employed
by, or providing services to the Corporation or an Affiliate, or if the Grantee’s
employment or service shall terminate by reason of Disability, all Options theretofore
granted to such Grantee (to the extent vested and exercisable at the date of
termination) may, unless earlier terminated in accordance with their terms, be
exercised by the Grantee or by the Grantee’s estate or by a Person who acquired the
right to exercise such Options by bequest or inheritance or otherwise by result of
death or Disability of the Grantee, at any time within one (1) year after the death or
Disability of the Grantee. In the event that an Option granted hereunder shall be
exercised by the legal representatives of a deceased or former Grantee, written notice
of such exercise shall be accompanied by a certified copy of letters testamentary or
equivalent proof of the right of such legal representative to exercise such Option.
	 
	 	7.8.	 	Retirement of Grantee. In the event that the employment of a Grantee
shall terminate on account of such Grantee’s Retirement, all Options of such Grantee
that are vested and exercisable at the time of such Retirement may, unless earlier
terminated in accordance with their terms, be exercised at any time within one (1) year
after the date of such Retirement.
	 
	 	7.9.	 	Extensions. Notwithstanding the foregoing provisions of Sections 7.6,
7.7 and 7.8 the Committee may provide, either at the time an Option is granted or
thereafter, that such Option may be exercised after the periods provided for in
Sections 7.6, 7.7 and 7.8 but in no event beyond the Expiration Date.
	 
	 	7.10.	 	Other Provisions. The Option Agreements shall contain such other
terms and

 

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	 	 	 	conditions not inconsistent with the Plan as the Committee may determine.

	8.	 	Designation of Options Pursuant to Section 102

	 	8.1.	 	The Corporation may designate Options granted to Employees pursuant to
Section 102 as Unapproved 102 Options or Approved 102 Options.
	 
	 	8.2.	 	The grant of Approved 102 Options shall be made under the Plan adopted by the
Board as described in Section 17 and shall be conditioned upon the approval of the Plan
by the Israeli Tax Authorities.
	 
	 	8.3.	 	An Approved 102 Option may either be classified as a Capital Gains Option
(CGO) or as an Ordinary Income Option (OIO).
	 
	 	8.4.	 	The Corporation’s election of the type of Approved 102 Options as CGO or OIO
granted to Employees (the “Election”), shall be appropriately filed with the Israeli
Tax Authorities before the Date of Grant of an Approved 102 Option. Such Election shall
become effective beginning the first Date of Grant of an Approved 102 Option under the
Plan and shall remain in effect with respect to all Approved 102 Options granted
following such Election until the end of the year following the year during which the
Corporation first granted Approved 102 Options. The Election shall obligate the
Corporation to grant only the type of Approved 102 Option it has elected, and shall
apply to all Grantees who were granted Approved 102 Options during the period indicated
herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For
the avoidance of doubt, such Election shall not prevent the Corporation from granting
Unapproved 102 Options simultaneously.
	 
	 	8.5.	 	All Approved 102 Options must be held in trust by a Trustee, as described in
Section 10 below.
	 
	 	8.6.	 	For the avoidance of doubt, the designation of Unapproved 102 Options and
Approved 102 Options shall be subject to the terms and conditions set forth in Section
102 of the Ordinance and the regulations promulgated thereunder.
	 
	 	8.7.	 	With regards to Approved 102 Options, the provisions of the Plan and/or the
Option Agreement shall be subject to the provisions of Section 102 and the Israeli Tax
Assessing Officer’s permit, and the said provisions and permit shall be deemed an
integral part of the Plan and of the Option Agreement. Any provision of Section 102
and/or the said permit which is necessary in order to receive and/or to keep any tax
benefit pursuant to Section 102, which is not expressly specified in the Plan or the
Option Agreement, shall be considered binding upon the Corporation and the Grantees.
	 
	 	8.8.	 	Options granted pursuant to this Section 8 are subject to the general terms
and conditions specified in Section 7 hereof; and other provisions of the Plan, except
for said provisions of the Plan applying to Options under a different tax law or
regulation.

