UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report: August 13, 2008(Date of earliest event reported)
ABIOMED, Inc.
(Exact name of registrant as specified in its charter)Delaware 04-2743260
(State or other Jurisdiction of Incorporation) (IRS Employer Identification Number)
0-20584
(Commission File Number)
22 Cherry Hill Drive Danvers, MA 01923
(Address of Principal Executive Offices, including Zip Code)
(978) 646-1400
(Registrant’s Telephone Number, including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)
Item 1.01 Entry into a Material Definitive Agreement.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.
Approval of the 2008 Stock Incentive Plan
On August 13, 2008, at our annual meeting of stockholders, our stockholders approved our 2008 Stock Incentive Plan. A copy of the 2008 Stock Incentive plan is set forth in Appendix A to our definitive proxy statement filed with the SEC on July 9, 2008 and is incorporated by reference herein.
Adoption of forms of agreements for use under the 2008 Stock Incentive Plan
Immediately following the annual meeting of stockholders our Compensation Committee adopted the following forms of agreement, which are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, for use under the 2008 Stock Incentive Plan:
• Form of Non-Statutory Stock Option Agreement for Employees and Consultants;
• Form of Non-Statutory Stock Option Agreement for Non-Employee Directors; and
• Form of Restricted Stock Agreement
Each of the forms of agreement provides that our Compensation Committee may accelerate, in full or in part, the vesting of awards pursuant to those agreements upon the occurrence of a change of control, as defined in the agreements.
Grants of Restricted Stock and Stock Option Awards
Also on August 13, 2008, our Compensation Committee approved the issuance of restricted stock awards, pursuant to restricted stock agreements in substantially the form attached hereto as Exhibit 10.3, to the following executive officers in the amounts set forth opposite their respective names:
Name
Number of shares of common stock subject to restricted stock award
Michael R. Minogue, President and
Chief Executive Officer 93,750
David Weber, Chief Operating Officer 72,500
Daniel J. Sutherby, Vice President and
Chief Financial Officer 23,750
William J. Bolt, Senior Vice President,
Engineering and Quality Assurance 45,000
Andrew J. Greenfield, Vice President for
In addition, the Compensation Committee also approved the issuance of a stock option award, pursuant to a stock option agreement in substantially the form attached hereto as Exhibit 10.1, to Mr. Minogue to purchase 93,750 shares of our common stock at an exercise price of $18.63 per share, the closing price of our common stock on August 13, 2008.
Pursuant to the terms of the restricted stock award agreements and the stock option agreement, the restricted stock awards and the stock option award will vest in three tranches, which vary in size depending on the employee, conditioned upon the recipient’s continued employment and the achievement of
performance milestones related to our revenue for fiscal year 2009, fiscal year 2010 and the achievement of a specified profitability threshold by fiscal year 2011. Each of the revenue milestones can vest 0%, 40%, 80% or 100% depending on the applicable revenue thresholds that are reached, while the profitability threshold milestone can vest 0%, 80% or 100% depending on the timing that the threshold is met. For the purposes of the milestones, profitability will be calculated excluding certain costs and expenses associated with stock options, research and development and acquisitions. In addition, the awards vest in full upon a change of control to the extent that the relevant time period for achieving the applicable milestone has not yet lapsed.
In addition, on August 13, 2008, our board of directors approved the form of Non-Statutory Stock Option Agreement for Non-Employee Directors attached hereto as Exhibit 10.1 and granted stock options to each of our non-employee directors. Our lead director received a stock option to purchase 13,500 shares of our common stock and each of our other non-employee directors received a stock option to purchase 12,000 shares of our common stock. The exercise price of these stock options was $18.63 per share, the closing price of our common stock on August 13, 2008, and the stock options vest in full on August 12, 2009, the date of our next scheduled annual meeting of stockholders.
Change of Control Agreements
On August 13, 2008 the Compensation Committee also authorized us to enter into change of control agreements with Messrs. Sutherby, Bolt, Greenfield and Weber (collectively, the “Executives”) in substantially the form attached hereto as Exhibit 10.4.
Under the change of control agreements, if we terminate an Executive’s employment for any reason other than for cause, death or disability during the two-year period following a change of control, as defined in the change of control agreements, or if an Executive terminates his employment with us for good reason during the eighteen-month period beginning six months after a change of control, then we are required to make a lump sum payment to that Executive equal to two times the sum of the Executive’s then-effective annual salary plus their target bonus, except that in the case of Mr. Sutherby the payment shall be equal to Mr. Sutherby’s then-effective annual salary plus his target bonus. For up to two years following any such termination, we are also required to provide medical and dental benefits to the Executive and his family. Additionally upon such a termination, the vesting of all of the Executive’s then-unvested and outstanding stock options and restricted stock will accelerate.
The foregoing description of the form of non-statutory stock option agreement for employees and consultants, the form of non-statutory stock option agreement for non-employee directors, the form of restricted stock agreement and the form of change of control agreement does not purport to be complete and is qualified in its entirety by the terms and conditions of the aforementioned agreements, copies of which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated herein by reference.
Item 8.01 Other Events.
Updated Information Regarding Healthcare Fraud and Abuse Laws
We are supplementing our disclosures in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008, contained in Item 1. Business— Government Regulation, and our risk factor titled “We must comply with healthcare “fraud and abuse” laws, and we could face substantial penalties for non-compliance and be excluded from government healthcare programs, which would adversely affect our business, financial condition and results of operations.” with the following information:
Our business is regulated by laws pertaining to healthcare fraud and abuse, including:
• the Federal Anti-Kickback Statute, which prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration,
directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the furnishing, recommending, or arranging for, a good or service for which payment may be made under a federal healthcare program such as Medicare and Medicaid; and
• state law equivalents to the Anti-Kickback Statute, which may not be limited to government-reimbursed items.
