Exhibit 10.2
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE NXSTAGE MEDICAL, INC.
1999 STOCK OPTION AND GRANT PLAN
FOR GRANTS PRIOR TO SEPTEMBER 15, 2005
NAME OF OPTIONEE: _______ (the "Optionee")
NO. OF OPTION SHARES: _______ Shares of Common Stock
GRANT DATE: _______ (the "Grant Date")
EXPIRATION DATE: _______ (the "Expiration Date")
OPTION EXERCISE PRICE/SHARE: $______ (the "Option Exercise Price")
Pursuant to the NxSTAGE MEDICAL, INC., 1999 Stock Option and Grant Plan
(the "Plan"), NxSTAGE MEDICAL, INC., a Delaware corporation (together with all
successors thereto, the "Company"), hereby grants to the Optionee, who is an
employee of the Company or any of its Subsidiaries, an option (the "Stock
Option") to purchase on or prior to the Expiration Date, or such earlier date as
is specified herein, all or any part of the number of shares of Common Stock,
par value $0.001 per share ("Common Stock"), of the Company indicated above (the
"Option Shares," and such shares once issued shall be referred to as the "Issued
Shares"), at the Option Exercise Price, subject to the terms and conditions set
forth in this Incentive Stock Option Agreement (this "Agreement") and in the
Plan. This Stock Option is intended to qualify as an "incentive stock option" as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). To the extent that any portion of the Stock Option
does not so qualify, it shall be deemed a non-qualified Stock Option.
1. DEFINITIONS. For the purposes of this Incentive Stock Option Agreement
(this "Agreement"), the following terms shall have the following respective
meanings. All capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Plan.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
An "Affiliate" of any Person shall mean a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the first mentioned Person. A Person shall be deemed
to control another Person if such first Person possesses directly or indirectly
the power to direct, or cause the direction of, the management and policies of
the second Person, whether through the ownership of voting securities, by
contract or otherwise.
"Bankruptcy" shall mean (i) the filing of a voluntary petition under
any bankruptcy or insolvency law, or a petition for the appointment of a
receiver or the making of an assignment for the benefit of creditors, with
respect to the Optionee or any Permitted Transferee, or (ii) the Optionee or any
Permitted Transferee being subjected involuntarily to such a petition or
assignment or to an attachment or other legal or equitable interest with respect
to the Optionee's assets, which involuntary petition or assignment or attachment
is not discharged
within 60 days after its date, and (iii) the Optionee or any Permitted
Transferee being subject to a transfer of the Stock Option or the Issued Shares
by operation of law, except by reason of death.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean a vote of the Board of Directors of the Company or
its successor entity as the case may be, resolving that the Optionee should be
dismissed as a result of (i) the commission of any act by an Optionee
constituting financial dishonesty against the Company (which act would be
chargeable as a crime under applicable law); (ii) an Optionee's engaging in any
other act of dishonesty, fraud, intentional misrepresentation, moral turpitude,
illegality or harassment which, as determined in good faith by the Board, would:
(A) materially adversely affect the business or the reputation of the Company
with its current or prospective customers, suppliers, lenders and/or other third
parties with whom it does or might do business; or (B) negligently expose the
Company to a risk of civil or criminal legal damages, liabilities or penalties;
(iii) the repeated failure by an Optionee to follow the directives of the
Company's chief executive officer or Board or (iv) an Optionee's inadequate
performance of his or her duties to the Company which inadequate performance is
not cured within 30 days after the Company has given written notice to such
Optionee specifying the inadequate performance in reasonable detail and
demanding its cure.
"Committee" shall mean the Board or a committee of the Board then
responsible for administration of the Plan at the relevant time.
"Common Stock" shall mean the Company's Common Stock, par value $0.001
per share, together with any shares into which Common Stock may be converted or
exchanged, as provided above and herein.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Good Reason" shall mean the occurrence of any of the following
events: (i) the Optionee's being subject to illegal harassment for which the
Company is responsible; (ii) a material, comprehensive and adverse change in the
Optionee's job description, responsibilities or direct support staff size; (iii)
a reduction of more than 15% in the Optionee's earnings from his or her earnings
in the previous fiscal year, except for across-the-board salary reductions
similarly affecting all or substantially all management employees and reductions
related to the Optionee's job performance; or (iii) the relocation of the office
at which the Optionee is principally employed to a location more than fifty (50)
miles from such office.
"Initial Public Offering" shall mean the consummation of the first
fully underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4 or S-8 or their
then equivalents, covering the offer and sale by the Company of its equity
securities.
"Permitted Transferees" shall mean any of the following to whom the
Optionee may transfer Issued Shares hereunder: the Optionee's spouse, children
(natural or adopted), stepchildren or a trust for their sole benefit of which
the Optionee is the settlor; provided, however, that any such trust does not
require or permit distribution of any Issued Shares during the term of this
Agreement unless subject to its terms.
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"Person" shall mean any individual, corporation, partnership (limited
or general), limited liability Company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Sale Event" shall mean, regardless of form thereof, (i) the
dissolution or liquidation of the Company, (ii) the sale of all or substantially
all of the assets of the Company on a consolidated basis to an unrelated person
or entity, (iii) a merger, reorganization or consolidation in which the
outstanding shares of Company's capital stock are converted into or exchanged
for a different kind of securities of the successor entity and the holders of
the Company's outstanding voting power immediately prior to such transaction do
not own a majority of the outstanding voting power of the successor entity
immediately upon completion of such transaction, or (iv) the sale of all of the
outstanding stock of the Company to an unrelated person or entity.
"Service Relationship" shall mean any relationship as an employee,
part-time employee, director or consultant of the Company or any Subsidiary of
the Company such that, for example, a Service Relationship shall be deemed to
continue without interruption in the event the Optionee's status changes from
full-time employee to part-time employee or consultant.
"Subsidiary" shall mean any corporation or other entity (other than
the Company) in any unbroken chain of corporations or other entities beginning
with the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing more than 50 percent of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
2. VESTING AND EXERCISABILITY.
(a) This Option is fully exercisable as of the Date of Grant;
provided, however, that this Option may not be exercised as to any shares after
the expiration of ten (10) years from the Date of Grant.
(b) Except as set forth below and in Section 6, and subject to the
determination of the Committee, in its sole discretion to accelerate the vesting
schedule hereunder, this Stock Option shall be vested and exercisable with
respect to 100% of the Option Shares accordingly: (1)twenty-five percent 25% on
__________ and (2)seventy-five percent (75%) at the rate of one thirty-sixth
(1/36th) per month over the three (3) years thereafter. Vesting calculations
shall be rounded up to the whole share. All unvested shares shall be subject to
the Company's Right of Repurchase set forth in Section 9 below.
Notwithstanding anything herein to the contrary, but without limitation of
Section 6, in the event that this Stock Option is assumed or continued by the
Company or its successor entity in the sole discretion of the parties to a Sale
Event and thereafter remains in effect following such Sale Event as contemplated
by Section 6, then this Stock Option shall be deemed vested and exercisable in
full upon the date on which the Optionee's employment with the Company and its
subsidiaries or successor entity terminates if (i) such termination occurs
within 12 months of such Sale Event and (ii) such termination is by the Company
without Cause or by the Optionee for Good Reason.
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(c) In the event that the Optionee's Service Relationship with the
Company and its Subsidiaries terminates for any reason or under any
circumstances, including the Optionee's resignation, retirement or termination
by the Company, upon the Optionee's death or disability (as defined in Section
422(c)(6) of the Code, or for any other reason, regardless of the circumstances
thereof, this Stock Option may thereafter be exercised, to the extent it was
vested on such date of such termination, until the date specified in Section
2(d) below. Any portion of the Stock Option that is not vested on the date of
termination of the Service Relationship shall immediately expire and be null and
void.