	9.	 	3(9) Options
	 
	 	 	Options granted pursuant to this Section 9 may be granted to Non-Employees only and are
intended to constitute 3(9) Options and shall be subject to the general terms and conditions
specified in Section 7 hereof and other provisions of the Plan, except for said provisions
of the Plan applying to Options under a different tax law or regulation.
	 
	10.	 	Issuance of Stock in Trust.

	 	10.1.	 	Approved 102 Options granted under the Plan and all Underlying Shares issued
upon

 

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	 	 	 	exercise of an Approved 102 Option and/or other stock received subsequently
following any realization of rights, including without limitation bonus
 shares, shall be issued to the Trustee, and held by the Trustee in trust for
the benefit of the Grantee in respect of whom such Approved 102 Option was
granted for the period of time as required by Section 102 and the regulations
promulgated thereunder (the “Holding Period”). In the event the requirements
for Approved 102 Options are not met, the Approved 102 Options may be treated
as Unapproved 102 Options, all in accordance with the provisions of Section
102 and regulations promulgated thereunder.
	 
	 	10.2.	 	All certificates representing Stock issued to the Trustee hereunder shall be
deposited with the Trustee, and shall be held by the Trustee until such time that such
Stock is released from the trust as herein provided.
	 
	 	10.3.	 	With respect to any Approved 102 Option, unless the provisions of Section
102 and any rules or regulations or orders or procedures promulgated thereunder provide
otherwise, a Grantee shall not sell or release from trust any Stock received upon the
exercise of an Approved 102 Option and/or any stock received subsequently following any
realization of rights, including without limitation, bonus shares, until the lapse of
the Holding Period required under Section 102 of the Ordinance. Notwithstanding the
above, if any such sale or release occurs during the Holding Period, the sanctions
under Section 102 of the Ordinance and under any rules or regulation or orders or
procedures promulgated thereunder shall apply to and shall be borne by such Grantee.
	 
	 	10.4.	 	Subject to the terms of Sections 8 and 10 the following shall apply:

	 	10.4.1.	 	Upon the written request of any Grantee, the Trustee shall
release from the trust the Approved 102 Options or the Underlying Shares
issued, on behalf of such Grantee, by executing and delivering to the
Corporation such instrument(s) as the Corporation may require, giving
due notice of such release to such Grantee.
	 
	 	10.4.2.	 	Alternatively, upon the written instructions of the Grantee
to sell any Underlying Shares issued upon exercise of Approved 102
Options, the Trustee shall use its best efforts to effect such sale and
shall transfer such Underlying Shares to the purchaser thereof
concurrently with the receipt, or after having made suitable
arrangements to secure the payment of the proceeds, of the purchase
price in such transaction. The Trustee shall withhold from such proceeds
any and all taxes required to be paid in respect of such sale, shall
remit the amount so withheld to the appropriate tax authorities and
shall pay the balance thereof directly to the Grantee, reporting to such
Grantee and to the Corporation the amount so withheld and paid to said
tax authorities.

	 	10.5.	 	Notwithstanding anything to the contrary herein, the Trustee shall not
release any Approved 102 Options which were not already exercised into Underlying
Shares by the Grantee or release any Underlying Shares issued upon exercise of Approved
102 Options, prior to the full payment of the Grantee’s tax liabilities arising from
the grant and/or exercise of the Approved 102 Options so granted.
	 
	 	10.6.	 	Upon receipt of an Approved 102 Option, the Grantee will sign an undertaking
releasing the Trustee from any liability in respect of any action or decision duly
taken and bona fide executed in relation with the Plan, any Approved 102 Option or
Underlying Share granted to the Grantee thereunder.

 

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	11.	 	Exercise of Options

	 	11.1.	 	Options shall be exercisable pursuant to the terms under which they were
awarded and subject to the terms and conditions of the Plan.
	 
	 	11.2.	 	The exercise of an Option shall be made by a written notice of exercise
delivered by the Grantee , in such form and method as may be determined by the
Corporation and when applicable, by the Trustee in accordance with the requirements of
Section 102, to the Corporation at its principal executive office, specifying the
number of shares of Stock to be purchased and accompanied by the payment of the
Exercise Price, and containing such other terms and conditions as the Committee shall
prescribe from time to time.

