ALLIED HEALTHCARE INTERNATIONAL INC. STOCK APPRECIATION RIGHTS AGREEMENT
Exhibit 10.1
THIS STOCK APPRECIATION RIGHTS AGREEMENT (the “Agreement”) is hereby entered into effective as
of April 21, 2009 (the “Date of Grant”) by and between ALLIED HEALTHCARE INTERNATIONAL INC., a New
York corporation (the “Company”), having an address at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
and Xxxxxxxxx Xxxxx, having an address at Fords Field, Xxxxxxxxx Xxxx, Xxxxxxxxxxx, Xxxx Xxxxxx,
Xxxxxxx XX0 0XX (the “Grantee”).
1. PURPOSE. This Agreement is intended to constitute a one person special scheme and forms an
integral part of the Company’s compensation package offered to the Grantee in connection with the
Grantee’s agreement to become employed by the Company as its chief executive officer.
2. GRANT OF AWARD. The Company hereby grants to the Grantee an award of 566,135 stock
appreciation rights (“SARs”) with respect to shares of the Company’s common stock, $.01 par value
per share (the “Shares”), subject to the terms and conditions set forth in this Agreement (the
“Award”). The SARs represent the right to receive from the Company, upon settlement of the Award
under the circumstances set forth herein, a payment, paid in Shares of the Company, equal to the
product of (A) the number of SARs granted pursuant to this Agreement that become vested pursuant to
Section 5 hereof and (B) the excess of (i) the Fair Market Value of one Share of the Company on the
date the vested SARs are paid to the Grantee over (ii) the Base Price.
3. ADMINISTRATION. The terms and conditions of this Agreement are, to the extent
interpretation is required, to be determined by the Compensation Committee of the Company’s Board
of Directors, or such committee of the Board of Directors as may be established and charged with
such responsibilities from time to time. The Compensation Committee of the Board of Directors, any
other committee of the Board of Directors as may be charged with such responsibilities from time to
time, and/or the Board of Directors itself, when acting to administer and interpret this Agreement,
shall be referred to herein as the “Committee.”
4. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms shall have the meanings
indicated:
(a) “Base Price” means the Fair Market Value of one Share determined on the Date of Grant or
such greater price as is required pursuant to Section 7.
(b) “Change of Control” shall be deemed to have occurred at such time as any person, or
persons acting as a group, acquires more than 50% of the outstanding voting equity of the Company,
or at such time as all or substantially all of the assets of the Company are sold or otherwise
disposed of to any person, or persons acting as a group. In the case of a sale or
disposition of assets of the Company, the acquiring party may be treated as a Surviving Entity
for purposes of paragraph 5(d).
(c) “Fair Market Value” means, with respect to a Share as of any date of determination, in the
discretion of the Committee, (i) the last reported sale price (on that date) of the Common Stock on
the principal national securities exchange on which the Shares are traded; or (ii) 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 Shares are not reported on the NASDAQ Stock Market; or (iii) if
Shares are not publicly traded, the fair market value of such Share as determined by the Board in
good faith after taking into consideration all facts which it deems appropriate and in accordance
with applicable statutory and regulatory guidelines.
(d) “Grantee’s Options” means those stock options granted by the Company to the Grantee on
February 6, 2008.
(e) “Performance Period” means the four-year period beginning on October 1, 2007 and ending
September 30, 2011.
(f) “Vesting Date” means September 30, 2011.
5. VESTING.
(a) Performance Vesting. Except as otherwise provided below, as soon as practicable
following the completion of the Performance Period, the Committee shall determine the number of
SARs that will be vested, as of the Vesting Date, based on the achievement of the Performance
Measures set forth on Exhibit A. If the Threshold performance level for all Performance Measures
(as set forth on Exhibit A) has not been achieved, the Award shall be forfeited without
consideration as of the last day of the Performance Period.
(b) Time Vesting. The Award shall vest and become nonforfeitable with respect to the
number of SARs determined to be vested pursuant to Section 5(a) above provided that the Grantee
remains continuously employed with the Company for the three (3) year period beginning on January
14, 2008 and ending on January 13, 2011. Except as provided below, if the Grantee’s employment
with the Company is terminated by the Grantee or the Company prior to January 14, 2011, the Award
shall be immediately forfeited on the date of his termination of employment regardless of the
achievement of any of the Performance Measures set forth in Exhibit A.