(d) Subject to the provisions of Section 6 below, once any portion of
this Stock Option becomes vested, it shall continue to be vested by the Optionee
or his or her successors as contemplated herein at any time or times prior to
the earliest of (i) the date which is (A) twelve (12) months following the date
on which the Optionee's Service Relationship with the Company and its
Subsidiaries terminates due to death or disability or (B) 90 days following the
date on which the Optionee's Service Relationship with the Company terminates if
the termination is due to any other reason, or (ii) the Expiration Date;
provided, however, if the Optionee's service relationship is terminated for
Cause, this Stock Option shall be null and void upon such date of termination
for cause. For purposes of this Agreement, and in accordance with the terms of
this Agreement and the Plan, the Committee shall have sole discretion to
determine the reason for the termination of the Optionee's Service Relationship
with the Company or any Subsidiary.
(e) It is understood and intended that this Stock Option is intended
to qualify as an "incentive stock option" as defined in Section 422 of the Code
to the extent permitted under applicable law. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 422 of the Code, no sale or other disposition may be made of
Issued Shares for which incentive stock option treatment is desired within the
one-year period beginning on the day after the day of the transfer of such
Issued Shares to him or her, nor within the two-year period beginning on the day
after the grant of this Stock Option and further that this Stock Option must be
exercised within three months after termination of employment (or twelve months
in the case of death or disability) to qualify as an incentive stock option. If
the Optionee disposes (whether by sale, gift, transfer or otherwise) of any such
Issued Shares within either of these periods, he or she will notify the Company
within thirty (30) days after such disposition. The Optionee also agrees to
provide the Company with any information concerning any such dispositions
required by the Company for tax purposes. Further, to the extent Option Shares
and any other incentive stock options of the Optionee having an aggregate Fair
Market Value in excess of $100,000 (determined as of the Grant Date) vest in any
year, such options will not qualify as incentive stock options.
3. EXERCISE OF STOCK OPTION.
(a) The Optionee may exercise this Stock Option only in the following
manner: prior to the Expiration Date (subject to Section 6), the Optionee may
deliver a Stock Option exercise notice (an "Exercise Notice") in the form of
Appendix A hereto indicating his or her election to purchase some or all of the
Option Shares with respect to which this Stock Option is exercisable at the time
of such notice. Such notice shall specify the number of Option Shares to be
purchased. Payment of the purchase price may be made by one or more of the
following methods:
(i) in cash, by certified or bank check, or other instrument
acceptable to the Committee in U.S. funds payable to the order of the Company in
an amount equal to the purchase price of such Option Shares;
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(ii) if the Initial Public Offering covering the offer and sale
of Common Stock of the Company to the public has occurred, then (A) through the
delivery (or attestation to ownership) of shares of Common Stock that have been
purchased by the Optionee on the open market or that have been held by the
Optionee for at least six months and are not subject to restrictions under any
Plan of the Company, (B) by the Optionee delivering to the Company a properly
executed Exercise Notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the
Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements
of indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure; or
(iii) a combination of (i), (ii)(A) and (ii)(B) above.
Payment instruments will be received subject to collection.
(b) Certificates for the Option Shares so purchased will be issued and
delivered to the Optionee upon compliance to the satisfaction of the Committee
with all requirements under applicable laws or regulations in connection with
such issuance. Until the Optionee shall have complied with the requirements
hereof and of the Plan, the Company shall be under no obligation to issue the
Option Shares subject to this Stock Option, and the determination of the
Committee as to such compliance shall be final and binding on the Optionee. The
Optionee shall not be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of Common Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to
the terms hereof, the Company shall have issued and delivered the Option Shares
to the Optionee, and the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee shall
have full dividend and other ownership rights with respect to such Issued
Shares, subject to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the contrary,
this Stock Option shall be subject to and governed by all the terms and
conditions of the Plan.
5. TRANSFERABILITY OF STOCK OPTION. This Agreement is personal to the
Optionee and is not transferable by the Optionee in any manner other than by
will or by the laws of descent and distribution. The Stock Option may be
exercised during the Optionee's lifetime only by the Optionee (or by the
Optionee's guardian or personal representative in the event of the Optionee's
incapacity). The Optionee may elect to designate a beneficiary by providing
written notice of the name of such beneficiary to the Company, and may revoke or
change such designation at any time by filing written notice of revocation or
change with the Company; such beneficiary may exercise the Optionee's Stock
Option in the event of the Optionee's death to the extent provided herein. If
the Optionee does not designate a beneficiary, or if the designated beneficiary
predeceases the Optionee, the executor of the Optionee may exercise this Stock
Option to the extent provided herein in the event of the Optionee's death.
6. EFFECT OF CERTAIN TRANSACTIONS. (a) In the case of and subject to the
consummation of a Sale Event, unless otherwise provided herein, fifty percent
(50%) of all Stock
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Options issued hereunder but not vested and exercised immediately prior to the
effective date of such Sale Event shall vest and become fully exercisable as of
the effective date of such Sale Event.
(b) The Stock Option issued hereunder shall terminate upon the
effectiveness of any such Sale Event, unless provision is made in connection
with such transaction in the sole discretion of the parties thereto for the
assumption of Stock Options theretofore granted (after taking into account any
acceleration under Section 6(a) above), or the substitution for such Stock
Options of new Stock Options of the successor entity or a parent or subsidiary
thereof, with such adjustment as to the number and kind of shares and the per
share exercise prices as such parties shall agree (after taking into account any
acceleration hereunder). In the event of such termination each participant shall
be permitted, within a specified period of time prior to the consummation of the
Sale Event as may be determined by the Committee, to exercise all outstanding
Options held by such participant which are then vested or will become vested
upon the effectiveness of the Sale Event, provided, however, that the exercise
of Options not vested immediately prior to the Sale Event shall be subject to
the effectiveness of the Sale Event. In the event provision is made in
connection with the Sale Event for the assumption of Stock Options or the
substitution for such Stock Options of the successor entity or a parent or
subsidiary thereof, the remaining Stock Options that do not vest as a result of
the Sale Event shall continue to be subject to the original vesting provisions
as set forth in this Agreement and as adjusted on a pro rata basis to reflect
the acceleration provided herein.
7. WITHHOLDING TAXES. The Optionee shall, not later than the date as of
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal, state and local taxes required by law to
be withheld on account of such taxable event. Subject to approval by the
Committee, the Optionee may elect to have the minimum tax withholding obligation
satisfied, in whole or in part, by authorizing the Company to withhold from
shares of Common Stock to be issued or transferring to the Company, a number of
shares of Common Stock with an aggregate Fair Market Value that would satisfy
the withholding amount due. The Optionee acknowledges and agrees that the
Company or any Subsidiary of the Company has the right to deduct from payments
of any kind otherwise due to the Optionee, or from the Option Shares to be
issued in respect of an exercise of this Stock Option, any federal, state or
local taxes of any kind required by law to be withheld with respect to the
issuance of Option Shares to the Optionee.
