Form of Non-Statutory Stock Option Agreement - 2003 Stock Option Plan
THIS AGREEMENT is entered into and effective as of _________ __, 200__ (the
"Date of Grant"), by and between Optical Sensors Incorporated (the "Company")
and ___________ (the "Optionee").
A. The Company and its stockholders have adopted the Optical Sensors
Incorporated 2003 Stock Option Plan (the "Plan") authorizing the Board of
Directors of the Company, or a committee as provided for in the Plan (the Board
or such a committee to be referred to as the "Committee"), to grant
non-statutory stock options to employees and nonemployee consultants and
directors of the Company.
B. The Company desires to give the Optionee an inducement to acquire a
proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Optionee an option to purchase
shares of common stock of the Company pursuant to the Plan.
Accordingly, the parties hereby agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to the Optionee the right, privilege, and option
(the "Option") to purchase __________ (___) shares (the "Option Shares") of the
Company's common stock, $.01 par value (the "Common Stock"), according to the
terms and subject to the terms and conditions set forth in this Agreement and
the Plan. The Option is for non-qualified stock and is not intended to be an
"incentive stock option," as that term is used in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. OPTION EXERCISE PRICE.
The per share price to be paid by Optionee in the event of an exercise of
the Option will be $____.
3. DURATION OF OPTION AND TIME OF EXERCISE.
3.1. Initial Period of Exercisability. The Option shall become exercisable
with respect to the Option Shares in four (4) installments. The
following table sets forth the initial dates of exercisability of each
installment and the number of Option Shares as to which this Option
shall become exercisable on such dates:
Initial Date of Number of Option Shares
Exercisability Available for Exercise
_________ __, 200__ #
_________ __, 200__ #
_________ __, 200__ #
_________ __, 200__ #
The foregoing rights to exercise this Option shall be cumulative with
respect to the Option Shares becoming exercisable on each such date
but in no event shall this Option be exercisable after, and this
Option shall become void and expire as to all unexercised Option
Shares at, 5:00 p.m. (Minneapolis, Minnesota
time) on __________ __,
201__ (the "Time of Termination").
3.2. Termination of Employment or Other Service. Except as otherwise
provided in Section 3.3 below:
(a) In the event that the Optionee's employment or other service with
the Company and all Subsidiaries (as defined in the Plan) is
terminated by reason of the Optionee's death, Disability or
Retirement (as such terms are defined in the Plan), this Option
shall remain exercisable to the extent exercisable as of such
termination for a period of one (1) year after such termination
in the case of death or Disability and three (3) months in the
case of Retirement (but in no event after the Time of
(b) In the event the Optionee dies within three months following
termination of employment or other service with the Company for
any reason other than "cause" (as defined in the Plan), then this
Option shall remain exercisable to the extent exercisable as of
such termination for a period of one year after such termination
(but in no event after the Time of Termination).
(c) In the event the Optionee's employment or other service with the
Company and all Subsidiaries is terminated for any reason other
than death, Disability or Retirement, all rights of the Optionee
under the Plan and this Agreement shall immediately terminate
without notice of any kind, and this Option shall no longer be
exercisable; provided, however, that if such termination is due
to any reason other than termination by the Company or any
Subsidiary for "Cause" (as defined in the Plan), this Option
shall remain exercisable to the extent exercisable as of such
termination for a period of three (3) months after such
termination (but in no event after the Time of Termination).
(d) Notwithstanding anything in this Agreement or the Plan to the
contrary, in the event that the Optionee materially breaches the
terms of any confidentiality or non-compete agreement entered
into with the Company or any Subsidiary, whether such breach
occurs before or after termination of the Optionee's employment
or other service with the Company or any Subsidiary, the
Committee in its sole discretion may immediately terminate all
rights of the Optionee under this Agreement and the Plan without
notice of any kind.
3.3. Change in Control.
(a) For purposes of this Section 3.3, the term "Change in Control"
shall have the meaning set forth in Section 9.1 of the Plan.
(b) If any events constituting a Change in Control of the Company
shall occur, then this Option shall become immediately
exercisable in full until the Time of Termination, whether or not
the Optionee remains in the employ or service of the Company or
any Subsidiary. In addition, if a Change in Control of the
Company shall occur, the Committee, in its sole discretion, and
without the consent of the Optionee, may determine that the
Optionee shall receive, with respect to some or all of the Option
Shares, as of the effective date of any such Change in Control of
the Company, cash in an amount equal to the excess of the Fair
Market Value (as defined in the Plan) of such Option Shares
immediately prior to the effective date of such Change in Control
of the Company over the option exercise price per share of this
(c) Notwithstanding anything in this Section 3.3 to the contrary, if,
with respect to the Optionee, acceleration of the exercisability
of this Option or the payment of cash in
exchange for all or part of this Option as provided above (which
acceleration or payment could be deemed a payment within the
meaning of Section 280G(b)(2) of the Code), together with any
other payments which the Optionee has the right to receive from
the Company or any corporation which is a member of an
"affiliated group" (as defined in Section 1504(a) of the Code
without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a "parachute payment" (as
defined in Section 280G(b)(2) of the Code), then the acceleration
of exercisability and the payments to the Optionee as set forth
herein shall be reduced to the largest amount as, in the sole
judgment of the Committee, will result in no portion of such
payments being subject to the excise tax imposed by Section 4999
of the Code.