We have various arrangements with customers that may implicate these laws. For example, some physicians who use our products also provide medical advisory and other consulting and personal services. Some of these physician arrangements may not meet Anti-Kickback Statute safe harbor requirements, which may result in increased scrutiny by government authorities having responsibility for enforcing these laws. Additionally, we do not maintain a formal compliance plan concerning interactions with healthcare professionals nor have we formally adopted the recommendations issued by the Office of Inspector General of the U.S. Department of Health and Human Services, or OIG. The OIG may interpret the absence of such formal plan negatively in the case of an enforcement action, which could result in a material adverse effect on our financial condition and results of operations. Further, the absence of a formal compliance plan causes us to be out of compliance with certain state laws — such as in Nevada and California — that require drug and device companies to have formal compliance plans.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Number Title
10.1 Form of Non-Statutory Stock Option Agreement for Employees and Consultants
10.2 Form of Non-Statutory Stock Option Agreement for Non-Employee Directors
10.3 Form of Restricted Stock Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Abiomed, Inc.
By: /s/ Daniel J. Sutherby
Daniel J. Sutherby Chief Financial Officer Date: August 18, 2008
Exhibit Index
Number Title
10.1 Form of Non-Statutory Stock Option Agreement for Employees and Consultants
10.2 Form of Non-Statutory Stock Option Agreement for Non-Employee Directors
10.3 Form of Restricted Stock Agreement
Exhibit 10.1
Date: Non-Statutory Stock Option
Granted by ABIOMED, INC. (hereinafter called the “Company”)
to
(hereinafter called the “Holder”) under the
2008 STOCK INCENTIVE PLAN WITNESSETH:
For valuable consideration, the receipt of which is hereby acknowledged, the Company hereby grants to the Holder the following option: FIRST: Subject to the terms and conditions hereinafter set forth, the Holder is hereby given the right and option to purchase from the Company an aggregate of shares of Common Stock of the Company, $.01 par value, at the time and in the manner hereinafter stated. Schedule A attached hereto and incorporated herein sets forth with respect to this option (i) its expiration date, (ii) its exercise price per share, (iii) its vesting rate, and (iv) certain other terms and conditions applicable to this option and incorporated herein.
This option is and shall be subject in every respect to the provisions of the Company’s 2008 Stock Incentive Plan, as amended from time to time (the “Plan”), which is incorporated herein by reference and made a part hereof. In the event of any conflict or inconsistency between the terms hereof and those of the Plan, the latter shall prevail. References herein to the Committee shall mean the Committee as defined in the Plan.
This option shall be exercised by the delivery of written notice of exercise to the Company (the “Notice”) setting forth the number of shares with respect to which the option is to be exercised and the address to which the certificates for such shares are to be mailed, together with (i) cash or bank check payable to the order of the Company for an amount equal to the option price for the number of shares specified in the Notice, or (ii) with the consent of the Committee, shares of Common Stock of the Company which are not then subject to restrictions,
having a fair market value on the date of surrender not less than the option price for the shares as to which this option is being exercised, (iii) if the Common Stock is registered under the Securities Exchange Act of 1934 (the “Act”) at such time, irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price, provided that in the event the Holder chooses to pay the purchase price as so provided, the Holder 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 and provided further that the Company need not act upon such exercise notice until the Company receives full payment of the exercise price, (iv) by reducing the number of option shares otherwise issuable to the optionee upon exercise of this option by a number of shares of Common Stock having a fair market value on the date of surrender not less than the option price for the shares as to which this option is being exercised, or (v) by any combination of such methods of payment. For the purpose of this option, the fair market value per share of the Common Stock on any given date means the price per share of the Common Stock on such date as reported by a nationally recognized stock exchange, or, if the Common Stock is not listed on such an exchange, the fair market value of the Common Stock as determined by the Committee.
The delivery of certificates representing shares of Common Stock to be purchased pursuant to the exercise of this option will be contingent upon receipt from the Holder (or a purchaser acting in his stead in accordance with the provisions of this option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in this option or imposed by applicable law.
The Holder shall, no later than the date as of which the value of any Common Stock or other amounts received under this option first becomes includable in the gross income of the Holder for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any Federal, state, local and/or payroll taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder. The Holder may elect, with the consent of the Committee, to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Common Stock to be issued pursuant to this option a number of shares with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due with respect to this option, or (ii) transferring to the Company shares of Common Stock which are not subject to restrictions on transfer and with an aggregate fair market value (as of the date the minimum withholding is effected) that would satisfy the withholding amount due.
SECOND: The Company, in its discretion, may file a registration statement on Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), to register shares of Common Stock reserved for issuance under the Plan. At any time at which such a registration statement is not in effect, it shall be an additional condition precedent to any exercise of this option that the Holder shall deliver to the Company a customary “investment letter” satisfactory to the Company and its counsel in which, among other things, the Holder shall state that the Holder is purchasing the shares for investment and acknowledges that they are not freely transferable except in compliance with state and federal securities laws.