8. RESTRICTIONS ON TRANSFER OF ISSUED SHARES. None of the Issued Shares
acquired upon exercise of the Stock Option shall be sold, assigned, transferred,
pledged, hypothecated, given away or in any other manner disposed of or
encumbered, whether voluntarily or by operation of law, unless such transfer is
in compliance with all applicable securities laws (including, without
limitation, the Act), and such disposition is in accordance with the terms and
conditions of Sections 8 and 9. In connection with any transfer of Issued
Shares, the Company may require the transferor to provide at the Optionee's own
expense an opinion of counsel to the transferor, satisfactory to the Company,
that such transfer is in compliance with all foreign, federal and state
securities laws (including, without limitation, the Act). Any attempted
disposition of Issued Shares not in accordance with the terms and conditions of
Sections 8 and 9 shall be null and void, and the Company shall not reflect on
its records any change in record ownership of any Issued Shares as a result of
any such disposition, shall otherwise refuse to recognize any such disposition
and shall not in any way give effect to any such disposition of any Issued
Shares. Subject to the foregoing general provisions, Issued Shares may be
transferred pursuant to the following specific terms and conditions:
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(a) Transfers to Permitted Transferees. The Optionee may sell, assign,
transfer or give away any or all of the Issued Shares to Permitted Transferees;
provided, however, that such Permitted Transferee(s) shall, as a condition to
any such transfer, agree to be subject to the provisions of this Agreement to
the same extent as the Optionee (including, without limitation, the provisions
of Sections 8 and 9) and shall have delivered a written acknowledgment to that
effect to the Company.
(b) Transfers Upon Death. Upon the death of the Optionee, any Issued
Shares then held by the Optionee at the time of such death and any Issued Shares
acquired thereafter by the Optionee's legal representative pursuant to this
Agreement shall be subject to the provisions of Sections 8 and 9, if applicable,
and the Optionee's estate, executors, administrators, personal representatives,
heirs, legatees and distributees shall be obligated to convey such Issued Shares
to the Company or its assigns under the terms contemplated hereby.
(c) Company's Right of First Refusal. In the event that the Optionee
(or any transferee holding Issued Shares subject to this Section 8(c)) desires
to transfer all or any part of the Issued Shares to any person other than the
Company (an "Offeror"), the Optionee shall: (i) obtain in writing an irrevocable
and unconditional bona fide offer (the "Offer") for the purchase thereof from
the Offeror; and (ii) give written notice (the "Option Notice") to the Company
setting forth the Optionee's desire to transfer such shares, which Option Notice
shall be accompanied by a photocopy of the Offer and shall set forth the name
and address of the Offeror and the price and terms of the Offer. Upon receipt of
the Option Notice, the Company shall have an assignable option to purchase any
or all of such Issued Shares (the "Company Option Shares") specified in the
Option Notice, such option to be exercisable by giving, within 30 days after
receipt of the Option Notice, a written counternotice to the Optionee. If the
Company elects to purchase any or all of such Company Option Shares, it shall be
obligated to purchase, and the Optionee shall be obligated to sell to the
Company, such Company Option Shares at the price and terms indicated in the
Offer within 30 days from the date of delivery by the Company of such
counternotice.
(d) Sale of Option Shares to Offeror. The Optionee may, for 60 days
after the expiration of the 30-day option period as set forth in Section 8(c),
sell to the Offeror, pursuant to the terms of the Offer, any or all of such
Company Option Shares not purchased or agreed to be purchased by the Company or
its assignee. If any or all of such Company Option Shares are not sold pursuant
to an Offer within the time permitted above, the unsold Company Option Shares
shall remain subject to the terms of this Section 8.
(e) Adjustments for Changes in Capital Structure. If, as a result of
any reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Common Stock, the
outstanding shares of Common Stock are increased or decreased or are exchanged
for a different number or kind of shares of the Company's stock, the
restrictions contained in this Section 8 shall apply with equal force to
additional and/or substitute securities, if any, received by the Optionee in
exchange for, or by virtue of his or her ownership of, Issued Shares.
(f) Expiration of Company's Right of First Refusal. The first refusal
rights of the Company set forth above shall remain in effect until the closing
of an Initial Public Offering.
9. COMPANY'S RIGHT OF REPURCHASE.
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(a) Right of Repurchase. The Company shall have the right (the
"Repurchase Right") upon the occurrence of any of the events specified in
Section 9(b) below (the "Repurchase Event") to repurchase from the Optionee (or
his or her estate) some or all (as determined by the Company) of the Unvested
Shares held or subsequently acquired upon exercise of this Stock Option in
accordance with the terms hereof by the Optionee (or his or her estate) at the
price per share specified below. The Repurchase Right may be exercised by the
Company within sixty (60) days following the date of such event (the "Repurchase
Period"). The Repurchase Right shall be exercised by the Company by giving the
holder written notice on or before the last day of the Repurchase Period of its
intention to exercise the Repurchase Right, and, together with such notice,
tendering to the holder an amount equal to the Exercise Price of the shares. The
Company may assign the Repurchase Right to one or more persons. Upon exercise of
the Repurchase Right in the manner provided in this Section 9(a), the Optionee
(or his or her estate) shall deliver to the Company the stock certificate or
certificates representing the shares being repurchased, duly endorsed and free
and clear of any and all liens, charges and encumbrances.
If Issued Shares are not purchased under the Repurchase Right, the Optionee
and his or her successor in interest, if any, will hold any such shares in his
or her possession subject to all of the provisions of this Section 8 and Section
9 hereof.
(b) Company's Right to Exercise Repurchase Right. The Company shall
have the Repurchase Right in the event that any of the following events shall
occur:
(i) The termination of the Optionee's Service Relationship with
the Company and its Subsidiaries for any reason whatsoever, regardless of the
circumstances thereof, and including without limitation upon death, disability,
retirement, discharge or resignation for any reason, whether voluntarily or
involuntarily; or
(ii) The Optionee's Bankruptcy.
(c) Expiration of Company's Repurchase Right. The Repurchase Rights of
the Company shall remain in effect until the closing of an Initial Public
Offering.
10. ESCROW ARRANGEMENT.
(a) Escrow. In order to carry out the provisions of Sections 8 and 9
of this Agreement more effectively, the Company shall hold any Issued Shares in
escrow together with separate stock powers executed by the Optionee in blank for
transfer, and any Permitted Transferee shall, as an additional condition to any
transfer of Issued Shares, execute a like stock power as to such Issued Shares.
The Company shall not dispose of the Issued Shares except as otherwise provided
in this Agreement. In the event of any purchase by the Company (or any of its
assigns) pursuant to this Agreement, the Company is hereby authorized by the
Optionee and any Permitted Transferee, as the Optionee's and each such Permitted
Transferee's attorney-in-fact, to date and complete the stock powers necessary
for the transfer of the Issued Shares being purchased and to transfer such
Issued Shares in accordance with the terms hereof. At such time as any Issued
Shares are no longer subject to the Company's Repurchase and first refusal
rights, the Company shall, at the written request of the Optionee, deliver to
the Optionee (or the relevant Permitted Transferee) a certificate representing
such Issued Shares with the balance of the Issued Shares to be held in escrow
pursuant to this Section 10.
