SECOND AMENDED & RESTATED PERFORMANCE ACCELERATED STOCK OPTIONS AGREEMENT
EXHIBIT
10.3
SECOND
AMENDED & RESTATED
PERFORMANCE
ACCELERATED
This
SECOND AMENDED & RESTATED PERFORMANCE ACCELERATED STOCK OPTIONS AGREEMENT
(this “Agreement”), dated as
of the 14th day of
October, 2008 by and between Orthofix International N.V. (the “Company”) and Xx.
Xxxxxxx X. Xxxxx (the “Optionee”).
WITNESSETH:
WHEREAS,
in connection with the transaction contemplated by the Acquisition Agreement,
dated as of November 20, 2003 (the “Acquisition
Agreement”), among the Company, Trevor Acquisition, Inc., a Delaware
corporation and an indirect wholly owned subsidiary of Orthofix, Breg, Inc., a
California corporation, and Xxxxxxx X. Xxxxx, as shareholder’s representative,
and the Optionee’s employment with the Company, the Company granted the Optionee
Options (as defined herein) to purchase shares of the Company’s common stock,
par value U.S. $0.10 per share (“Common Stock”), on
the terms and conditions set forth in that certain Performance Accelerated Stock
Options Agreement between the Company and the Optionee dated November 20, 2003
(the “Original
Agreement”).
WHEREAS,
the Company and Optionee entered into an Amended and Restated Performance
Accelerated Stock Options Agreement on November 14, 2007 (the “First Amended
Agreement”) in order to amend the Original Agreement and reflect
Optionee's then-current election with respect to exercising the
Options.
WHEREAS,
all Options are vested as of December 30, 2007, pursuant to the terms of the
First Amended Agreement.
WHEREAS,
in connection with the extension of Optionee’s Employment Agreement through
April 1, 2010, the Company and the Optionee have agreed to modify the Optionee’s
election with respect to exercising the Options and desire to amend and restate
the First Amended Agreement in its entirety by executing this
Agreement.
NOW,
THEREFORE, in consideration of the covenants and agreements set forth herein,
the parties hereto hereby agree as follows:
SECTION
1. Definitions. For
the purpose of this Agreement, the following terms shall have the meanings
specified below:
(a) “Board” means the
Board of Directors of the Company.
(b) “Cause” means
termination of the Optionee’s employment because of any of the following
events:
(i)
Any of the events or circumstances under the definition of “Cause”
pursuant to the Optionee’s employment agreement with the Company, dated November
20, 2003, or any future employment agreement (any of which, as amended, the
“Employment
Agreement”), if any such Employment Agreement is in effect;
or
(ii) The
Optionee’s (A) involvement in fraud, misappropriation or embezzlement related to
the business or property of the Company, (B) conviction for, or guilty plea to,
a felony or crime of similar gravity in the jurisdiction which such conviction
or guilty plea occurs, or (C) unauthorized disclosure of any trade secrets or
other confidential information relating to the Company’s business and affairs
(except to the extent such disclosure is required under the applicable
law).
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(c) “Code” means the
Internal Revenue Code of 1986, as amended.
(d) “Committee” means the
Compensation Committee of the Board.
(e) “Expiration Date”
means the date that is the ten (10) year anniversary of the Grant
Date.
SECTION
2. Grant of
Options. Pursuant to the Original Agreement, the Company
granted to the Optionee, as of the Grant Date (as defined in the Original
Agreement) and through the Expiration Date (the “Option Period”),
options to purchase from the Company one hundred and fifty thousand (150,000)
shares of Common Stock at an exercise price of $38.00 per share (the “Options”).
SECTION
3. Exercise
of Options. Subject to the terms and conditions set forth in
this Agreement, the Options shall be subject to the following exercisability
requirements:
(a) Generally. All
shares subject to the Options are fully vested. Notwithstanding the
Expiration Date, the Options are now only exercisable in accordance with the
Optionee’s exercise elections set forth in Section 3(b) hereof and any
limitations on exercise in effect on the date of exercise.