-2-THIRD: Within a reasonable time after receipt by the Company of the Notice and payment for any shares to be purchased hereunder and, if required as a condition to exercise, the investment letter described in paragraph SECOND, the Company will deliver or cause to be delivered to the Holder (or if any other individual or individuals are exercising this option, to such individual or individuals) at the address specified in the Notice a certificate or certificates for the number of shares with respect to which the option is then being exercised, registered in the name or names of the individual or individuals exercising the option, either alone or jointly with another person or persons with rights of survivorship, as the individual or individuals exercising the option shall prescribe in writing to the Company at or prior to such purchase; provided, however, that if any law or regulation or order of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or the Holder (or the individual or individuals exercising this option) to take any action in connection with the shares then being purchased, the date for the delivery of the certificates for such shares shall be extended for the period necessary to take and complete such action, it being understood that the Company shall have no obligation to take and complete any such action. The Company may imprint upon such certificate such legends referencing stock transfer restrictions which counsel for the Company or the Committee considers appropriate. Delivery by the Company of the certificates for such shares shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Holder, at the address specified in the Notice.
FOURTH: The existence of this option shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of Common Stock, or any issue of bonds, debentures, preferred or prior preference stock or other capital stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
In the event that the Company effects a stock dividend, stock split or similar change in capitalization affecting the Common Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares remaining subject to this option, and (ii) the option price in respect of such shares. In the event of any merger, consolidation, dissolution or liquidation of the Company, the Committee in its sole discretion may, as to this option, make such substitution or adjustment in the number and purchase price (if any) of shares subject to this option as it may determine and as may be permitted by the terms of such transaction, or accelerate, amend or terminate this option upon such terms and conditions as it shall provide (which, in the case of the termination of the vested portion of this option, shall require payment or other consideration which the Committee deems equitable in the circumstances), subject, however, to the following provisions of this paragraph Fourth.
-3-Upon the occurrence of a Change of Control as defined in this paragraph Fourth:
(i) subject to the provisions of clause (iii) below, after the effective date of such Change of Control, the Holder of this option shall be entitled, upon exercise of this option, to receive, in lieu of shares of Common Stock shares of such stock or other securities, cash or property as the holders of shares of Common Stock received in connection with the Change of Control;
(ii) the Committee may accelerate, fully or in part, the time for exercise of, and waive any or all conditions and restrictions on, the unexercised and unexpired portion of this option, effective upon a date prior or subsequent to the effective date of such Change of Control, specified by the Committee; or
(iii) this option may be cancelled by the Committee as of the effective date of any such Change of Control provided that (x) prior written notice of such cancellation shall be given to the Holder and (y) the Committee shall have accelerated the time for exercise of this option, during the ten (10) day period preceding the effective date of such Change of Control.
“Change of Control” shall mean the occurrence of any one of the following events:
(i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Act) becomes, after the effective date of the Plan, a “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Act) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or
(ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation or other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
(iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
FIFTH: No person shall, by virtue of the granting of this option to the Holder, be deemed to be a holder of any shares purchasable under this option or to be entitled to the rights or privileges of a holder of such shares unless and until this option has been exercised with respect to such shares and they have been issued pursuant to that exercise of this option.
-4-The Company shall, at all times while any portion of this option is outstanding, reserve and keep available, out of shares of its authorized and unissued stock or reacquired shares, a sufficient number of shares of its Common Stock to satisfy the requirements of this option; shall comply with the terms of this option promptly upon exercise of the option rights; and shall pay all fees or expenses necessarily incurred by the Company in connection with the issuance and delivery of shares pursuant to the exercise of this option.
SIXTH: This option is not transferable by the Holder otherwise than by will or under the laws of descent and distribution. The granting of this option shall not impose upon the Company any obligation to employ or to continue to employ the Holder. The right of the Company to terminate the employment of the Holder shall not be diminished or affected by reason of the fact that this option has been granted to such Holder.
This option is exercisable, subject to the vesting rate and certain other terms and conditions contained in Schedule A attached hereto and incorporated herein, at any time prior to the date of expiration of this option and during the Holder’s lifetime, only by the Holder. If the employment of the Holder with the Company or a subsidiary of the Company is terminated, then after such termination the option may be exercised as to all shares with respect to which the Holder could exercise the option on the date of termination (the “Termination Date”), and which shares have not been previously purchased, within one of the following periods of time as applicable:
(i) in the case of termination by reason of death, until the earlier of the expiration of the option or one (1) year after the Termination Date; and
(ii) in all other cases other than termination for cause, until the earlier of the expiration of the option or the date which is ninety (90) days after
the Termination Date.
Notwithstanding the foregoing, in the case of termination for cause (as determined by the Committee in its sole discretion), the ability to exercise this option may be terminated on such earlier date as the Company may specify, and such date may be set so as to prevent the Holder from further exercising any portion of the option.
As used herein, “cause” shall mean a determination by the Company (including the Board) or any affiliate of the Company (parent or subsidiary) that the Holder’s employment or other relationship with the Company or any such affiliate should be terminated as a result of (x) any material breach by the Holder of any agreement to which the Holder and the Company (or any such affiliate) are both parties, (y) any act (other than retirement) or omission to act by the Holder that may have a material and adverse effect on the business of the Company (or any affiliate) or on the Holder’s ability to perform services for the Company (or any affiliate), including, without limitation, the commission of any crime (other than an ordinary traffic violation), or (z) any material misconduct or material neglect of duties by the Holder in connection with the business or affairs of the Company (or any affiliate).
SEVENTH: The Holder agrees that upon the request of the Company or the managing underwriter(s) of any offering of securities of the Company that is the subject of a registration
-5-statement filed under the Securities Act, for a period of time (not to exceed 180 days, plus such additional number of days (not to exceed 35) as may reasonably be requested to enable the underwriter(s) of such offering to comply with Rule 2711(f) of the Financial Industry Regulatory Authority or any amendment or successor thereto) from the effective date of the registration statement under the Securities Act for such offering, the Holder will not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Stock issued pursuant to the exercise of this Option, without the prior written consent of the Company and such underwriters.