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(b) Remedy. Without limitation of any other provision of this
Agreement or other rights, in the event that the Optionee, any Permitted
Transferees or any other person or entity is required to sell the Optionee's
Issued Shares pursuant to the provisions of Section 8 and 9 of this Agreement
and in the further event that he or she refuses or for any reason fails to
deliver to the Company or its designated purchaser of such Issued Shares the
certificate or certificates evidencing such Issued Shares together with a
related stock power, the Company or such designated purchaser may deposit the
applicable purchase price for such Issued Shares with a bank designated by the
Company, or with the Company's independent public accounting firm, as agent or
trustee, or in escrow, for the Optionee, any Permitted Transferees or other
person or entity, to be held by such bank or accounting firm for the benefit of
and for delivery to him, them or it, and/or, in its discretion, pay such
purchase price by offsetting any indebtedness then owed by the Optionee as
provided above. Upon any such deposit and/or offset by the Company or its
designated purchaser of such amount and upon notice to the person or entity who
was required to sell the Issued Shares to be sold pursuant to the provisions of
Sections 8 and 9, such Issued Shares shall at such time be deemed to have been
sold, assigned, transferred and conveyed to such purchaser, the holder thereof
shall have no further rights thereto (other than the right to withdraw the
payment thereof held in escrow, if applicable), and the Company shall record
such transfer in its stock transfer book or in any appropriate manner.
11. DRAG ALONG RIGHT. In the event the holders of a majority of the Common
Stock (or Common Stock equivalents) then outstanding (the "Majority
Shareholders") determine to sell or otherwise dispose of all or substantially
all of the assets of the Company or all or fifty percent (50%) or more of the
capital stock of the Company owned by the Majority Shareholders in each case in
a transaction constituting a change in control of the Company, to any
non-Affiliate(s) of the Company or any of the Majority Shareholders, or to cause
the Company to merge with or into or consolidate with any non-Affiliate(s) of
the Company or any of the Majority Shareholders (in each case, the "Buyer") in a
bona fide negotiated transaction (a "Sale"), the Optionee, including any of his
or her successors as contemplated herein, shall be obligated to and shall upon
the written request of a Majority Shareholders (subject to Sections 6 and 8):
(a) sell, transfer and deliver, or cause to be sold, transferred and delivered,
to the Buyer, his or her Issued Shares (including for this purpose all of such
Optionee's or his or her Permitted Transferee's Issued Shares that presently or
as a result of any such transaction may be acquired upon the exercise of options
(following the payment of the exercise price therefor)) on substantially the
same terms applicable to the Majority Shareholders (with appropriate adjustments
to reflect the conversion of convertible securities, the redemption of
redeemable securities and the exercise of vested securities as well as the
relative preferences and priorities of preferred stock); and (b) execute and
deliver such instruments of conveyance and transfer and take such other action,
including voting such Issued Shares in favor of any Sale proposed by the
Majority Shareholders and executing any purchase agreements, merger agreements,
indemnity agreements, escrow agreements or related documents, as the Majority
Shareholders or the Buyer may reasonably require in order to carry out the terms
and provisions of this Section 11. The provisions of this Section 11 shall
terminate upon the completion of an Initial Public Offering.
12. LOCKUP PROVISION. The Optionee agrees, if requested by the Company and
any underwriter engaged by the Company, not to sell or otherwise transfer or
dispose of any securities of the Company (including, without limitation pursuant
to Rule 144 under the Act) held by him or her for such period following the
effective date of any registration statement of the Company filed under the Act
as the Company or such underwriter shall specify reasonably and in good faith,
not to exceed 180 days in the case of the Company's Initial Public Offering or
90 days in the case of any other public offering.
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12. MISCELLANEOUS PROVISIONS.
(a) Equitable Relief. The parties hereto agree and declare that legal
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
(b) Change and Modifications. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Massachusetts without regard to conflict of law
principles.
(d) Headings. The headings are intended only for convenience in
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(e) Saving Clause. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
(f) Notices. All notices, requests, consents and other communications
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage prepaid. Notices to the Company or the Optionee shall be
addressed as set forth underneath their signatures below, or to such other
address or addresses as may have been furnished by such party in writing to the
other.
(g) Benefit and Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors, permitted assigns, and legal representatives. The Company has the
right to assign this Agreement, and such assignee shall become entitled to all
the rights of the Company hereunder to the extent of such assignment.
(h) Dispute Resolution. Except as provided below, any dispute arising
out of or relating to this Agreement or the breach, termination or validity
hereof shall be finally settled by binding arbitration conducted expeditiously
in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and
Procedures (the "J.A.M.S. Rules"). The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Boston, Massachusetts.
The parties covenant and agree that the arbitration shall commence within
60 days of the date on which a written demand for arbitration is filed by any
party hereto. In connection with the arbitration proceeding, the arbitrator
shall have the power to order the production of documents by each party and any
third-party witnesses. In addition, each party may take up to three depositions
as of right, and the arbitrator may in his or her discretion allow additional
depositions upon good cause shown by the moving party. However, the arbitrator
shall not have the power to order the answering of interrogatories or the
response to requests for admission. In connection with any arbitration, each
party shall provide to the other, no later than 7 business days before the date
of the arbitration, the identity of all persons that may testify at the
arbitration
10
and a copy of all documents that may be introduced at the arbitration or
considered or used by a party's witness or expert. The arbitrator's decision and
award shall be made and delivered within 6 months of the selection of the
arbitrator. The arbitrator's decision shall set forth a reasoned basis for any
award of damages or finding of liability. The arbitrator shall not have power to
award damages in excess of actual compensatory damages and shall not multiply
actual damages or award punitive damages or any other damages that are
specifically excluded under this Agreement, and each party hereby irrevocably
waives any claim to such damages.
The parties covenant and agree that they will participate in the
arbitration in good faith. This Section 13(h) applies equally to requests for
temporary, preliminary or permanent injunctive relief, except that in the case
of temporary or preliminary injunctive relief any party may proceed in court
without prior arbitration for the limited purpose of avoiding immediate and
irreparable harm.
Each of the parties hereto (i) hereby irrevocably submits to the
jurisdiction of any United States District Court of competent jurisdiction for
the purpose of enforcing the award or decision in any such proceeding, (ii)
hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution (except as protected
by applicable law), that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court, and hereby waives and agrees not to seek any review by any court of
any other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court. Each of the parties hereto hereby consents to
service of process by registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its, his or her submission to
jurisdiction and its, his or her consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
party hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction.
(i) Counterparts. For the convenience of the parties and to
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
This Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned as of the date first above written.
NxSTAGE MEDICAL, INC.
By:
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
11
Address:
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
This Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned as of the date first above written.
Optionee:
-------------------------------------
Name:
Address:
-------------------------------------
-------------------------------------
-------------------------------------
SPOUSE'S CONSENT(1)
I acknowledge that I have read the
foregoing Incentive Stock Option
Agreement and understand the contents
thereof.
Name:
----------------------------------
Date: ,
----------------- ---- ----------
----------
(1) Required only if the Optionee's state of residence is one of the following
states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas,
Washington and Wisconsin.
12
DESIGNATED BENEFICIARY:
Name:
-------------------------------
Beneficiary's Address:
-------------------------------------
-------------------------------------
-------------------------------------
13
APPENDIX A
STOCK OPTION EXERCISE NOTICE
NxSTAGE MEDICAL, INC.
Attention: Chief Financial Officer
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pursuant to the terms of my Incentive Stock Option Agreement dated
__________ (the "Agreement") under the NxSTAGE MEDICAL, Inc. 1999 Stock Option
and Grant Plan, I, [Insert Name] ________________, hereby [Circle One]
partially/fully exercise such option by including herein payment in the amount
of $______ representing the purchase price for [Fill in number of Option Shares]
_______ Option Shares. I have chosen the following form(s) of payment:
[ ] 1. Cash
[ ] 2. Certified or bank check payable to NxSTAGE MEDICAL, INC.
[ ] 3. Other (as described in the Agreement (please describe))
.
-------------------------------------------------------
Sincerely yours,
OPTIONEE
-------------------------------------
Name:
Address:
-------------------------------------
-------------------------------------
-------------------------------------
14
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE NXSTAGE MEDICAL, INC.