	12.	 	Voting and Dividend Rights

	 	12.1.	 	All Stock issued upon the exercise of Options granted hereunder shall
entitle the Grantee thereof to receive dividends with respect thereto, subject to the
Corporation’s By Laws, Certificate of Incorporation and subject to any applicable
taxation on distribution of dividends, and when applicable subject to the provisions of
Section 102 and the rules, regulations or orders promulgated thereunder. For so long as
Stock issued to the Trustee on behalf of the Grantee is held in trust, cash dividends
or dividends in kind (i.e. other than stock dividends) paid or distributed with respect
thereto shall be remitted directly to the Grantee, subject to the provisions of Section
102 and the rules, regulations or orders promulgated thereunder.
	 
	 	12.2.	 	At such time as Stock may be transferred to the Grantee by the Trustee in
accordance with the Ordinance and this Plan, the Grantee shall grant an irrevocable
power of attorney to the person or persons designated by the Board and representing all
Grantees, to participate and vote the Stock issued upon the exercise of Options at the
general assemblies of the Corporation, including assemblies for the appointment of
directors. If the Corporation requires him to do so, the Grantee will sign the said
power of attorney at the time Options are granted to the Grantee in the wording
presented to him by the Corporation. Such power of attorney shall be in effect until
such time as the Corporation shall effect an IPO. Without derogating from the above,
with respect to Approved 102 Options, for so long as Stock shall be held by the Trustee
on behalf of a Grantee, such Stock shall be voted by the Trustee on any issue or
resolution brought before the stockholders of the Corporation, by himself or by proxy,
subject to the provisions of Section 102 and any rules, regulations or orders
promulgated thereunder, in the same proportion as the votes of the other stockholders
of the Corporation voting on such issue or resolution, .

	13.	 	Adjustment Upon Changes in Capitalization. Subject to any required action
by the shareholders of the Corporation, the number of shares of Stock covered by each
outstanding Option, and the number of shares of Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as the Exercise
Price, shall be proportionately adjusted for any increase or decrease in the number of
            shares of issued Stock resulting from a stock split, reverse stock split, combination or
reclassification of the Stock or the payment of a stock dividend (bonus shares) with respect
to the Stock or any other increase or decrease in the number of issued shares of Stock
effected without receipt of consideration by the Corporation; provided,
however, that conversion of any convertible securities of the Corporation shall not
be deemed to have been “effected without receipt of consideration”. Such adjustment shall be
made by the Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided

 

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	 	 	herein, no issuance by the Corporation of stock of any class, or securities convertible into
stock of any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or shares of Stock subject to an Option or the Exercise Price.

	14.	 	Liquidation or M&A. In the event of the proposed dissolution or liquidation
of the Corporation or the proposed consolidation or the acquisition of the Corporation by
means of merger (with or into another entity), or in the event of any other reclassification
of the Corporation’s securities or any other form of corporate reorganization in which the
outstanding shares of the Corporation are exchanged for securities or other consideration
issued, or caused to be issued, by the acquiring company or its subsidiary, or in the event
of the sale of all or substantially all of the assets of the Corporation, the Committee
shall notify each Grantee at least fifteen (15) days prior to such proposed action. To the
extent it has not been previously exercised, each Option shall terminate immediately prior
to the consummation of such proposed action (for avoidance of doubt, all options which have
not yet been vested at that time shall also terminate at that time). However, in the event
of the proposed consolidation or the merger of the Corporation with or into another
corporation, the Committee may, at its absolute discretion and without obligation to, agree
that instead of such termination: (i) each unexercised Option, if possible, shall be assumed
or an equivalent option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation; or (ii) the Corporation shall pay to the Grantee
such an amount equivalent to the valuation of such Grantee’s unexercised Options (on an as
converted basis) at that time.

	15.	 	Non-Transferability and Other Limitations

	 	15.1.	 	No Option shall be assignable or transferable by the Grantee to whom granted
otherwise than by will or the laws of descent and distribution, and an Option may be
exercised during the lifetime of the Grantee only by such Grantee or by such Grantee’s
guardian or legal representative. The terms of such Option shall be binding upon the
beneficiaries, executors, administrators, heirs and successors of such Grantee.
	 