(b) Election to Exercise
Options. Notwithstanding any other provision of this Agreement
to the contrary:
(i) provided
the Optionee’s employment with the Company does not terminate on or prior to
March 31, 2010, the Optionee hereby voluntarily elects (pursuant to section IX.C
of the preamble to the proposed Treasury Regulations (herein so called) issued
under Code Section 409A, as amended by Internal Revenue Notice 2006-79, Section
3.02, and as further modified and superseded by Internal Revenue Notice 2007-86,
Section 3.01) to fix the periods that the Optionee may exercise the Options as
follows:
(A) 50,000
Options during the period beginning April 1, 2010, and ending on December 31,
2010 (the “First
Exercise Period”);
(B) 50,000
Options during the period beginning January 1, 2011, and ending on December 31,
2011 (the “Second
Exercise Period”); and
(C) 50,000
Options during the period beginning January 1, 2012, and ending on December 31,
2012 (the “Third
Exercise Period”);
(ii)
in the event the Optionee’s employment with the Company
terminates (for a reason other than termination by the Company for Cause) on or
prior to March 31, 2010, the Optionee elects to exercise the Options with
respect to 150,000 shares upon the earlier to occur of (A) the later of the
Optionee’s death or January 1, 2009 or (B) the date that is six months and one
day following the date of termination of the Optionee’s employment; provided, however, that the
Optionee shall not be deemed to have elected such exercise if the exercise price
of the Options is greater than the fair market value of the Common Stock on such
date;
(iii) in
the event the Optionee’s employment with the Company is terminated by
the Company for Cause, the Options shall lapse and be canceled; and
(iv) the
Optionee further elects that any amounts payable shall be paid in a lump sum
payment upon exercise of any Options pursuant to this Section 3(b).
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(c) Any
portion of each respective tranche of 50,000 Options that is not exercised by
midnight Eastern Time on the last day of the First Exercise Period, Second
Exercise Period or Third Exercise Period (each, an “Exercise Period”),
respectively, shall not be exercisable thereafter and shall terminate and be
cancelled immediately following such date and time. For the avoidance of doubt
and by way of example, if the Optionee exercises 35,000 of 50,000 Options during
the First Exercise Period, the remaining 15,000 Options exercisable during the
First Exercise Period but not exercised by the Optionee shall lapse and may not
be exercised at any time after the First Exercise Period.
(d) Any
exercise described in Section 3(b) shall be delayed to the extent required to
avoid a violation of federal securities laws or other applicable laws; provided, however, such
exercise shall not be delayed beyond the earliest date at which the Company
reasonably anticipates that such exercise will not cause such
violation. An exercise that would cause inclusion in gross income or
the application of any penalty provision or other provision of the Code is not
treated as a violation of applicable law.
(e) Upon
the death of the Optionee, the executor or administrator of the estate of the
Optionee or the person or persons to whom the Options shall have been validly
transferred by the executor or administrator pursuant to will or the laws of
descent and distribution shall have the right to exercise the Options to the
extent that the Optionee was entitled to exercise them on the date of death
under Section 3(b).
SECTION
4. Termination of
Employment.
(a) General. A
termination of employment shall be deemed to have occurred if the Optionee has a
"separation from service" from the Company as described under Code Section 409A
and the guidance and Treasury Regulations issued thereunder. For purposes
of the determination of whether the Optionee has had a “separation from service”
as described under Code Section 409A and the guidance and Treasury Regulations
issued thereunder, the terms “Company,” “employer” and “service recipient” mean
Orthofix International N.V. and any affiliate with which Orthofix International
N.V. would be considered a single employer under Code Section 414(b) or 414(c),
provided that in applying Code Sections 1563(a)(1), (2), and (3) for purposes of
determining a controlled group of corporations under Code Section 414(b), the
language “at least 50 percent” is used instead of “at least 80 percent” each
place it appears in Code Sections 1563(a)(1), (2), and (3), and in applying
Treasury Regulation Section 1.414(c)-2 for purposes of determining trades or
businesses (whether or not incorporated) that are under common control for
purposes of Code Section 414(c), “at least 50 percent” is used instead of “at
least 80 percent” each place it appears in Treasury Regulation Section
1.414(c)-2. In addition, where the use of such definition of
“Company,” “employer” or “service recipient” for purposes of determining a
“separation from service” is based upon legitimate business criteria, in
applying Code Sections 1563(a)(1), (2), and (3) for purposes of determining a
controlled group of corporations under Code Section 414(b), the language “at
least 20 percent” is used instead of “at least 80 percent” at each place it
appears in Code Sections 1563(a)(1), (2), and (3), and in applying Treasury
Regulation Section 1.414(c)-2 for purposes of determining trades or businesses
(whether or not incorporated) that are under common control for purposes of Code
Section 414(c), the language “at least 20 percent” is used instead of “at least
80 percent” at each place it appears in Treasury Regulation Section
1.414(c)-2.