EIGHTH: Any notice to be given to the Company hereunder shall be deemed sufficient if addressed to the Company and delivered by hand or by mail to the Treasurer of the Company, 22 Cherry Hill Drive, Danvers, Massachusetts 01923 or such other address as the Company may hereafter designate.
Any notice to be given to the Holder hereunder shall be deemed sufficient if addressed to and delivered in person to the Holder or when deposited in the mail, postage prepaid, addressed to the Holder at the Holder’s address furnished to the Company.
NINTH: This option is subject to all laws, regulations and orders of any governmental authority which may be applicable thereto and, notwithstanding any of the provisions hereof, the Holder agrees that the Holder will not exercise the option granted hereby nor will the Company be obligated to issue or sell any shares of stock hereunder if the exercise thereof or the issuance or sale of such shares, as the case may be, would constitute a violation by the Holder or the Company of any such law, regulation or order or any provision thereof. The Company shall not be obligated to take any affirmative action in order to cause the exercise of this option or the issuance or sale of shares pursuant hereto to comply with any such law, regulation, order or provision.
TENTH: This option shall be governed by, and construed and enforced in accordance with, the substantive laws of The Commonwealth of Massachusetts. IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf as of the date first written above.
ABIOMED, INC. By:
Its: ATTEST: (Seal)
Secretary or Assistant Secretary
-6-SCHEDULE A ABIOMED, INC.
Non-Statutory Stock Option Date of Grant:
Name of Holder: Address: City, State, Zip: Social Security Number: Maximum number of shares for which this option is exercisable: Exercise (purchase) price per share: Expiration date of option:
Vesting Rate:
Position in, or relationship to, the Company: Other terms and conditions:
1. The Holder acknowledges receipt of the stock option of which this Schedule A is a part and agrees to its terms; and further acknowledges receipt of the Plan, as amended, the prospectus describing the Plan (documents incorporated by reference in the prospectus are available upon request), and the annual report of the Company for the most recent fiscal year.
* * *
Holder’s Signature Print Name:
Exhibit 10.2
Date: Non-Statutory Stock Option
Granted by ABIOMED, INC. (hereinafter called the “Company”)
to
(hereinafter called the “Holder”) under the
2008 STOCK INCENTIVE PLAN WITNESSETH:
For valuable consideration, the receipt of which is hereby acknowledged, the Company hereby grants to the Holder the following option: FIRST: Subject to the terms and conditions hereinafter set forth, the Holder is hereby given the right and option to purchase from the Company an aggregate of shares of Common Stock of the Company, $.01 par value, at the time and in the manner hereinafter stated. Schedule A attached hereto and incorporated herein sets forth with respect to this option (i) its expiration date, (ii) its exercise price per share, (iii) its vesting rate, and (iv) certain other terms and conditions applicable to this option and incorporated herein.
This option is and shall be subject in every respect to the provisions of the Company’s 2008 Stock Incentive Plan, as amended from time to time (the “Plan”), which is incorporated herein by reference and made a part hereof. In the event of any conflict or inconsistency between the terms hereof and those of the Plan, the latter shall prevail. References herein to the Committee shall mean the Committee as defined in the Plan.
This option shall be exercised by the delivery of written notice of exercise to the Company (the “Notice”) setting forth the number of shares with respect to which the option is to be exercised and the address to which the certificates for such shares are to be mailed, together with (i) cash or bank check payable to the order of the Company for an amount equal to the option price for the number of shares specified in the Notice, or (ii) with the consent of the Committee, shares of Common Stock of the Company which are not then subject to restrictions,
having a fair market value on the date of surrender not less than the option price for the shares as to which this option is being exercised, (iii) if the Common Stock is registered under the Securities Exchange Act of 1934 (the “Act”) at such time, irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price, provided that in the event the Holder chooses to pay the purchase price as so provided, the Holder 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 and provided further that the Company need not act upon such exercise notice until the Company receives full payment of the exercise price, (iv) by reducing the number of option shares otherwise issuable to the optionee upon exercise of this option by a number of shares of Common Stock having a fair market value on the date of surrender not less than the option price for the shares as to which this option is being exercised, or (v) by any combination of such methods of payment. For the purpose of this option, the fair market value per share of the Common Stock on any given date means the price per share of the Common Stock on such date as reported by a nationally recognized stock exchange, or, if the Common Stock is not listed on such an exchange, the fair market value of the Common Stock as determined by the Committee.
The delivery of certificates representing shares of Common Stock to be purchased pursuant to the exercise of this option will be contingent upon receipt from the Holder (or a purchaser acting in his stead in accordance with the provisions of this option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in this option or imposed by applicable law.
The Holder shall, no later than the date as of which the value of any Common Stock or other amounts received under this option first becomes includable in the gross income of the Holder for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any Federal, state, local and/or payroll taxes of any kind required by law to be withheld with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder. The Holder may elect, with the consent of the Committee, to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from shares of Common Stock to be issued pursuant to this option a number of shares with an aggregate fair market value (as of the date the withholding is effected) that would satisfy the minimum withholding amount due with respect to this option, or (ii) transferring to the Company shares of Common Stock which are not subject to restrictions on transfer and with an aggregate fair market value (as of the date the minimum withholding is effected) that would satisfy the withholding amount due.