1999 STOCK OPTION AND GRANT PLAN, AS AMENDED
FOR GRANTS AFTER SEPTEMBER 15, 2005
NAME OF OPTIONEE: __________ (the "Optionee")
NO. OF OPTION SHARES: __________ Shares of Common Stock
GRANT DATE: __________ (the "Grant Date")
EXPIRATION DATE: __________ (the "Expiration Date")
OPTION EXERCISE PRICE/SHARE: __________ (the "Option Exercise Price")
Pursuant to the NxSTAGE MEDICAL, INC., 1999 Stock Option and Grant Plan
(the "Plan"), NxSTAGE MEDICAL, INC., a Delaware corporation (together with all
successors thereto, the "Company"), hereby grants to the Optionee, who is an
employee of the Company or any of its Subsidiaries, an option (the "Stock
Option") to purchase on or prior to the Expiration Date, or such earlier date as
is specified herein, all or any part of the number of shares of Common Stock,
par value $0.001 per share ("Common Stock"), of the Company indicated above (the
"Option Shares," and such shares once issued shall be referred to as the "Issued
Shares"), at the Option Exercise Price, subject to the terms and conditions set
forth in this Incentive Stock Option Agreement (this "Agreement") and in the
Plan. This Stock Option is intended to qualify as an "incentive stock option" as
defined in Section 422(b) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code"). To the extent that any portion of the Stock Option
does not so qualify, it shall be deemed a non-qualified Stock Option.
1. DEFINITIONS. For the purposes of this Incentive Stock Option Agreement
(this "Agreement"), the following terms shall have the following respective
meanings. All capitalized terms used herein and not otherwise defined shall have
the respective meanings set forth in the Plan.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
An "Affiliate" of any Person shall mean a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the first mentioned Person. A Person shall be deemed
to control another Person if such first Person possesses directly or indirectly
the power to direct, or cause the direction of, the management and policies of
the second Person, whether through the ownership of voting securities, by
contract or otherwise.
"Bankruptcy" shall mean (i) the filing of a voluntary petition under
any bankruptcy or insolvency law, or a petition for the appointment of a
receiver or the making of an assignment for the benefit of creditors, with
respect to the Optionee or any Permitted Transferee, or (ii) the Optionee or any
Permitted Transferee being subjected involuntarily to such a petition or
assignment or to an attachment or other legal or equitable interest with respect
to the Optionee's assets, which involuntary petition or assignment or attachment
is not discharged
within 60 days after its date, and (iii) the Optionee or any Permitted
Transferee being subject to a transfer of the Stock Option or the Issued Shares
by operation of law, except by reason of death.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean a vote of the Board of Directors of the Company or
its successor entity as the case may be, resolving that the Optionee should be
dismissed as a result of (i) the commission of any act by an Optionee
constituting financial dishonesty against the Company (which act would be
chargeable as a crime under applicable law); (ii) an Optionee's engaging in any
other act of dishonesty, fraud, intentional misrepresentation, moral turpitude,
illegality or harassment which, as determined in good faith by the Board, would:
(A) materially adversely affect the business or the reputation of the Company
with its current or prospective customers, suppliers, lenders and/or other third
parties with whom it does or might do business; or (B) negligently expose the
Company to a risk of civil or criminal legal damages, liabilities or penalties;
(iii) the repeated failure by an Optionee to follow the directives of the
Company's chief executive officer or Board or (iv) an Optionee's inadequate
performance of his or her duties to the Company which inadequate performance is
not cured within 30 days after the Company has given written notice to such
Optionee specifying the inadequate performance in reasonable detail and
demanding its cure.
"Committee" shall mean the Board or a committee of the Board then
responsible for administration of the Plan at the relevant time.
"Common Stock" shall mean the Company's Common Stock, par value $0.001
per share, together with any shares into which Common Stock may be converted or
exchanged, as provided above and herein.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Good Reason" shall mean the occurrence of any of the following
events: (i) the Optionee's being subject to illegal harassment for which the
Company is responsible; (ii) a material, comprehensive and adverse change in the
Optionee's job description, responsibilities or direct support staff size; (iii)
a reduction of more than 15% in the Optionee's earnings from his or her earnings
in the previous fiscal year, except for across-the-board salary reductions
similarly affecting all or substantially all management employees and reductions
related to the Optionee's job performance; or (iii) the relocation of the office
at which the Optionee is principally employed to a location more than fifty (50)
miles from such office.
"Initial Public Offering" shall mean the consummation of the first
fully underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4 or S-8 or their
then equivalents, covering the offer and sale by the Company of its equity
securities.
"Permitted Transferees" shall mean any of the following to whom the
Optionee may transfer Issued Shares hereunder: the Optionee's spouse, children
(natural or adopted), stepchildren or a trust for their sole benefit of which
the Optionee is the settlor; provided, however, that any such trust does not
require or permit distribution of any Issued Shares during the term of this
Agreement unless subject to its terms.
2
"Person" shall mean any individual, corporation, partnership (limited
or general), limited liability Company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Sale Event" shall mean, regardless of form thereof, (i) the
dissolution or liquidation of the Company, (ii) the sale of all or substantially
all of the assets of the Company on a consolidated basis to an unrelated person
or entity, (iii) a merger, reorganization or consolidation in which the
outstanding shares of Company's capital stock are converted into or exchanged
for a different kind of securities of the successor entity and the holders of
the Company's outstanding voting power immediately prior to such transaction do
not own a majority of the outstanding voting power of the successor entity
immediately upon completion of such transaction, or (iv) the sale of all of the
outstanding stock of the Company to an unrelated person or entity.
"Service Relationship" shall mean any relationship as an employee,
part-time employee, director or consultant of the Company or any Subsidiary of
the Company such that, for example, a Service Relationship shall be deemed to
continue without interruption in the event the Optionee's status changes from
full-time employee to part-time employee or consultant.
"Subsidiary" shall mean any corporation or other entity (other than
the Company) in any unbroken chain of corporations or other entities beginning
with the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing more than 50 percent of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
2. VESTING AND EXERCISABILITY.
(a) Except as set forth below and in Section 6, and subject to the
determination of the Committee, in its sole discretion to accelerate the vesting
schedule hereunder, this stock option shall become exercisable ("vest") as to
25% of the original number of Shares on the first anniversary of the Grant Date
and as to an additional 1/48th of the original number of Shares at the end of
each successive one-month period following the first anniversary of the Grant
Date until the fourth anniversary of the Grant Date. The right of exercise shall
be cumulative so that to the extent the Stock Option is not exercised in any
period to the maximum extent permissible it shall continue to be exercisable, in
whole or in part, with respect to all Option Shares for which it is vested until
the earlier of the Expiration Date or the termination of this option under
Section 2 hereof or the Plan.
Notwithstanding anything herein to the contrary, but without limitation of
Section 6, in the event that this Stock Option is assumed or continued by the
Company or its successor entity in the sole discretion of the parties to a Sale
Event and thereafter remains in effect following such Sale Event as contemplated
by Section 6, then this Stock Option shall be deemed vested and exercisable in
full upon the date on which the Optionee's employment with the Company and its
subsidiaries or successor entity terminates if (i) such termination occurs
within 12 months of such Sale Event and (ii) such termination is by the Company
without Cause or by the Optionee for Good Reason.