(b) The
Board and the Committee each shall have the discretion to determine whether
employment has been or could have been terminated for the purposes of this
Agreement, and the reasons therefore. Any such determination shall be
final, binding and conclusive. For the avoidance of doubt and
notwithstanding anything to the contrary in this Agreement, the Optionee
acknowledges that he must remain employed with the Company through March 31,
2010 as a condition precedent to his exercising any Options during any Exercise
Period, except as provided in Sections 3(b)(ii). If during any
Exercise Period the Optionee's employment terminates for a reason other than
termination by the Company for Cause, the respective Options shall continue to
be exercisable by the Optionee, but only in the same amounts and until the end
of each applicable Exercise Period, subject to any limitation on the exercise of
the Options in effect on the date of exercise.
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(c) Change in
Control. No change in control or other business combination
engaged in by or involving the Company or any affiliate of the Company alters
the exercisability of the Options on the dates specified and for the amounts
noted herein.
SECTION
5. Methods
of Exercising Options.
(a) Notice of
Exercise. Subject to the terms and conditions of this
Agreement, the Options may be exercised by written notice to the Company signed
by the Optionee or a Permitted Transferee and stating the number of shares of
Common Stock in respect of which the Options are being
exercised. Such notice shall be accompanied by payment of the full
exercise price. The date of exercise of the Options shall be the
later of (i) the date on which the Company receives the notice of exercise or
(ii) the date on which any requisite conditions are satisfied, including,
without limitation, the conditions set forth below in Section 8
hereof. Notwithstanding any other provision of this Agreement, the
Optionee may not exercise the Options and no shares of Common Stock will be
issued by the Company with respect to any attempted exercise when such exercise
is prohibited by law or any Company policy then in effect. The
Options may not be exercised at any one time as to less than one hundred (100)
shares (or such number of shares as to which the Options are then exercisable if
less than one hundred (100)). In no event shall the Options be
exercisable for a fractional share.
(b) Payment. Prior
to the issuance of a certificate pursuant to Section 14 hereof evidencing the
shares of Common Stock in respect of which all or a portion of the Options shall
have been exercised, the Optionee shall have paid to the Company the exercise
price for all shares of Common Stock purchased pursuant to the exercise of such
Options. Payment may be made by personal check, bank draft or postal
or express money order (such modes of payment are collectively referred to as
“cash”) payable
to the order of the Company in U.S. dollars. Payment may also be made
in mature shares of Common Stock owned by the Optionee, or in any combination of
cash or such mature shares as the Board or the Committee (as the case may be) in
their sole discretion may approve. The Company may also permit the
Optionee to pay for such shares of Common Stock by directing the Company to
withhold shares of Common Stock that would otherwise be received by the
Optionee, pursuant to such rules as the Board or the Committee may establish
from time to time. In the discretion of the Board or the Committee,
and in accordance with rules and procedures established by the Board or the
Committee, the Optionee may be permitted to make a “cashless” exercise of all or
a portion of the Options.
SECTION
6. Withholding. The
Company shall have the right, prior to the delivery of any certificates
evidencing shares of Common Stock to be issued upon full or partial exercise of
the Options (whether by the Optionee or any Permitted Transferees), to require
the Optionee to remit to the Company any amount sufficient to satisfy the
minimum required federal, state or local tax withholding
requirements. The Company may permit the Optionee to satisfy, in
whole or in part, such obligation to remit taxes, by directing the Company to
withhold shares of Common Stock that would otherwise be received by the
Optionee, pursuant to such rules as the Board or the Committee may establish
from time to time. The Company shall also have the right to deduct
from all cash payments made pursuant to, or in connection with, the Options the
minimum required federal, state or local taxes required to be withheld with
respect to such payments.