SECOND: The Company, in its discretion, may file a registration statement on Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), to register shares of Common Stock reserved for issuance under the Plan. At any time at which such a registration statement is not in effect, it shall be an additional condition precedent to any exercise of this option that the Holder shall deliver to the Company a customary “investment letter” satisfactory to the Company and its counsel in which, among other things, the Holder shall state that the Holder is purchasing the shares for investment and acknowledges that they are not freely transferable except in compliance with state and federal securities laws.
-2-THIRD: Within a reasonable time after receipt by the Company of the Notice and payment for any shares to be purchased hereunder and, if required as a condition to exercise, the investment letter described in paragraph SECOND, the Company will deliver or cause to be delivered to the Holder (or if any other individual or individuals are exercising this option, to such individual or individuals) at the address specified in the Notice a certificate or certificates for the number of shares with respect to which the option is then being exercised, registered in the name or names of the individual or individuals exercising the option, either alone or jointly with another person or persons with rights of survivorship, as the individual or individuals exercising the option shall prescribe in writing to the Company at or prior to such purchase; provided, however, that if any law or regulation or order of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or the Holder (or the individual or individuals exercising this option) to take any action in connection with the shares then being purchased, the date for the delivery of the certificates for such shares shall be extended for the period necessary to take and complete such action, it being understood that the Company shall have no obligation to take and complete any such action. The Company may imprint upon such certificate such legends referencing stock transfer restrictions which counsel for the Company or the Committee considers appropriate. Delivery by the Company of the certificates for such shares shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Holder, at the address specified in the Notice.
FOURTH: The existence of this option shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of Common Stock, or any issue of bonds, debentures, preferred or prior preference stock or other capital stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
In the event that the Company effects a stock dividend, stock split or similar change in capitalization affecting the Common Stock, the Committee shall make appropriate adjustments in (i) the number and kind of shares remaining subject to this option, and (ii) the option price in respect of such shares. In the event of any merger, consolidation, dissolution or liquidation of the Company, the Committee in its sole discretion may, as to this option, make such substitution or adjustment in the number and purchase price (if any) of shares subject to this option as it may determine and as may be permitted by the terms of such transaction, or accelerate, amend or terminate this option upon such terms and conditions as it shall provide (which, in the case of the termination of the vested portion of this option, shall require payment or other consideration which the Committee deems equitable in the circumstances), subject, however, to the following provisions of this paragraph Fourth.
-3-Upon the occurrence of a Change of Control as defined in this paragraph Fourth:
(i) subject to the provisions of clause (iii) below, after the effective date of such Change of Control, the Holder of this option shall be entitled, upon exercise of this option, to receive, in lieu of shares of Common Stock shares of such stock or other securities, cash or property as the holders of shares of Common Stock received in connection with the Change of Control;
(ii) the Committee may accelerate, fully or in part, the time for exercise of, and waive any or all conditions and restrictions on, the unexercised and unexpired portion of this option, effective upon a date prior or subsequent to the effective date of such Change of Control, specified by the Committee; or
(iii) this option may be cancelled by the Committee as of the effective date of any such Change of Control provided that (x) prior written notice of such cancellation shall be given to the Holder and (y) the Committee shall have accelerated the time for exercise of this option, during the ten (10) day period preceding the effective date of such Change of Control.
“Change of Control” shall mean the occurrence of any one of the following events:
(i) any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Act) becomes, after the effective date of the Plan, a “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Act) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or
(ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation or other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
(iii) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
FIFTH: No person shall, by virtue of the granting of this option to the Holder, be deemed to be a holder of any shares purchasable under this option or to be entitled to the rights or privileges of a holder of such shares unless and until this option has been exercised with respect to such shares and they have been issued pursuant to that exercise of this option.
-4-The Company shall, at all times while any portion of this option is outstanding, reserve and keep available, out of shares of its authorized and unissued stock or reacquired shares, a sufficient number of shares of its Common Stock to satisfy the requirements of this option; shall comply with the terms of this option promptly upon exercise of the option rights; and shall pay all fees or expenses necessarily incurred by the Company in connection with the issuance and delivery of shares pursuant to the exercise of this option.
SIXTH: This option is not transferable by the Holder otherwise than by will or under the laws of descent and distribution. The granting of this option shall not impose upon the Company any obligation to appoint the Holder a Director of the Company or to continue the service of the Holder as a Director of the Company. The right of the Company to terminate the service of the Holder as a Director of the Company shall not be diminished or affected by reason of the fact that this option has been granted to such Holder.
This option is exercisable, subject to the vesting rate and certain other terms and conditions contained in Schedule A attached hereto and incorporated herein, at any time prior to the date of expiration of this option and during the Holder’s lifetime, only by the Holder. If the service of the Holder as a Director of the Company is terminated, then after such termination the option may be exercised as to all shares with respect to which the Holder could exercise the option on the date of termination (the “Termination Date”), and which shares have not been previously purchased, within one of the following periods of time as applicable:
(i) in the case of termination by reason of death, until the earlier of the expiration of the option or one (1) year after the Termination Date; and
(ii) in all other cases other than termination for cause, until the earlier of the expiration of the option or the date which is ninety (90) days after
the Termination Date.
Notwithstanding the foregoing, in the case of termination for cause (as determined by the Company), the ability to exercise this option may be terminated on such earlier date as the Company may specify, and such date may be set so as to prevent the Holder from further exercising any portion of the option.
As used herein, “cause” shall mean a determination by the Company (including the Board) or any affiliate of the Company (parent or subsidiary) that the Holder’s employment or other relationship with the Company or any such affiliate should be terminated as a result of (x) any material breach by the Holder of any agreement to which the Holder and the Company (or any such affiliate) are both parties, (y) any act (other than retirement) or omission to act by the Holder that may have a material and adverse effect on the business of the Company (or any affiliate) or on the Holder’s ability to perform services for the Company (or any affiliate), including, without limitation, the commission of any crime (other than an ordinary traffic violation), or (z) any material misconduct or material neglect of duties by the Holder in connection with the business or affairs of the Company (or any affiliate).