	 	15.2.	 	Unless otherwise determined by the Committee, until such time as the
Corporation shall complete an IPO, a Grantee shall not have the right to sell Stock
issued upon the exercise of an Option within six (6) months and one day of the date of
exercise of such Option or issuance of such Stock.
	 
	 	15.3.	 	As long as Options and/or Stock are held by the Trustee on behalf of the
Grantee, all rights of the Grantee over the Stock are personal, can not be transferred,
assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent
and distribution.
	 
	 	15.4.	 	No Stock purchasable hereunder that was not fully paid for shall be
assignable or transferable by the Grantee. In addition, and without derogating from the
rights and powers of the Committee to provide otherwise, until the consummation of an
IPO, a Grantee, or the Trustee on his behalf, shall sell, assign, transfer, pledge,
hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber, all
or any part of the Stock owned by him (“Transfer”) only subject to the provisions of
this Section 15, including the rights of first refusal of certain stockholders of the
Corporation, in accordance with the Stockholders Agreement among the Corporation and
its stockholders, dated December 9, 2002, as may be amended from time to time.
	 
	 	15.5.	 	Any proposed Transfer not made in conformance with this Section 15 shall be
null and void, shall not be recorded on the books of the Corporation and shall not be
recognized by the Corporation.
	 
	 	15.6.	 	The right of first refusal shall not apply to: transfers to family members
of the Grantee or descendants; provided that such family members of the Grantee or

 

11

	 	 	 	descendants shall have assumed the obligations of the Grantee under this
Section 15 with respect to subsequent transfers. In addition, such rights
shall not apply to stock sold in an IPO.
	 
	 	15.7.	 	If, prior to the closing of an IPO: (i) all or substantially all of the
Stock of the Corporation is to be sold; or (ii) upon a merger or reorganization or the
like, the Stock of the Corporation, or any class thereof, are to be exchanged for
securities of another corporation then the Grantee or any Person that the Stock was
transferred to or the Trustee shall be obliged to sell or exchange, as the case may be,
the Stock held by them, in accordance with the instructions then issued by the Board,
whose determination shall be final and binding.
	 
	 	15.8.	 	The Grantee acknowledges that in the event the Corporation’s shares shall be
registered for trading in any public market, the Grantee’s right to sell the Stock may
be subject to certain limitations (including a lock-up period), as will be requested by
the Corporation or its underwriters; and the Grantee unconditionally agrees and accepts
any such limitations.

	16.	 	Amendment of the Plan. Subject to applicable laws, the Board may, at any
time and from time to time, terminate or amend the Plan in any respect. In no event may any
action of the Corporation alter or impair the rights of a Grantee, without his consent,
under any Option previously granted to him.
	 
	17.	 	Terms of the Plan. The Plan shall take effect upon its adoption by the
Board and shall terminate on the tenth (10th) anniversary of such date.
Notwithstanding the foregoing, in the event that approval of the Plan by the stockholders of
the Corporation is required under applicable law, in connection with the application of
certain tax treatment or pursuant to applicable stock exchange rules or regulations, such
approval shall be obtained within the time required under the applicable law.
	 
	18.	 	Tax Consequences.

	 	18.1.	 	All tax consequences arising from the grant or exercise of any Option, from
the payment for, or the subsequent disposition of, Stock covered thereby or from any
other event or act (of the Corporation and/or its Affiliates, the Trustee or the
Grantee) hereunder, shall be borne solely by the Grantee, and the Grantee shall
indemnify the Corporation and/or its Affiliates and/or the Trustee and hold them
harmless against and from any and all liability for any such tax or interest or penalty
thereon, including without limitation, liabilities relating to the necessity to
withhold, or to have withheld, any such tax from any payment made to the Grantee.
	 
	 	18.2.	 	The Committee and/or the Trustee shall not be required to release any Stock
certificate to a Grantee until all required payments have been fully made.
	 