(c) Employment Termination: If, prior to January 14, 2011, the Grantee’s employment
with the Company is terminated by reason of the Grantee’s death, a condition that the Committee
determines constitutes a disability, injury or health condition making continued employment
impossible or impractical (which may include, but is not limited to a condition that constitutes a
“disability” for purposes of disability insurance or other benefits), or by reason of any other
circumstances the Committee determines, the Grantee shall become vested in the Award to the extent
determined by the Committee, which determination shall be made by determining the extent to which
the performance levels have been achieved, and further establishing the portion of the Award that
is to be considered vested by multiplying that portion of the Award that are deemed potentially to
have vested by reason of satisfaction of the
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applicable performance levels by a fraction, the numerator of which is the number of completed
months elapsed from October 1, 2007 through the date of the Grantee’s termination of employment,
and the denominator of which is forty-eight (48).
(d) Change of Control: In the event there is a Change of Control, the Award shall
become immediately vested to the same extent as provided for in paragraph 5(c), above, and shall,
to the extent vested, be exercisable for a period of thirty (30) days following the Change of
Control. If not exercised within such thirty (30) day period, the Award shall be forfeited.
Notwithstanding the foregoing, however, if there is a surviving entity following the Change of
Control that is continuing the business operations of the Company as in place immediately prior to
the Change of Control (the “Surviving Entity”), and the Surviving Entity makes arrangements for the
continuation of the Award, with appropriate adjustments to take into account changes in the
business structure of the Surviving Entity as compared with the Company immediately prior to the
Change of Control, the Award shall only become vested at the time and to the extent provided in
this Agreement without regard to the accelerated vesting provided for in this paragraph 5(d).
(e) Termination for Cause. If the Grantee’s employment with the Company is terminated
at any time by the Company for reasons the Committee constitutes Cause for the Grantee’s
termination, the Award shall be forfeited in its entirety, without regard to whether the Award had
previously become vested and exercisable. For this purpose, “Cause” includes the circumstances
that would permit the Company to terminate the Grantee’s employment pursuant to “Termination by
Events of Default” in that certain employment agreement in effect between the Grantee and the
Company dated December 22, 2007, (other than clause (e) (relating to becoming of unsound mind) and
clause (i) (relating to illness or injury).
6. PAYMENT OF AWARD. Subject to the provisions of Sections 7 and 10 hereof, the Company shall
deliver to the Grantee a payment for each earned and vested SAR as determined in accordance with
this Agreement, with such payment to be made in Shares. Payment shall be made as soon as
practicable following the Committee’s determination of the number of vested SARs, based on the
achievement of the Performance Measures set forth on Exhibit A, but not later than January 31,
2012.
7. LIMITS ON AWARD.
(a) Notwithstanding any provisions contained herein to the contrary, the maximum aggregate
value of (i) the vested portion of the Award and (ii) the vested portion of the Grantee’s Options
(“Total Award Value”) shall be limited to £3,000,000, determined as of the date the Award is
settled. If the Total Award Value exceeds £3,000,000, the Base Price shall increase so that the
Total Award Value equals £3,000,000.
(b) The value of the vested portion of the Grantee’s Options shall be determined, if still
outstanding on the date the Award is settled, as of the date the Award is settled and shall be
equal to the excess of (i) the Fair Market Value of the Shares subject to the vested portion of the
Grantee’s Options on such date, in the aggregate, over (ii) the exercise price required to purchase
such Shares in their entirety. The Grantee shall not be obligated to exercise
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the Grantee’s Options in connection with the settlement of the Award, and future increases in
value of the Grantee’s Options shall have no impact on the value of the Award.
(c) If the vested portion of the Grantee’s Options have been exercised, in whole or in part,
prior to the date the Award is settled hereunder, the value of the vested portion of the Grantee’s
Options, to the extent already exercised, shall be equal to the excess of the Fair Market Value of
the Shares purchased upon exercise of the Option, determined as of the date the Option was
exercised over (ii) the exercise price required to purchase such Shares.
(d) Because the limitation on the value of the Award in paragraph 6(b), above, is an
aggregate, the limitation shall be applied on a pro rata basis if the Award actually being
exercised represent less than all of the SARs.
8. NONTRANSFERABILITY. The Award may be transferred only by will or the laws of descent and
distribution, but only to the extent vested as of the date of the Grantee’s death. During the
Grantee’s lifetime, the Award may be exercised only by the Grantee (or by the Grantee’s legal
representative in the event the Grantee is disabled and is incapable of acting on his own behalf).