-5-SEVENTH: The Holder agrees that upon the request of the Company or the managing underwriter(s) of any offering of securities of the Company that is the subject of a registration statement filed under the Securities Act, for a period of time (not to exceed 180 days, plus such additional number of days (not to exceed 35) as may reasonably be requested to enable the underwriter(s) of such offering to comply with Rule 2711(f) of the Financial Industry Regulatory Authority or any amendment or successor thereto) from the effective date of the registration statement under the Securities Act for such offering, the Holder will not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares of Stock issued pursuant to the exercise of this Option, without the prior written consent of the Company and such underwriters.
EIGHTH: Any notice to be given to the Company hereunder shall be deemed sufficient if addressed to the Company and delivered by hand or by mail to the Treasurer of the Company, 22 Cherry Hill Drive, Danvers, Massachusetts 01923 or such other address as the Company may hereafter designate.
Any notice to be given to the Holder hereunder shall be deemed sufficient if addressed to and delivered in person to the Holder or when deposited in the mail, postage prepaid, addressed to the Holder at the Holder’s address furnished to the Company.
NINTH: This option is subject to all laws, regulations and orders of any governmental authority which may be applicable thereto and, notwithstanding any of the provisions hereof, the Holder agrees that the Holder will not exercise the option granted hereby nor will the Company be obligated to issue or sell any shares of stock hereunder if the exercise thereof or the issuance or sale of such shares, as the case may be, would constitute a violation by the Holder or the Company of any such law, regulation or order or any provision thereof. The Company shall not be obligated to take any affirmative action in order to cause the exercise of this option or the issuance or sale of shares pursuant hereto to comply with any such law, regulation, order or provision.
TENTH: This option shall be governed by, and construed and enforced in accordance with, the substantive laws of The Commonwealth of Massachusetts. IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf as of the date first written above.
ABIOMED, INC. By:
Its: ATTEST: (Seal)
Secretary or Assistant Secretary
-6-SCHEDULE A ABIOMED, INC.
Non-Statutory Stock Option Date of Grant:
Name of Holder: Address: City, State, Zip: Social Security Number: Maximum number of shares for which this option is exercisable: Exercise (purchase) price per share: Expiration date of option:
Vesting Rate:
Position in, or relationship to, the Company: Other terms and conditions:
1. The Holder acknowledges receipt of the stock option of which this Schedule A is a part and agrees to its terms; and further acknowledges receipt of the Plan, as amended, the prospectus describing the Plan (documents incorporated by reference in the prospectus are available upon request), and the annual report of the Company for the most recent fiscal year.
* * *
Holder’s Signature Print Name:
-7-Exhibit 10.3 ABIOMED, Inc.
Restricted Stock Agreement
This Restricted Stock Agreement (this “Agreement”) is made effective as of , between ABIOMED, Inc. (the “Company”), and (the “Employee”), pursuant to the Company’s 2008 Stock Incentive Plan, as it may be amended from time to time (the “Plan”). This Agreement is expressly subject to all of the terms and conditions contained in the Plan, which is hereby incorporated herein by reference. In the event that any of the terms and conditions contained in this Agreement are inconsistent with the Plan, the terms of the Plan shall control. All capitalized terms not defined in this Agreement have the meanings specified in the Plan.
WITNESSETH:
WHEREAS, on the Committee granted a Restricted Stock Award under Section 7 of the Plan to the Employee in the amount of
shares of its Common Stock, $.01 par value of the Company (the “Shares”), subject to the restrictions set forth herein, including restrictions related to the ability of the Employee to transfer the Shares and the forfeiture of any unvested Shares in the event of the termination of the Employee’s employment with the Company; and
WHEREAS, the Plan provides that a participant who is granted a Restricted Stock Award shall have no rights with respect to the Award unless the
participant shall have accepted the Award within sixty (60) days following the award date by making payment to the Company of the specified purchase price of the shares covered by the Award and by executing and delivering to the Company a written instrument that sets forth the terms and conditions applicable to the Restricted Stock in such form as the Committee shall determine (the “Written Instrument”);
WHEREAS, the Committee has specified that the Shares be acquired at no cost;
WHEREAS, this Agreement constitutes the required Written Instrument the Employee must deliver to accept the Restricted Stock Award; and WHEREAS, the Employee wishes to accept the Restricted Stock Award by delivery to the Company of this Agreement;
NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the Company and the Employee agree as follows:
1. Forfeiture; Vesting. If the Employee ceases to be an employee, consultant or advisor to the Company or a subsidiary of the Company at any time for any reason (the date this occurs being hereafter referred to as the “Termination Date”), whether because of any action of the Company or the Employee, the death or incapacity of the Employee or otherwise, all Unvested Shares (as defined below) shall automatically be forfeited to the Company. For purposes of this
Agreement, “Unvested Shares” means any Shares that are not Vested Shares, and “Vested Shares” means any Shares that have vested in accordance with the following schedule:
[ ] [ ] [ ]
Shares shall vest in each case only to the extent that the Employee remains an employee, consultant or advisor to the Company or a subsidiary of the Company at such time.