	 	18.3.	 	To the extent provided by the terms of an Option Agreement, the Grantee may
satisfy any tax withholding obligation relating to the exercise or acquisition of Stock
under an Option by any of the following means (in addition to the Corporation’s right
to withhold from any compensation paid to the Grantee by the Corporation) or by a
combination of such means: (i) tendering a cash payment; (ii) subject to the
Committee’s approval on the payment date, authorizing the Corporation to withhold Stock
from the Stock otherwise issuable to the Grantee as a result of the exercise or
acquisition of Stock under the Option in an amount not to exceed the minimum amount of
tax required to be withheld by law; or (iii) subject to Committee approval on the
payment date, delivering to the Corporation owned and unencumbered Stock; provided that
Stock acquired on exercise of Options have been held for at least 6 months from the
date of exercise.
	 
	 	18.4.	 	With respect to Unapproved 102 Option, if the Grantee ceases to be employed
by the

 

12

	 	 	 	Corporation or any Affiliate, the Grantee shall extend to the Corporation
and/or its Affiliate a security or guarantee for the payment of tax due at the
time of sale of Stock, all in accordance with the provisions of Section 102
and the rules, regulation or orders promulgated thereunder.

	 	19.	 	Multiple Agreements.
	 
	 	 	 	The Corporation has allocated and/or is entitled to allocate Options and Stock to other
employees and other Persons, and the Grantee shall have no claim regarding such allocations,
their quantity, the relationship among them and between them and the other Stock in the
Corporation, exercising of the Options or any matter related to or stemming from them.
	 
	 	20.	 	Continuance of Employment or Hired Services
	 
	 	 	 	Neither the Plan nor the grant of Option or Stock hereunder shall impose any obligation on
the Corporation or an Affiliate to continue the engagement of the Grantee, and nothing in
the Plan or in any Option or Stock granted pursuant thereto shall confer upon any Grantee
any right to continue being engaged by the Corporation or an Affiliate, or restrict the
right of the Corporation or an Affiliate to terminate such engagement at any time.
	 
	 	21.	 	Governing Law and Jurisdiction. The Plan and all instruments issued
thereunder or in connection therewith, shall be governed by, and interpreted in accordance
with, the laws of the State of Israel. The competent courts in Tel Aviv shall have sole and
exclusive jurisdiction over any dispute with regard to any controversy or claim arising
under, out of, or in connection with this Plan, its validity, its interpretation, its
execution or any breach or claimed breach thereof.
	 
	 	22.	 	Application of Funds. The proceeds received by the Corporation from the
issuance of Stock pursuant to Options granted under the Plan will be used for general
corporate purposes of the Corporation.
	 
	 	23.	 	Government Regulations. The Plan, and the granting and exercise of Options
hereunder, and the obligation of the Corporation to sell and deliver Stock under such
Options, shall be subject to all applicable laws, rules, and regulations, whether of the
State of Israel or of the United States or any other State having jurisdiction over the
Corporation and the Grantee, including the registration of the Stock pursuant to the United
States Securities Act of 1933, and the Ordinance and to such approvals by any governmental
agencies or national securities exchanges as may be required. Nothing herein shall be deemed
to require the Corporation to register the Stock under the securities laws of any
jurisdiction.
	 
	 	24.	 	Non-Exclusivity of the Plan. The adoption of the Plan by the Board shall
not be construed as amending, modifying or rescinding any previously approved incentive
arrangement or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation, the granting
of stock options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
	 
	 	 	 	For the avoidance of doubt, prior grant of options to Grantees of the Corporation under
their employment agreements, and not in the framework of any previous option plan, shall not
be deemed an approved incentive arrangement for the purpose of this Section.exv10w3

 

Exhibit 10.3

Option Agreement

This option agreement (“Agreement”) is effective as of ___, ___(the “Date of Grant”),
by and between ___(“Optionee”) and Topspin Medical, Inc. (the “Corporation”).

Under the Topspin Medical Inc. 2003 Israeli Stock Option Plan (“Plan”) (a copy of which is attached
hereto as Exhibit A), the Corporation hereby grants to the Optionee options to purchase such number
of shares of Common Stock of the Corporation par value US$0.001 each as set forth below (“Options”)
pursuant and subject to the terms and provisions set forth in the Plan and as provided herein.

All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Plan.