4. MANNER OF OPTION EXERCISE.
4.1. Notice. This Option may be exercised by the Optionee in whole or in
part from time to time, subject to the conditions contained in the
Plan and herein, by delivery, in person or by registered mail, to the
Company at its principal executive office in Minneapolis, Minnesota
(Attention: Chief Financial Officer), of a written notice of exercise.
Such notice shall be in a form satisfactory to the Committee, shall
identify the Option, shall specify the number of Option Shares with
respect to which the Option is being exercised, and shall be signed by
the person or persons so exercising the Option. Such notice shall be
accompanied by payment in full of the total purchase price of the
Option Shares purchased. In the event that the Option is being
exercised, as provided by the Plan and Section 3.2 above, by any
person or persons other than the Optionee, the notice shall be
accompanied by appropriate proof of right of such person or persons to
exercise the Option. As soon as practicable after the effective
exercise of the Option, the Optionee shall be recorded on the stock
transfer books of the Company as the owner of the Option Shares
purchased, and the Company shall deliver to the Optionee one or more
duly issued stock certificates evidencing such ownership.
4.2. Payment. At the time of exercise of this Option, the Optionee shall
pay the total purchase price of the Option Shares to be purchased
solely in cash (including a check, bank draft or money order, payable
to the order of the Company); provided, however, that to the extent
permitted by the Plan, the Committee, in its sole discretion, may
allow such payments to be made, in whole or in part, by tender of a
Broker Exercise Notice, by tender, or attestation as to ownership, of
Previously Acquired Shares that have been held for the period of time
necessary to avoid a charge to the Company's earnings for financial
reporting purposes and that are otherwise acceptable to the Committee,
or by a combination thereof. For purposes of this Agreement, the terms
"Broker Exercise Notice" and "Previously Acquired Shares" shall have
the meanings set forth in the Plan. In the event the Optionee is
permitted to pay the total purchase price of this Option in whole or
in part with Previously Acquired Shares, the value of such shares
shall be equal to their Fair Market Value on the date of exercise of
Neither this Option nor the Option Shares acquired upon exercise may be
transferred by the Optionee, either voluntarily or involuntarily, or subjected
to any lien, directly or indirectly, by operation of law or otherwise, except as
provided in the Plan. Any attempt to transfer or encumber this Option or the
Option Shares other than in accordance with this Agreement and the Plan shall be
null and void and shall void this Option.
6. LIMITATION OF LIABILITY.
Nothing in this Agreement shall be construed to (a) limit in any way the
right of the Company to terminate the employment or service of the Optionee at
any time, or (b) be evidence of any agreement or understanding, express or
implied, that the Company will retain the Optionee in any particular position,
at any particular rate of compensation or for any particular period of time.
7. WITHHOLDING TAXES.
The Company is entitled to (a) withhold and deduct from future wages of the
Optionee (or from other amounts which may be due and owing to the Optionee from
the Company), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any federal, state or local withholding
and employment-related tax requirements attributable to the grant or exercise of
this Option or otherwise incurred with respect to this Option, or (b) require
the Optionee promptly to remit the amount of such withholding to the Company
before acting on the Optionee's notice of exercise of this Option. In the event
that the Company is unable to withhold such amounts, for whatever reason, the
Optionee hereby agrees to pay to the Company an amount equal to the amount the
Company would otherwise be required to withhold under federal, state or local
In the event of any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin-off) or any other change in the corporate structure or shares
of the Company, the Committee (or, if the Company is not the surviving
corporation in any such transaction, the board of directors of the surviving
corporation), in order to prevent dilution or enlargement of the rights of the
Optionee, shall make appropriate adjustment (which determination shall be
conclusive) as to the number, kind and exercise price of securities subject to
9. SUBJECT TO PLAN.
The Option and the Option Shares granted and issued pursuant to this
Agreement have been granted and issued under, and are subject to the terms of,
the Plan. The terms of the Plan are incorporated by reference herein in their
entirety, and the Optionee, by execution hereof, acknowledges having received a
copy of the Plan. The provisions of this Agreement shall be interpreted as to be
consistent with the Plan, and any ambiguities herein shall be interpreted by
reference to the Plan. In the event that any provision hereof is inconsistent
with the terms of the Plan, the terms of the Plan shall prevail.
10.1. Binding Effect. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
10.2. Governing Law. This Agreement and all rights and obligations
hereunder shall be construed in accordance with the Plan and governed
by the laws of the State of Minnesota
10.3. Entire Agreement. This Agreement and the Plan set forth the entire
agreement and understanding of the parties hereto with respect to the
grant and exercise of this Option and the administration of the Plan
and supersede all prior agreements, arrangements, plans and
understandings relating to the grant and exercise of this Option and
the administration of the Plan.
10.4. Amendment and Waiver. Other than as provided in the Plan, this
Agreement may be amended, waived, modified or cancelled only by a
written instrument executed by the parties hereto or, in the case of
a waiver, by the party waiving compliance.
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The parties hereto have executed this Agreement effective the day and year
first above written.
OPTICAL SENSORS INCORPORATED
[By execution hereof, the Optionee OPTIONEE
acknowledges having received a copy of
the Plan.] ----------------------------------------