(b) Except as otherwise provided in this Section 2, this Stock Option
may not be exercised unless the Optionee, at the time he or she exercises this
option, has and has had at all
3
times since the Grant Date a Service Relationship with the company. In the event
that the Optionee's Service Relationship with the Company and its Subsidiaries
terminates for any reason or under any circumstances, including the Optionee's
resignation, retirement or termination by the Company, upon the Optionee's death
or disability (as defined in Section 422(c)(6) of the Code), or for any other
reason, regardless of the circumstances thereof, this Stock Option may
thereafter be exercised, to the extent it was vested on such date of such
termination, until the date specified in Section 2(d) below. Any portion of the
Stock Option that is not vested on the date of termination of the Service
Relationship shall immediately expire and be null and void.
(c) Subject to the provisions of Section 6 below, once any portion of
this Stock Option becomes exercisable, it shall continue to be exercisable by
the Optionee or his or her successors as contemplated herein at any time or
times prior to the earliest of (i) the date which is (A) twelve (12) months
following the date on which the Optionee's Service Relationship with the Company
and its Subsidiaries terminates due to death or disability or (B) 90 days
following the date on which the Optionee's Service Relationship with the Company
terminates if the termination is due to any other reason, or (ii) the Expiration
Date; provided, however, if the Optionee's Service Relationship is terminated
for Cause, this Stock Option shall be null and void upon such date of
termination for Cause. For purposes of this Agreement, and in accordance with
the terms of this Agreement and the Plan, the Committee shall have sole
discretion to determine the reason for the termination of the Optionee's Service
Relationship with the Company or any Subsidiary.
(d) It is understood and intended that this Stock Option is intended
to qualify as an "incentive stock option" as defined in Section 422 of the Code
to the extent permitted under applicable law. Accordingly, the Optionee
understands that in order to obtain the benefits of an incentive stock option
under Section 422 of the Code, no sale or other disposition may be made of
Issued Shares for which incentive stock option treatment is desired within the
one-year period beginning on the day after the day of the transfer of such
Issued Shares to him or her, nor within the two-year period beginning on the day
after the grant of this Stock Option and further that this Stock Option must be
exercised within three months after termination of employment (or twelve months
in the case of death or disability) to qualify as an incentive stock option. If
the Optionee disposes (whether by sale, gift, transfer or otherwise) of any such
Issued Shares within either of these periods, he or she will notify the Company
within thirty (30) days after such disposition. The Optionee also agrees to
provide the Company with any information concerning any such dispositions
required by the Company for tax purposes. Further, to the extent shares issuable
upon exercise of this stock option (the "Option Shares") and shares issuable
upon exercise of any other incentive stock options of the Optionee having an
aggregate fair market value in excess of $100,000 (determined as of the Grant
Date) vest in any year, such options will not qualify as incentive stock
options.
3. EXERCISE OF STOCK OPTION.
(a) The Optionee may exercise this Stock Option only in the following
manner: prior to the Expiration Date (subject to Section 6 and subject to the
provisions of Section 2 above), the Optionee may deliver a Stock Option exercise
notice (an "Exercise Notice") in the form of Appendix A hereto indicating his or
her election to purchase some or all of the Option Shares with respect to which
this Stock Option is exercisable at the time of such notice. Such notice shall
specify the number of Option Shares to be purchased. Payment of the purchase
price may be made by one or more of the following methods:
4
(i) in cash, by certified or bank check, or other instrument
acceptable to the Committee in U.S. funds payable to the order of the Company in
an amount equal to the purchase price of such Option Shares;
(ii) if the Initial Public Offering covering the offer and sale
of Common Stock of the Company to the public has occurred, then (A) through the
delivery (or attestation to ownership) of shares of Common Stock that have been
purchased by the Optionee on the open market or that have been held by the
Optionee for at least six months and are not subject to restrictions under any
Plan of the Company, (B) by the Optionee delivering to the Company a properly
executed Exercise Notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option purchase price, provided that in the event the
Optionee chooses to pay the option purchase price as so provided, the Optionee
and the broker shall comply with such procedures and enter into such agreements
of indemnity and other agreements as the Committee shall prescribe as a
condition of such payment procedure; or
(iii) a combination of (i), (ii)(A) and (ii)(B) above.
Payment instruments will be received subject to collection.
(b) Certificates for the Option Shares so purchased will be issued and
delivered to the Optionee upon compliance to the satisfaction of the Committee
with all requirements under applicable laws or regulations in connection with
such issuance. Until the Optionee shall have complied with the requirements
hereof and of the Plan, the Company shall be under no obligation to issue the
Option Shares subject to this Stock Option, and the determination of the
Committee as to such compliance shall be final and binding on the Optionee. The
Optionee shall not be deemed to be the holder of, or to have any of the rights
of a holder with respect to, any shares of Common Stock subject to this Stock
Option unless and until this Stock Option shall have been exercised pursuant to
the terms hereof, the Company shall have issued and delivered the Option Shares
to the Optionee, and the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee shall
have full dividend and other ownership rights with respect to such Issued
Shares, subject to the terms of this Agreement.
(c) Notwithstanding any other provision hereof or of the Plan, no
portion of this Stock Option shall be exercisable after the Expiration Date.
4. INCORPORATION OF PLAN. Notwithstanding anything herein to the contrary,
this Stock Option shall be subject to and governed by all the terms and
conditions of the Plan.
5. TRANSFERABILITY OF STOCK OPTION. This Agreement is personal to the
Optionee and is not transferable by the Optionee in any manner other than by
will or by the laws of descent and distribution. The Stock Option may be
exercised during the Optionee's lifetime only by the Optionee (or by the
Optionee's guardian or personal representative in the event of the Optionee's
incapacity). The Optionee may elect to designate a beneficiary by providing
written notice of the name of such beneficiary to the Company, and may revoke or
change such designation at any time by filing written notice of revocation or
change with the Company; such beneficiary may exercise the Optionee's Stock
Option in the event of the Optionee's death to the extent provided herein. If
the Optionee does not designate a beneficiary, or if the designated beneficiary
predeceases the Optionee, the executor of the Optionee may exercise this Stock
Option to the extent provided herein in the event of the Optionee's death.
5
6. EFFECT OF CERTAIN TRANSACTIONS. (a) In the case of and subject to the
consummation of a Sale Event, unless otherwise provided herein, fifty percent
(50%) of all Stock Options issued hereunder but not vested and exercised
immediately prior to the effective date of such Sale Event shall vest and become
fully exercisable as of the effective date of such Sale Event.
(b) The Stock Option issued hereunder shall terminate upon the
effectiveness of any such Sale Event, unless provision is made in connection
with such transaction in the sole discretion of the parties thereto for the
assumption of Stock Options theretofore granted (after taking into account any
acceleration under Section 6(a) above), or the substitution for such Stock
Options of new Stock Options of the successor entity or a parent or subsidiary
thereof, with such adjustment as to the number and kind of shares and the per
share exercise prices as such parties shall agree (after taking into account any
acceleration hereunder). In the event of such termination each participant shall
be permitted, within a specified period of time prior to the consummation of the
Sale Event as may be determined by the Committee, to exercise all outstanding
Options held by such participant which are then vested or will become vested
upon the effectiveness of the Sale Event, provided, however, that the exercise
of Stock Options not vested immediately prior to the Sale Event shall be subject
to the effectiveness of the Sale Event. In the event provision is made in
connection with the Sale Event for the assumption of Stock Options or the
substitution for such Stock Options of the successor entity or a parent or
subsidiary thereof, the remaining Stock Options that do not vest as a result of
the Sale Event shall continue to be subject to the original vesting provisions
as set forth in this Agreement and as adjusted on a pro rata basis to reflect
the acceleration provided herein.