9. GRANTEE’S REPRESENTATIONS.
(a) Grantee acknowledges that the Company may issue Shares upon the settlement of the Award
without registering such Shares under the Securities Act of 1933, as amended (the “1933 Act”), on
the basis of certain exemptions from such registration requirement. Accordingly, Grantee agrees
that the settlement of Award may be expressly conditioned upon his delivery to the Company of an
investment certificate including such representations and undertakings as the Company may
reasonably require in order to assure the availability of such exemptions, including a
representation that Grantee is acquiring the Shares for investment and not with a present intention
of selling or otherwise disposing thereof and an agreement by Grantee that the certificates
evidencing the Shares may bear a legend indicating such non registration under the 1933 Act and the
resulting restrictions on transfer. Grantee acknowledges that, because Shares received upon the
settlement of the Award may be unregistered, Grantee may be required to hold the Shares
indefinitely unless they are subsequently registered for resale under the 1933 Act or an exemption
from such registration is available.
(b) Grantee hereby acknowledges that, in addition to certain restrictive legends that the
securities laws of the jurisdiction in which Grantee resides may require, each certificate
representing the Shares may be endorsed with the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY HAVE BEEN ACQUIRED
BY THE HOLDER FOR INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT AND ANY
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APPLICABLE STATE SECURITIES LAW OF RECEIPT BY THE ISSUER OF AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT REGISTRATION
UNDER THE ACT AND APPLICABLE STATE LAW IS NOT REQUIRED.
10. ADJUSTMENT IN THE SHARES. If the Shares, as presently constituted, shall be changed into
or exchanged for a different number or kind of shares or other securities of the Company or of
another corporation (whether by reason of merger, consolidation, recapitalization,
reclassification, split, reverse split, combination of shares, or otherwise) or if the number of
Shares shall be increased through the payment of a share dividend, the determinations of value of
the Award and of the Shares that may be issued upon the settlement of the Award shall be modified
so as to preserve the intended economic benefits intended to be provided by the grant of the Award,
as determined by the Committee. The deemed exercise price and other terms of the hypothetical
nonqualified stock option to which the grant of the Award corresponds shall be appropriately
modified as determined by the Committee.
11. TAX WITHHOLDING. The Company shall have the right to require the Grantee to remit to the
Company amount sufficient to satisfy any applicable foreign, federal, state and local tax
withholding requirements in respect of the settlement of the Award. The Grantee may give the
Company cash equal to the amount required to be withheld or the Company may withhold Shares
otherwise issuable upon the settlement of the Award having a Fair Market Value on the settlement
date equal to the amount required to be withheld (but only to the extent of the minimum amount that
must be withheld to comply with applicable foreign, state, federal and local income, employment and
wage tax laws.)
12. NO LIMITATION ON RIGHTS OF COMPANY. The Award shall not in any way affect the right or
power of the Company to make adjustments, reclassifications, or changes in its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
13. NO RIGHTS AS A SHAREHOLDER. The Grantee shall have no rights of a shareholder with
respect to any shares that may be transferable to the Grantee in connection with the settlement of
the Award unless and until Shares are in fact issued to the Grantee.
14. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein to the contrary, the
Company shall not be obligated to cause to be issued or delivered any certificates for Shares
pursuant to the settlement of the Award, unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authority, and the requirements of any exchange upon which Shares are
traded. The Company shall in no event be obligated to register any securities pursuant to the 1933
Act (as now in effect or as hereafter amended) or to take any other action in order to cause the
issuance and delivery of such certificates to comply with any such law, regulation or requirement.
The Board of Directors of the Company may require, as a condition of the issuance and delivery of
such certificates and in order to ensure compliance with such laws, regulations, and requirements,
that the Grantee make such covenants, agreements, and representations as the Board of Directors, in
its sole discretion, considers necessary or desirable.
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15. NO OBLIGATION TO EXERCISE RIGHTS. The granting of the Award shall impose no obligation
upon the Grantee to exercise the Award.
16. AGREEMENT NOT A CONTRACT OF EMPLOYMENT. This Agreement is not a contract of employment,
and the terms of service of the Grantee or the relationship of the Grantee with the Company or any
affiliate shall not be affected in any way by this Agreement except as specifically provided
herein. The execution of this Agreement shall not be construed as conferring any legal rights upon
the Grantee for a continuation of directorship or relationship with the Company or any affiliate,
nor shall it interfere with the right of the Company or any affiliate to discharge the Grantee and
to treat him without regard to the effect which that treatment might have upon him as a Grantee.
17. NOTICES. Any notice or other communication required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified, registered, or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered personally or, if mailed,
four days after the date of deposit in the United States mails, to each party at its address set
forth above or to such other address as may be designated in a notice given in accordance with this
paragraph 17.