2. Deposit of Shares. Simultaneously with the execution of this Agreement, the Employee shall deposit with the Company the certificate or certificates representing all of the Stock and shall promptly upon acquisition of any additional shares of stock, as described in Section 6 hereof, deposit with the Company the certificate or certificates for such additional shares. Any such additional shares shall for all purposes be deemed Shares under this Agreement. To all certificates deposited by the Employee with the Company, there shall be attached a stock power or stock powers, duly executed by the Employee in blank, constituting and appointing the Company his attorney to transfer such stock on the books of the Company. The Company shall hold such certificates and stock powers for the purposes of this Agreement. The Employee shall continue to be the owner of the Shares, despite such deposit and stock powers, and shall be entitled to exercise all rights of ownership in such Shares, subject, however, to the provisions of this Agreement.
3. Restriction on Transfer. Other than as set forth in Section 1 with respect to forfeitures to the Company, the Employee shall not sell, assign, transfer, pledge, hypothecate, mortgage, encumber or otherwise dispose of, voluntarily or involuntarily, by operation of law or otherwise (collectively, “transfer”), any of the Unvested Shares or any interest therein, unless and until such Shares are no longer subject to the Repurchase Option.
4. Lock-Up Agreement. The Employee agrees that upon the request of the Company or the managing underwriter(s) of any offering of securities of the Company that is the subject of a registration statement filed under the Securities Act of 1933, as amended, for a period of time (not to exceed 180 days, plus such additional number of days (not to exceed 35) as may reasonably be requested to enable the underwriter(s) of such offering to comply with Rule 2711(f) of the Financial Industry Regulatory Authority or any amendment or successor thereto) from the effective date of the registration statement under the Act for such offering, the Employee will not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Shares, without the prior written consent of the Company and such underwriters.
5. Restrictive Legends. All certificates representing the Shares shall have affixed thereto legends in substantially the following form, in addition to any other legends that may be required under federal or state securities laws:
“The securities represented by this certificate are subject forfeiture and the restrictions on transfer set forth in an agreement between the Corporation and the registered holder hereof, a copy of which will be provided to the holder hereof by the Corporation upon written request and without charge.”
-6. Adjustments for Stock Splits, Stock Dividends, etc.
6.1 If from time to time there is any stock split, stock dividend, stock distribution or other reclassification of the Common Stock of the Company, any and all new, substituted or additional securities to which the Employee is entitled by reason of the Employee’s ownership of the Shares shall be immediately subject to the Repurchase Option and the restrictions on transfer and the other provisions of this Agreement in the same manner and to the same extent as the Shares.
6.2 If the Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation, securities of another corporation, or other property (including cash), pursuant to any merger of the Company or acquisition of its assets, then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as to the Shares.
7. Change in Control. In order to preserve the Employee’s rights under this Agreement in the event of a change in control of the Company, the Committee in its discretion may take one or more of the following actions: (i) provide for the acceleration of any time period relating to the vesting of the Shares, (ii) adjust the terms of this Agreement in a manner determined by the Committee to reflect the change in control, (iii) cause this Agreement to be assumed, or new rights substituted therefor, by another entity, or (iv) make such other provision as the Committee may consider equitable and in the best interests of the Company.
8. Discretion of the Committee. Unless otherwise provided, the Committee shall make all determinations required to be made hereunder, including determinations required to be made by the Company, and shall interpret all provisions of this Agreement, as it deems necessary or desirable, in its sole and unfettered discretion. Such determinations and interpretations shall be binding and conclusive to the Company and the Employee. If there shall be no Compensation Committee of the Corporation’s Board of Directors or if the Board of Directors shall determine that the Board of Directors shall administer this Agreement, all references herein to the Committee shall be deemed references to the Board of Directors.
9. Withholding Taxes; No Section 83(b) Election.
9.1 The Employee acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Employee any federal, state or local taxes of any kind required by law to be withheld with respect to the lapse of the Repurchase Option.
9.2 The Employee has reviewed with the Employee’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Employee is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Employee
-understands that the Employee (and not the Company) shall be responsible for the Employee’s own tax liability that may arise as a result of the Restricted Stock Award or the transactions contemplated by this Agreement. The Employee understands that no election under Section 83(b) of the Code has been, or will be, made with the IRS with respect to the Restricted Stock Award.
10. No Rights To Employment. Nothing contained in this Agreement shall be construed as giving the Employee any right to continued employment with the Company, or to establish or maintain an on-going business relationship with the Company. The Employee acknowledges and agrees that the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as a consultant or employee for the vesting period, for any period, or at all.
11. Remedies. No transfer of Shares shall be effective or given effect on the books of the Company unless all of the applicable provisions of this Agreement have been duly complied with. If any transfer of Shares is made or attempted in violation of the foregoing restrictions the Company shall have the right to cause the forfeiture of such Shares from the owner thereof or his transferee at any time before or after the transfer, as herein provided. In addition to any other legal or equitable remedies which it may have, the Company may enforce its rights by actions for specific performance (to the extent permitted by law) and may refuse to recognize any transferee as one of its stockholders for any purpose, including, without limitation, for purposes of dividend and voting rights, until all applicable provisions hereof have been complied with.
12. Fractional Shares. No fractional shares shall vest under this Agreement and any calculation of Vested Shares that results in a fractional share shall be rounded down to a whole Share.
13. Assignment. The Company may assign any or all of its rights under this Agreement to one or more persons or entities.
14. Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.
15. Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Committee.
16. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Employee and their respective heirs, executors, administrators, legal representatives, successors and assigns, subject to the restrictions on transfer set forth in this Agreement.
17. Amendment. Subject to Section 14 of the Plan, the Committee may amend any conditions of this Agreement. In all other cases, this Agreement may only be modified or amended by a writing signed by both parties.