7. WITHHOLDING TAXES. The Optionee shall, not later than the date as of
which the exercise of this Stock Option becomes a taxable event for federal
income tax purposes, pay to the Company or make arrangements satisfactory to the
Committee for payment of any federal, state and local taxes required by law to
be withheld on account of such taxable event. Subject to approval by the
Committee, the Optionee may elect to have the minimum tax withholding obligation
satisfied, in whole or in part, by authorizing the Company to withhold from
shares of Common Stock to be issued or transferring to the Company, a number of
shares of Common Stock with an aggregate fair market value that would satisfy
the withholding amount due. The Optionee acknowledges and agrees that the
Company or any Subsidiary of the Company has the right to deduct from payments
of any kind otherwise due to the Optionee, or from the Option Shares to be
issued in respect of an exercise of this Stock Option, any federal, state or
local taxes of any kind required by law to be withheld with respect to the
issuance of Option Shares to the Optionee.
8. RESTRICTIONS ON TRANSFER OF ISSUED SHARES. None of the Issued Shares
acquired upon exercise of the Stock Option shall be sold, assigned, transferred,
pledged, hypothecated, given away or in any other manner disposed of or
encumbered, whether voluntarily or by operation of law, unless such transfer is
in compliance with all applicable securities laws (including, without
limitation, the Act), and such disposition is in accordance with the terms and
conditions of this Section 8. In connection with any transfer of Issued Shares,
the Company may require the transferor to provide at the Optionee's own expense
an opinion of counsel to the transferor, satisfactory to the Company, that such
transfer is in compliance with all foreign, federal and state securities laws
(including, without limitation, the Act). Any attempted disposition of Issued
Shares not in accordance with the terms and conditions of this Section 8 shall
be null and void, and the Company shall not reflect on its records any change in
record ownership of any Issued Shares as a result of any such disposition, shall
otherwise refuse to
6
recognize any such disposition and shall not in any way give effect to any such
disposition of any Issued Shares. Subject to the foregoing general provisions,
Issued Shares may be transferred pursuant to the following specific terms and
conditions:
(a) Transfers to Permitted Transferees. The Optionee may sell, assign,
transfer or give away any or all of the Issued Shares to Permitted Transferees;
provided, however, that such Permitted Transferee(s) shall, as a condition to
any such transfer, agree to be subject to the provisions of this Agreement to
the same extent as the Optionee (including, without limitation, the provisions
of this Section 8 ) and shall have delivered a written acknowledgment to that
effect to the Company.
(b) Transfers Upon Death. Upon the death of the Optionee, any Issued
Shares then held by the Optionee at the time of such death and any Issued Shares
acquired thereafter by the Optionee's legal representative pursuant to this
Agreement shall be subject to the provisions of this ▇▇▇▇▇▇▇ # ▇, if
applicable, and the Optionee's estate, executors, administrators, personal
representatives, heirs, legatees and distributees shall be obligated to convey
such Issued Shares to the Company or its assigns under the terms contemplated
hereby.
(c) Company's Right of First Refusal. In the event that the Optionee
(or any transferee holding Issued Shares subject to this Section 8(c)) desires
to transfer all or any part of the Issued Shares to any person other than the
Company (an "Offeror"), the Optionee shall: (i) obtain in writing an irrevocable
and unconditional bona fide offer (the "Offer") for the purchase thereof from
the Offeror; and (ii) give written notice (the "Option Notice") to the Company
setting forth the Optionee's desire to transfer such shares, which Option Notice
shall be accompanied by a photocopy of the Offer and shall set forth the name
and address of the Offeror and the price and terms of the Offer. Upon receipt of
the Option Notice, the Company shall have an assignable option to purchase any
or all of such Issued Shares (the "Company Option Shares") specified in the
Option Notice, such option to be exercisable by giving, within 30 days after
receipt of the Option Notice, a written counternotice to the Optionee. If the
Company elects to purchase any or all of such Company Option Shares, it shall be
obligated to purchase, and the Optionee shall be obligated to sell to the
Company, such Company Option Shares at the price and terms indicated in the
Offer within 30 days from the date of delivery by the Company of such
counternotice.
(d) Sale of Option Shares to Offeror. The Optionee may, for 60 days
after the expiration of the 30-day option period as set forth in Section 8(c),
sell to the Offeror, pursuant to the terms of the Offer, any or all of such
Company Option Shares not purchased or agreed to be purchased by the Company or
its assignee. If any or all of such Company Option Shares are not sold pursuant
to an Offer within the time permitted above, the unsold Company Option Shares
shall remain subject to the terms of this Section 8.
(e) Adjustments for Changes in Capital Structure. If, as a result of
any reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Common Stock, the
outstanding shares of Common Stock are increased or decreased or are exchanged
for a different number or kind of shares of the Company's stock, the
restrictions contained in this Section 8 shall apply with equal force to
additional and/or substitute securities, if any, received by the Optionee in
exchange for, or by virtue of his or her ownership of, Issued Shares.
(f) Expiration of Company's Right of First Refusal. The first refusal
rights of the Company set forth above shall remain in effect until the closing
of an Initial Public Offering.
7
9. ESCROW ARRANGEMENT. (a) Escrow. In order to carry out the provisions of
Section 8 of this Agreement more effectively, the Company shall hold any Issued
Shares in escrow together with separate stock powers executed by the Optionee in
blank for transfer, and any Permitted Transferee shall, as an additional
condition to any transfer of Issued Shares, execute a like stock power as to
such Issued Shares. The Company shall not dispose of the Issued Shares except as
otherwise provided in this Agreement. In the event of any purchase by the
Company (or any of its assigns) pursuant to this Agreement, the Company is
hereby authorized by the Optionee and any Permitted Transferee, as the
Optionee's and each such Permitted Transferee's attorney-in-fact, to date and
complete the stock powers necessary for the transfer of the Issued Shares being
purchased and to transfer such Issued Shares in accordance with the terms
hereof. At such time as any Issued Shares are no longer subject to the Company's
right of first refusal, the Company shall, at the written request of the
Optionee, deliver to the Optionee (or the relevant Permitted Transferee) a
certificate representing such Issued Shares with the balance of the Issued
Shares to be held in escrow pursuant to this Section 9.
(b) Remedy. Without limitation of any other provision of this
Agreement or other rights, in the event that the Optionee, any Permitted
Transferees or any other person or entity is required to sell the Optionee's
Issued Shares pursuant to the provisions of Section 8 of this Agreement and in
the further event that he or she refuses or for any reason fails to deliver to
the Company or its designated purchaser of such Issued Shares the certificate or
certificates evidencing such Issued Shares together with a related stock power,
the Company or such designated purchaser may deposit the applicable purchase
price for such Issued Shares with a bank designated by the Company, or with the
Company's independent public accounting firm, as agent or trustee, or in escrow,
for the Optionee, any Permitted Transferees or other person or entity, to be
held by such bank or accounting firm for the benefit of and for delivery to him,
them or it, and/or, in its discretion, pay such purchase price by offsetting any
indebtedness then owed by the Optionee as provided above. Upon any such deposit
and/or offset by the Company or its designated purchaser of such amount and upon
notice to the person or entity who was required to sell the Issued Shares to be
sold pursuant to the provisions of Section 8, such Issued Shares shall at such
time be deemed to have been sold, assigned, transferred and conveyed to such
purchaser, the holder thereof shall have no further rights thereto (other than
the right to withdraw the payment thereof held in escrow, if applicable), and
the Company shall record such transfer in its stock transfer book or in any
appropriate manner.
