INNOVASIVE DEVICES, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This 1996 Non-Employee Director Stock Option Plan
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(hereinafter, the "Plan") is intended to promote the interests of Innovasive
Devices, Inc., a Massachusetts corporation (the "Company"), by providing an
inducement to obtain and retain the services of qualified persons who are not
employees or officers of the Company to serve as members of its Board of
Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock, par
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value $.0001 per share, of the Company (the "Common Stock") for which options
may be granted under the Plan shall not exceed 150,000 shares, subject to
adjustment in accordance with paragraph 10 of the Plan. Shares subject to the
Plan are authorized but unissued shares or shares that were once issued and
subsequently reacquired by the Company. If any options granted under the Plan
are surrendered before exercise or lapse without exercise, in whole or in part,
the shares reserved therefor shall continue to be available under the Plan.
3. Administration. The Plan shall be administered by the Board or by the
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Compensation Committee appointed by the Board (the "Committee"). In the event
the Board fails to appoint or refrains from appointing a Committee, the Board
shall have all power and authority to administer the Plan. In such event, the
word "Committee" wherever used herein shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power to
construe the Plan, to establish, amend and waive the terms and conditions of
individual options and purchase authorizations granted hereunder, including,
without limitation, terms and conditions relating to vesting, exercisability,
and effect of termination of employment by the Company, and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable.
Effective on and after June 6, 1996, the date the Company first registered
its Common Stock under Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"), the selection of any director of the Company to whom Options
may be granted pursuant to the Plan, the determination of the number of shares
of Common Stock which may be covered by Options granted to any such director
pursuant to the Plan, the specification of the price at which shares of Common
Stock may be purchased pursuant to Options granted to any such director pursuant
to the Plan and the time or times at which Options may be granted to any such
director pursuant to the Plan shall be made solely by (i) a committee of two or
more non-employee directors (as defined in Rule 16b-3(b)(3)(i) under the
Exchange Act as adopted by the Securities and Exchange Commission effective as
of August 15, 1996 or as effective from time to time thereafter) or (ii) the
Board.
4. Granting of Options.
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(a) Annual Grants. At each annual meeting of the Board and during the
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term of the Plan, each person who is then serving on the Board and who is not a
current employee or officer of the Company shall automatically be granted an
option to purchase 2,500 shares of Common Stock, subject to the availability of
shares under the Plan, provided that such person has not received at such annual
meeting a grant pursuant to Section 4(b).
(b) Initial Grants. Each new director who is not a current employee
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or officer of the Company shall receive upon his initial election to the Board
of Directors an option to purchase 10,000 shares of Common Stock.
Except for the specific options referred to above, no other options shall
be granted under the Plan.
5. Option Price. The purchase price of the stock covered by an option
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granted pursuant to the Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of the Plan. For
purposes of the Plan, if, at the time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; (ii) the last reported sale price (on that date) of the Common Stock
on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for over-
the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market or on a national securities exchange. If, at the time an option
is granted under the Plan, the Company's stock is not publicly traded, "fair
market value" shall be the fair market value on the date the option is granted
as determined by the Board in good faith.
6. Period of Option. Unless sooner terminated in accordance with the
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provisions of paragraph 8 of the Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
7. Vesting of Shares and Non-transferability of Options.
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(a) Vesting. Options granted under the Plan shall not be exercisable
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until they become vested. Options granted under the Plan shall vest in the
Optionee and thus become exercisable by the Optionee in four annual installments
of 25% each on the first, second, third and fourth anniversaries of the date of
grant.
(b) Legend on Certificates. The certificates representing such shares
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shall carry such appropriate legend and such written instructions shall be given
to the Company's transfer agent as may be deemed necessary or advisable by
counsel to the Company in order to comply with the requirements of the
Securities Act of 1933 or any state securities laws.
(c) Non-transferability. Any option granted pursuant to the Plan
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shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order,
and shall be exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
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(a) In the event an optionee ceases to be a member
of the Board for any reason, including death or permanent disability, any then
unexercised portion of options granted to such optionee shall, to the extent not
then vested, immediately terminate and become void; any portion of an option
which is then vested but has not been exercised at the time the optionee so
ceases to be a member of the Board may be exercised, to the extent it is then
vested, by the optionee within 180 days of the date the optionee ceased to be a
member of the Board, or, in the event of death or permanent disability, within
one year of the date of death or permanent disability; and all options shall
terminate after the 180-day or one year period, as the case may be, has expired.
(b) Notwithstanding the provisions in this paragraph 8, the Committee
may, in its sole discretion, establish different terms and conditions pertaining
to the effect of a participant's termination of employment by the Company.
9. Exercise of Option. Subject to the terms and conditions of the Plan
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and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company at its principal office address, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares. Payment may be (a) in United States dollars in cash or by
check, (b) in whole or in part in shares of Common Stock of the Company already
owned by the person or persons exercising the option or shares subject to the
option being exercised (subject to such restrictions and
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guidelines as the Board may adopt from time to time), valued at fair market
value determined in accordance with the provisions of paragraph 5 or (c)
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise. There shall be no such exercise
at any one time as to fewer than one hundred (100) shares or all of the
remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificates(s) representing such shares to
be delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Matters. Upon
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the occurrence of any of the following events, an optionee's rights with respect
to options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends. In the event the Company shall issue any of its
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shares as a stock dividend upon or with respect to the shares of stock of the
class which shall at the time be subject to option hereunder, each optionee upon
exercising an Option shall be entitled to receive (for the purchase price paid
upon such exercise) the shares as to which he is exercising his Option and, in
addition thereto (at no additional cost), such number of shares of the class or
classes in which such stock dividend or dividends were declared or paid, and
such amount of cash in lieu of fractional shares, as he would have received if
he had been the holder of the shares as to which he is exercising his Option at
all times between the date of grant of such Option and the date of its exercise.