18. GOVERNING LAW. Except to the extent preempted by Federal law, this Agreement shall be
construed and enforced in accordance with, and governed by, New York law other than its conflicts
of law provisions.
19. ENTIRE AGREEMENT. This Agreement contains all of the understandings and agreements
between the Company and its affiliates, and the Grantee concerning the Award and supersedes all
earlier negotiations and understandings, written or oral, between the parties with respect thereto.
The Company, its affiliates and the Grantee have made no promises, agreements, conditions or
understandings, either orally or in writing, that are not included in this Agreement.
20. HEADINGS. The headings of paragraphs and subparagraphs herein are included solely for
convenience of reference and shall not affect the meaning of any of the provisions of the
Agreement.
21. AMENDMENTS. This Agreement may be amended or modified at any time by an instrument in
writing signed by the parties hereto.
IN WITNESS WHEREOF, the Company and the Grantee have duly executed this Agreement as of the
date first written above.
| ALLIED HEALTHCARE INTERNATIONAL INC. |
||||
| By: | /s/ Xxxxxxx Xxxxx | |||
| Title: Interim Chairman | ||||
| GRANTEE |
||||
| /s/ Xxxxx Xxxxx | ||||
| Xxxxxxxxx Xxxxx | ||||
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EXHIBIT A
Schedule of Performance Measures
| Metric | Weighting | Measurement Period | Threshold | Base | Stretch | |||||||||||||||
Sales Growth |
40 | % | Average of October | 34.4 | % | 43.8 | % | 52.4 | % | |||||||||||
| 1, 2009 - September | ||||||||||||||||||||
| 30, 2011 vs. Base | ||||||||||||||||||||
| Year ending | ||||||||||||||||||||
| September 30, 2007 | ||||||||||||||||||||
Earnings per Share |
30 | % | Average of October | 417.6 | % | 617.4 | % | 789.3 | % | |||||||||||
Growth |
1, 2009 - September | |||||||||||||||||||
| 30, 2011 vs. Base | ||||||||||||||||||||
| Year ending | ||||||||||||||||||||
| September 30, 2007 | ||||||||||||||||||||
| EBITA
(Earnings Before Interest, Taxes, and Amortization) Growth |
30 | % | Average of
October 1, 2009 - September 30, 2011 vs. Base Year ending September 30, 2007 |
150.6 | % | 228.5 | % | 311.7 | % | |||||||||||
Vesting Schedule
| Metric | < Threshold | Threshold | Base | Stretch | > Stretch | |||||||||||||||
Sales Growth |
0 | % | 4 | % | 22 | % | 40 | % | 40 | % | ||||||||||
Earnings per Share Growth |
0 | % | 3 | % | 16.5 | % | 30 | % | 30 | % | ||||||||||
EBITA Growth |
0 | % | 3 | % | 16.5 | % | 30 | % | 30 | % | ||||||||||
Total Vesting |
0 | % | 10 | % | 55 | % | 100 | % | 100 | % | ||||||||||
The above Metrics shall generally be applied to determine the vesting of the SARs as of
September 30, 2011, based on the following:
1. The determination of vesting attributable to each performance metric shall be independent
from the other performance metrics. For example, a below threshold performance
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on a single performance metric does not preclude vesting under either or both of the other
performance metrics.
2. If the actual results fall between Threshold and Base, or Base and Stretch, the vesting of
the Award will be prorated.
3. For purposes of measuring EBITA Growth and Earnings Per Share Growth, the accounting cost
of the long-term incentive plan share-based remuneration shall be included.
4. The Committee may adjust the performance metrics attributable to the Award at its
discretion at any time to take into account exceptional events, such as mergers, acquisitions and
share buybacks.
5. The performance metrics will be measured in the reporting currency for the Company’s
financial statements at the time of the payout of the Award. Any necessary currency conversions
shall be made using the average exchange rate over the course of the Performance Period.
6. In the event a determination regarding vesting of the Award is required to be made before
September 30, 2011, the performance metrics described above will be annualized on the basis of the
period elapsed from October 1, 2009 through such date of determination. The Company shall be
deemed not to have achieved any portion of the above performance metrics prior to October 1, 2009,
so that no portion of the Award shall become vested prior to such date, except to the extent
expressly provided in the Agreement. The methodology used by the Committee in determining the
extent to which any of the performance metrics have been achieved as of a date prior to September
30, 2011 shall be determined at the discretion of the Committee, taking into account such factors
as it deems appropriate under the facts and circumstances existing at the time of any such
determination.
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