Notwithstanding any other provision of this Agreement or the Plan, it is hereby clarified that the
grant of Option pursuant to this Agreement is conditioned upon the approval of the Tel Aviv Stock
Exchange of the registration to trade of the shares of common stock of TopSpin into which the
Options are exercisable (the “Shares”), and the provisions of this Agreement and the Grant of Stock
to the Optionee will be entered into force and effect only after the Corporation provides Optionee
with written notice that the Tel Aviv Stock Exchange approved the registration to trade of the
Shares. If such approval will not be obtained until 60 days after the Date of Grant this Agreement
shall become null and void, and Optionee shall have no claim against the Corporation, its
affiliates or any of their directors, officers and shareholders with respect to the Options or the
underlying Shares.

	1.	 	Terms and Conditions of Options

	 	 	 
	Number of Options:

	 	                    

Each Option shall be exercisable for one (1) share of
Common Stock of the Corporation par value US$0.001
each.
	 
	 	 
	Exercise Price:

	 	US $                      per share.
	 
	 	 
	Type of Options:

	 	o Approved 102 Options:
	 

	 	     o Capital Gain Options (CGO);
	 

	 	     o Ordinary Income Options (OIO)
	 

	 	o Unapproved 102 Options
	 

	 	o 3(9) Options

	 	 	 	 	 
	Vesting Schedule:

	 	·
	 	The Options shall vest over a period of 4 years
commencing on ___(the “Commencement Date”), in
the following manner:

 

 

	 	 	 	 	 
	 

	 	§
	 	___Options at the end of one year following
the Commencement Date.
	 

	 	§
	 	___Options at the end of each quarter
following the end of one year following the
Commencement Date.

	2.	 	Exercise of Options
	 
	 	 	The exercise of the Options shall be by delivery by the Optionee to the Corporation at its
principle executive office of a written notice of exercise in the form attached hereto as
Exhibit B, specifying inter alia the number of shares of Stock to be purchased and
accompanied by the payment of the Exercise Price.
	 
	 	 	Options may be exercised only to purchase whole shares of Stock (the “Shares”), and in no
case may a fraction of a Share be purchased. If any fractional Share would be deliverable
upon exercise, such fraction shall be rounded up one-half or less, or otherwise rounded
down, to the nearest whole number.
	 
	 	 	The Corporation shall not be obligated to issue any Shares upon the exercise of an Option
if such issuance, in the opinion of the Corporation, might constitute a violation by the
Corporation of any provision of law.
	 
	3.	 	Other Provisions

	 	3.1	 	All other terms and conditions, including terms and conditions of
expiration and termination of the Options, voting rights and adjustments, which are
set forth in the Plan, shall apply to the Options. Notwithstanding any other
provision of this Agreement or the Plan, it is hereby clarified the issuance of the
Options and the Shares, their holding and transfer, are subject to the provisions of
any applicable law, including, without limitation, the lock up periods imposed
pursuant the provisions of the Securities Law, 1968.
	 
	 	3.2	 	Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Agreement in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Agreement and fully understands all
provisions of the Agreement, the provisions of Section 102 of the Israeli Income Tax
Ordinance [New Version] 1961 as amended and all rules, regulations and orders
promulgated thereunder and the tax route applicable to the Options granted to
him/her.
	 
	 	3.3	 	Optionee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board or the Committee upon any question arising
under the Plan or this Agreement. Optionee further

 

 

	 	 	 	agrees to notify the Corporation upon any change in the residence address
indicated below.
	 	3.4	 	Optionee hereby acknowledges and confirms that he agrees to be bound by all
terms and conditions of the trust agreements by and among the Corporation, TopSpin
Medical (Israel) Ltd. and the Trustee, copies of which are attached hereto as Exhibit
C.
	 
	 	3.5	 	The Optionee shall regard the information in this Agreement and its
exhibits attached hereto as confidential information and the Optionee shall not
reveal their contents to anyone except when required by law or for the purpose of
gaining legal or tax advice.
	 
	 	3.6	 	Subject to the provisions of the Plan, to which this Agreement is subject,
this Agreement, together with the exhibits hereto, constitute the entire agreement
between the Optionee and the Corporation with respect to Options granted hereunder,
and supersedes all prior agreements, understandings and arrangements, oral or
written, between the Optionee and the Corporation with respect to the subject matter
hereof.
	 