10. DRAG ALONG RIGHT. In the event the holders of a majority of the Common
Stock (or Common Stock equivalents) then outstanding (the "Majority
Shareholders") determine to sell or otherwise dispose of all or substantially
all of the assets of the Company or all or fifty percent (50%) or more of the
capital stock of the Company owned by the Majority Shareholders in each case in
a transaction constituting a change in control of the Company, to any
non-Affiliate(s) of the Company or any of the Majority Shareholders, or to cause
the Company to merge with or into or consolidate with any non-Affiliate(s) of
the Company or any of the Majority Shareholders (in each case, the "Buyer") in a
bona fide negotiated transaction (a "Sale"), the Optionee, including any of his
or her successors as contemplated herein, shall be obligated to and shall upon
the written request of a Majority Shareholders (subject to Sections 6 and 8):
(a) sell, transfer and deliver, or cause to be sold, transferred and delivered,
to the Buyer, his or her Issued Shares (including for this purpose all of such
Optionee's or his or her Permitted Transferee's Issued Shares that presently or
as a result of any such transaction may be acquired upon the exercise of options
(following the payment of the exercise price therefor)) on substantially the
same terms applicable to the Majority Shareholders (with appropriate adjustments
to reflect the conversion of convertible securities, the redemption of
redeemable securities and the exercise of vested
8
securities as well as the relative preferences and priorities of preferred
stock); and (b) execute and deliver such instruments of conveyance and transfer
and take such other action, including voting such Issued Shares in favor of any
Sale proposed by the Majority Shareholders and executing any purchase
agreements, merger agreements, indemnity agreements, escrow agreements or
related documents, as the Majority Shareholders or the Buyer may reasonably
require in order to carry out the terms and provisions of this Section 10. The
provisions of this Section 10 shall terminate upon the completion of an Initial
Public Offering.
11. LOCKUP PROVISION. The Optionee agrees, if requested by the Company and
any underwriter engaged by the Company, not to sell or otherwise transfer or
dispose of any securities of the Company (including, without limitation pursuant
to Rule 144 under the Act) held by him or her for such period following the
effective date of any registration statement of the Company filed under the Act
as the Company or such underwriter shall specify reasonably and in good faith,
not to exceed 180 days in the case of the Company's Initial Public Offering or
90 days in the case of any other public offering.
12. MISCELLANEOUS PROVISIONS.
(a) Equitable Relief. The parties hereto agree and declare that legal
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
(b) Change and Modifications. This Agreement may not be orally
changed, modified or terminated, nor shall any oral waiver of any of its terms
be effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by the Company and the Optionee.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Massachusetts without regard to conflict of law
principles.
(d) Headings. The headings are intended only for convenience in
finding the subject matter and do not constitute part of the text of this
Agreement and shall not be considered in the interpretation of this Agreement.
(e) Saving Clause. If any provision(s) of this Agreement shall be
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
(f) Notices. All notices, requests, consents and other communications
shall be in writing and be deemed given when delivered personally, by telex or
facsimile transmission or when received if mailed by first class registered or
certified mail, postage prepaid. Notices to the Company or the Optionee shall be
addressed as set forth underneath their signatures below, or to such other
address or addresses as may have been furnished by such party in writing to the
other.
(g) Benefit and Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors, permitted assigns, and legal representatives. The Company has the
right to assign this Agreement, and such assignee shall become entitled to all
the rights of the Company hereunder to the extent of such assignment.
9
(h) Dispute Resolution. Except as provided below, any dispute arising
out of or relating to this Agreement or the breach, termination or validity
hereof shall be finally settled by binding arbitration conducted expeditiously
in accordance with the J.A.M.S./Endispute Comprehensive Arbitration Rules and
Procedures (the "J.A.M.S. Rules"). The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of arbitration shall be Boston, Massachusetts.
The parties covenant and agree that the arbitration shall commence within
60 days of the date on which a written demand for arbitration is filed by any
party hereto. In connection with the arbitration proceeding, the arbitrator
shall have the power to order the production of documents by each party and any
third-party witnesses. In addition, each party may take up to three depositions
as of right, and the arbitrator may in his or her discretion allow additional
depositions upon good cause shown by the moving party. However, the arbitrator
shall not have the power to order the answering of interrogatories or the
response to requests for admission. In connection with any arbitration, each
party shall provide to the other, no later than 7 business days before the date
of the arbitration, the identity of all persons that may testify at the
arbitration and a copy of all documents that may be introduced at the
arbitration or considered or used by a party's witness or expert. The
arbitrator's decision and award shall be made and delivered within 6 months of
the selection of the arbitrator. The arbitrator's decision shall set forth a
reasoned basis for any award of damages or finding of liability. The arbitrator
shall not have power to award damages in excess of actual compensatory damages
and shall not multiply actual damages or award punitive damages or any other
damages that are specifically excluded under this Agreement, and each party
hereby irrevocably waives any claim to such damages.
The parties covenant and agree that they will participate in the
arbitration in good faith. This Section 12(h) applies equally to requests for
temporary, preliminary or permanent injunctive relief, except that in the case
of temporary or preliminary injunctive relief any party may proceed in court
without prior arbitration for the limited purpose of avoiding immediate and
irreparable harm.
Each of the parties hereto (i) hereby irrevocably submits to the
jurisdiction of any United States District Court of competent jurisdiction for
the purpose of enforcing the award or decision in any such proceeding, (ii)
hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution (except as protected
by applicable law), that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court, and hereby waives and agrees not to seek any review by any court of
any other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court. Each of the parties hereto hereby consents to
service of process by registered mail at the address to which notices are to be
given. Each of the parties hereto agrees that its, his or her submission to
jurisdiction and its, his or her consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
party hereto in any such action, suit or proceeding may be enforced in other
jurisdictions by suit, action or proceeding on the judgment, or in any other
manner provided by or pursuant to the laws of such other jurisdiction.
(i) Counterparts. For the convenience of the parties and to facilitate
execution, this Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
10
This Agreement is hereby accepted and executed by the Company under its
corporate seal by its authorized officer and the terms and conditions thereof
hereby agreed to by the undersigned as of the date first above written.
NxSTAGE MEDICAL, INC.
By:
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President & CEO
Address:
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
This Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned as of the date first above written.
Optionee:
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Name:
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Address:
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SPOUSE'S CONSENT(2)
I acknowledge that I have read the
foregoing Incentive Stock Option
Agreement and understand the contents
thereof.
Name:
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Date: ,
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(2) Required only if the Optionee's state of residence is one of the following
states: Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas,
Washington and Wisconsin.
DESIGNATED BENEFICIARY:
Name:
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Beneficiary's Address:
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APPENDIX A
STOCK OPTION EXERCISE NOTICE
NxSTAGE MEDICAL, INC.
Attention: Chief Financial Officer
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pursuant to the terms of my Incentive Stock Option Agreement dated
__________ (the "Agreement") under the NxSTAGE MEDICAL, Inc. 1999 Stock Option
and Grant Plan, I, [Insert Name] ________________, hereby [Circle One]
partially/fully exercise such option by including herein payment in the amount
of $______ representing the purchase price for [Fill in number of Option Shares]
_______ Option Shares. I have chosen the following form(s) of payment:
[ ] 1. Cash
[ ] 2. Certified or bank check payable to NxSTAGE MEDICAL, INC.
[ ] 3. Other (as described in the Agreement (please describe))
.
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Sincerely yours,
OPTIONEE
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Name:
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Address:
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