-18. Notices. Any notices required to be given under this Agreement shall be sufficient if in writing and if sent by certified mail, return receipt requested, and addressed as follows:
if to the Corporation: ABIOMED, Inc. 22 Cherry Hill Drive
Danvers, Massachusetts 01923 Attn: Chief Financial Officer
if to the Employee, at the address of the Employee set forth in the Company’s records or to such other address as either party may designate under the provisions hereof.
19. Applicable Law. All rights and obligations under this Agreement shall be governed by the laws of The Commonwealth of Massachusetts, without regard to its conflicts of law principles.
20. Paragraph Headings. The paragraph headings used in this Agreement are for convenience or reference, and are not to be construed as part of this Agreement.
[SIGNATURE PAGE FOLLOWS] 5
-IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under seal effective as of the date written on the first page of this Agreement. ABIOMED, Inc. By: Its: EMPLOYEE: Print name: Acceptance date: 6
-IRREVOCABLE STOCK POWER
FOR VALUE RECEIVED, the undersigned does hereby sell assign and transfer unto , (SSN or Taxpayer ID)
shares of the capital stock of ABIOMED, INC. represented by certificate(s) no(s) , inclusive, standing in the name of the undersigned on the books of said Company.
The undersigned does (do) hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of said Company, with full power of substitution in the premises.
Print name:
-Exhibit 10.4
AGREEMENT
AGREEMENT by and between ABIOMED, INC., a Delaware corporation (the “Company”), and [ ] (the “Executive”), dated as of the [ ] day of [ ], 2008.
The Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat, or occurrence of a Change of Control (as defined below) of the Company. The Compensation Committee believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the
Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Compensation Committee has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The “Effective Date” shall be the first date during the “Change of Control Period” (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive’s employment with the Company is terminated or the Executive ceases to be an officer of the Company prior to the date on which a Change of Control occurs, and it is reasonably demonstrated that such termination of employment (1) was at the request of a third party who has
taken steps reasonably calculated to effect the Change of Control or (2) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment.
(b) The “Change of Control Period” is the period commencing on the date hereof and ending on the second anniversary of such date; provided, however that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof is hereinafter referred to as the “Renewal Date”), the Change of Control Period shall be automatically extended without any further action by the Company or the Executive so as to terminate two years from such Renewal Date; provided, however, that if the Company shall give notice in writing to the Executive, at least sixty days prior to the Renewal Date, stating that the Change of Control Period shall not be extended, then the Change of Control Period shall expire two years from the last effective Renewal Date.
2. Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent or more of the then outstanding shares of stock of the Company entitled to vote in the election of directors (the “Outstanding Company Common Stock”), whether in one transaction or in multiple transactions which in the aggregate equal or exceed thirty percent of the Outstanding Company Common Stock; provided, however,
-2-that (i) any acquisition by the Company or its subsidiaries, or any employee benefit plan (or related trust) of the Company or its subsidiaries of thirty percent or more of the Outstanding Company Common Stock shall not constitute a Change of Control; (ii) any acquisition by any individual, entity or group of beneficial ownership of thirty percent or more but less than forty percent of the Outstanding Company Common Stock may be deemed by the Incumbent Board (as hereinafter defined), excluding any members of the Incumbent Board affiliated with the acquiror, to not constitute a Change of Control, in the Incumbent Board’s sole and absolute discretion; and (iii) any acquisition by a corporation with respect to which, following such acquisition, more than fifty percent of the then outstanding shares of common stock of such corporation, is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock, shall not constitute a Change of Control; or
(b) Individuals who, as of the date of this Agreement, constitute the Board of the Directors (the “Board”) of the Company (together with any individuals deemed members of the Incumbent Board as set forth in this Section 2(b), the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the
-3-directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Board on the date of this Agreement and a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or
(c) Approval by the stockholders of the Company of (i) a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock immediately prior to such reorganization, merger or consolidation will not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than fifty percent of the then outstanding shares of common stock of the corporation resulting from such a reorganization, merger or consolidation, other than a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as such term is used in Sections 13(d) of the Exchange Act) acquires thirty percent or more of Outstanding Company Common Stock; or (ii) the sale or other disposition of all or substantially all of the assets of the Company, excluding a sale or other disposition of assets to a subsidiary of the Company and excluding a sale or license of a portion of the business of the Company which is deemed by the Incumbent Board, acting in its sole and absolute discretion, to not constitute a Change of Control.
-4-Anything in this Agreement to the contrary notwithstanding, if an event that would, but for this paragraph, constitute a Change of Control results from or arises out of a purchase or other acquisition of the Company, directly or indirectly, by a corporation or other entity in which the Executive has a greater than ten percent direct or indirect equity interest, such event shall not constitute a Change of Control.
3. Employment Period. Subject to the terms and conditions hereof, the Company hereby agrees to continue the Executive in its employ for the period commencing on the Effective Date and ending on the last day of the twenty-fourth month following the month in which the Effective Date occurs (the “Employment Period”). The Executive hereby agrees to remain in the employ of the Company for the period commencing on the Effective Date and ending on the last day of the sixth month following the month in which the Effective Date occurs (the “Six Month Period”).
4. Terms of Employment. (a) Position and Duties. (i) Except as provided in Section 4(c) below, during the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the one hundred and eighty-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote his full business time to the business and affairs of the Company and, to the extent necessary to discharge the
-5-responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such -5-responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable to the Executive by the Company in respect of the twelve-month period immediately preceding the twelve-month in which the Effective Date occurs. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the target bonus of the Executive (annualized for any fiscal year consisting of less than twelve full months or with respect to which the Executive has been