	 	3.7	 	The Options provided for herein are granted pursuant to the Plan and said
Options and this Agreement are in all respects governed by the Plan and subject to
all of the terms and provisions of the Plan. Any interpretation of this Agreement
will be made in accordance with the Plan. In the event there is any contradiction
between the provisions of this Agreement and the Plan, the provisions of the Plan
will prevail.
	 
	 	3.8	 	The Plan and this Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties hereof.
	 
	 	3.9	 	All notices or other communications given or made hereunder shall be in
writing and shall be delivered or mailed by registered mail or delivered by email or
facsimile with written confirmation of receipt to the Optionee and/or to the
Corporation at the addresses shown below, or at such other place as the Corporation
may designate by written notice to the Optionee.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first above
written.

	 	 	 
	 	 	 
	Optionee

	 	Topspin Medical, Inc.
	 

	 	By:
	 
	 	 
	Address:
	 	 
	 
	 	 
	 	 	 
	 
	 	 
	 	 	 
	 
	 	 
	 	 	 

 

 

Exhibit A

The Plan

 

 

Exhibit B

Notice of Exercise

Exercise of Option The undersigned (the “Optionee”) hereby elects to exercise Optionee’s
Option to purchase                     shares of Common Stock par value US$ 0.001 each of TopSpin Medical,
Inc. (hereinafter the “Corporation” and the “Exercised Shares”) pursuant to the Topspin Medical,
Inc. 2003 Israeli Stock Option Plan (the “Plan”) and the Option Agreement dated                     ,
(the “Option Agreement”).

All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the
Plan.

Delivery of Payment – Optionee herewith delivers to the Corporation the full Exercise Price
for the Exercised Shares, as set forth in the Option Agreement.

Representations of Optionee — Optionee acknowledges that Optionee has received, read and
understood the Plan, the Option Agreement and the trust agreements by and among the Corporation,
TopSpin Medical (Israel) Ltd. and the Trustee and agrees to abide by and be bound by their terms
and conditions. The Optionee further represents that in exercising the Option, the Optionee hereby
confirms and acknowledges that (i) the Exercised Shares are being acquired solely for the account
of the undersigned and not as a nominee for any other party, or for investment, and not with a view
to, or intention of, or otherwise for resale in connection with, any distribution; (ii) neither the
offer or sale of the Exercised Shares, nor the Exercised Shares themselves, have been registered
under the Securities Act of 1933, as amended, (the “Act”), or registered or qualified under the
applicable securities laws of any state or other jurisdiction, and that the Exercised Shares are
being sold to the Optionee by reason of and in reliance upon a specific exemption from the
registration provisions of the Act, and exemptions from registration or qualification provisions of
such applicable state or other jurisdiction securities laws which depend upon, among other things,
the bona fide nature of the investment intent as expressed herein and the truth and accuracy of the
representations and warranties of the Optionee set forth herein; and (iii) that the Optionee will
not offer, sell or otherwise dispose of the Exercised Shares except under circumstances that will
not result in a violation of the Act or any state securities laws and that the certificates
representing the Exercised Shares may bear a legend noting such restrictions.

Tax Consequences – Any tax consequences and/or future payment and/or costs arising from the
grant or exercise of any Option, from the payment for Shares covered thereby or from any other
event or act (of the Corporation and/or its Affiliates and the Trustee or the Optionee), hereunder,
shall be borne solely by the Optionee. The Corporation and/or its Affiliates, and/or the Trustee
shall withhold taxes according to the requirements under the applicable laws, rules, and
regulations, including the withholding of taxes at source. Furthermore, the Optionee shall agree to
indemnify the Corporation and/or its Affiliates and/or the Trustee and hold them harmless against
and from any and all liabilities for any such tax or interest or penalty thereon,

 

 

including without limitation, liabilities relating to the necessity to withhold, or to have
withheld, any such tax from any payment made to the Optionee.

Submitted on                     by

OPTIONEE

                                        

Signature

                                        

Print Name

Address:                                         

 

 

Exhibit C

Trust Agreements

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