(b) Merger; Consolidation; Liquidation; Sale of Assets. In the event
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the Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation or if the
Company is liquidated or sells or otherwise disposes of all or substantially all
of its assets to another corporation while unexercised options remain
outstanding under the Plan, (i) subject to the provisions of clauses (iii), (iv)
and (v) below, after the effective date of such merger, consolidation or sale,
as the case may be, each
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holder of an outstanding option shall be entitled, upon exercise of such option,
to receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of the merger, consolidation or sale; or (ii) the Board may waive any
discretionary limitations imposed with respect to the exercise of the option so
that all options from and after a date prior to the effective date of such
merger, consolidation, liquidation or sale, as the case may be, specified by the
Board, shall be exercisable in full; or (iii) all outstanding options may be
cancelled by the Board as of the effective date of any such merger,
consolidation, liquidation or sale, provided that notice of such cancellation
shall be given to each holder of an option, and each such holder thereof shall
have the right to exercise such option in full (without regard to any
discretionary limitations imposed with respect to the option) during a 30-day
period preceding the effective date of such merger, consolidation, liquidation
or sale; or (iv) all outstanding options may be cancelled by the Board as of the
date of any such merger, consolidation, liquidation or sale, provided that
notice of such cancellation shall be given to each holder of an option and each
such holder thereof shall have the right to exercise such option but only to the
extent exercisable in accordance with any discretionary limitations imposed with
respect to the option prior to the effective date of such merger, consolidation,
liquidation or sale; or (v) the Board may provide for the cancellation of all
outstanding options and for the payment to the holders thereof of some part or
all of the amount by which the value thereof exceeds the payment, if any, which
the holder would have been required to make to exercise such option.
(c) Issuance of Securities. Except as expressly provided herein, no
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issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(d) No Fractional Shares. No fractional shares shall actually be
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issued under the Plan. Any fractional shares which, but for this subparagraph
(d), would have been issued to an optionee pursuant to an Option, shall be
deemed to have been issued and immediately sold to the Company for their fair
market value, and the optionee shall receive from the Company cash in lieu of
such fractional shares.
(e) Adjustments. Upon the happening of any of the foregoing events,
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the class and aggregate number of shares set forth in paragraph 2 of the Plan
that are subject to options which previously have been or subsequently may be
granted under the Plan shall also be appropriately adjusted to reflect such
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events. The Board shall determine the specific adjustments to be made under
this paragraph 10 and its determination shall be conclusive.
11. Restrictions on Issuance of Shares. Notwithstanding the provisions of
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paragraphs 4 and 9 of the Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(i) The shares with respect to which the option has been exercised are
at the time of the issue of such shares effectively registered under
applicable Federal and state securities laws as now in force or hereafter
amended; or
(ii) Counsel for the Company shall have given an opinion that such
shares are exempt from registration under Federal and state securities laws
as now in force or hereafter amended; and the Company has complied with all
applicable laws and regulations with respect thereto, including without
limitation all regulations required by any stock exchange upon which the
Company's outstanding Common Stock is then listed.
12. Representation of Optionee. If requested by the Company, the optionee
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shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933).
13. Option Agreement. Each option granted under the provisions of the
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Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf for the Company and by the optionee to whom
such option is granted. The option agreement shall contain such terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the officer executing it.
14. Term and Amendment of Plan. The Plan was adopted by the Board on
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April 2, 1996 and approved by the stockholders of the Company on April 2, 1996.
Options may no longer be granted under the Plan after April 1, 2006, and the
Plan shall terminate when all options granted or to be granted hereunder are no
longer outstanding. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable; provided, however, that
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the Board may not, without approval by the stockholders, (a) increase the
maximum number of shares for which options may be granted under the Plan (except
by adjustment pursuant to Section 11), (b) materially modify the
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requirements as to eligibility to participate in the Plan, (c) materially
increase benefits accruing to option holders under the Plan or (d) amend the
Plan in any manner which would cause Rule 16b-3 to become inapplicable to the
Plan; and provided further that the provisions of the Plan specified in Rule
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16b-3(d) (or any successor or amended provision thereof) under the Securities
Exchange Act of 1934 (including without limitation, provisions as to
eligibility, amount, price and timing of awards) may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act or the rules
thereunder. Termination or any modification or amendment of the Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
15. Compliance with Regulations. It is the Company's intent that the Plan
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comply with all respects with Rule 16b-3 under the Securities Exchange Act of
1934 (or any successor or amended version thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of the Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
16. Governing Law. The validity and construction of the Plan and the
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instruments evidencing options shall be governed by the laws of The Commonwealth
of Massachusetts, without giving effect to the principles of conflicts of law
thereof.
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