SECTION
7. Optionee. Whenever
the word “Optionee” is used in any provision of this Agreement under
circumstances where the provision should logically be construed to apply to the
executors, the administrators, the person or persons to whom the Options may be
transferred by will or by the laws of descent and distribution or Permitted
Transferees (as defined below in Section 8 hereof), the word “Optionee” shall be
deemed to include such person or persons.
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SECTION
8. Non-Transferability. Unless
the Board or the Committee determines otherwise on or after the Grant Date, no
Options shall be transferable by the Optionee other than by will or by the laws
of descent and distribution or pursuant to a domestic relations order; provided, however, that the
Board or the Committee may, in their discretion and subject to such terms and
conditions as they shall specify, permit the transfer of the Options for no
consideration to the Optionee’s family members or to one or more trusts or
partnerships established in whole or in part for the benefit of one or more of
such family members (collectively, “Permitted
Transferees”). Any Options transferred to a Permitted
Transferee shall be further transferable only by will or the laws of descent and
distribution or, for no consideration, to another Permitted Transferee of the
Optionee. The Board or the Committee may in their discretion permit
transfers of Options other than those contemplated by this Section
8. During the lifetime of the Optionee, the Options shall be
exercisable only by the Optionee or by a Permitted Transferee to whom such
Options have been transferred in accordance with this Section 8. The
grant of the Options shall impose no obligation on the Optionee to exercise the
Options.
SECTION
9. Shareholder
Rights. No shares of Common Stock shall be issued in respect
of the exercise of the Options until full payment therefor has been
made. The holder of the Options shall have no rights as a shareholder
with respect to any shares of Common Stock covered by the Options until the date
the Optionee or his nominee becomes the holder of record of such
shares. Except as otherwise provided herein, no adjustments shall be
made for dividends or other rights for which the record date is prior to the
date such share certificate is issued.
SECTION
10. No
Restriction on Right to Effect Corporate Changes. Neither this
Agreement nor the existence of any Options granted hereunder shall affect or
restrict in any way the right or power of the Company or the shareholders of the
Company to make or authorize any adjustments, recapitalizations, reorganizations
or other change in the Company’s capital structure or business, any merger or
consolidation of the Company, any issue of stock or of options, warrants or
rights to purchase stock or bond, debentures, preferred or prior preference
stocks whose rights are superior to or affect the shares of Common Stock or the
rights thereof or which are convertible into or exchangeable for shares of
Common Stock, 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.
SECTION
11. Changes
in Capitalization. Notwithstanding any provision of this
Agreement, the number and kind of shares authorized for issuance under Section 2
hereof may be equitably adjusted in the sole discretion of the Board or the
Committee in the event of a stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, extraordinary dividend, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase shares of Common Stock at a price substantially below fair market value
or other similar corporate event affecting the shares of Common Stock in order
to preserve, but not increase, the benefits or potential benefits intended to be
made available under this Agreement. In addition, upon the occurrence
of any of the foregoing events, the number of outstanding Options and the number
and kind of shares subject to any outstanding Options and the exercise price per
share under any outstanding Options may be equitably adjusted (including by
payment of cash to the Optionee) in the sole discretion of the Board or the
Committee in order to preserve the benefits or potential benefits intended to be
made available to the Optionee. Such adjustments shall be made by the
Board or the Committee, in their sole discretion, whose determination as to what
adjustments shall be made, and the extent thereof, shall be
final. Unless otherwise determined by the Board or the Committee,
such adjusted Options shall be subject to the same restrictions (including,
without limitations, the limitations on exercise set forth in Section 3 hereof)
to which the underlying Options are subject.
SECTION
12. No
Right to Employment. Neither this Agreement, the grant of
Options under this Agreement, nor any action taken or omitted to be taken under
this Agreement shall be deemed to create or confer on the Optionee any right to
be retained in the employ of the Company or any subsidiary or other affiliate
thereof, or to interfere with or to limit in any way the right of the Company or
any subsidiary or other affiliate thereof to terminate the employment of such
Optionee at any time.
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SECTION
13. Compliance with
Law. Notwithstanding any of the provisions hereof, the
Optionee hereby agrees that Optionee will not exercise the Options, and that the
Company will not be obligated to issue or transfer any shares of Common Stock to
the Optionee hereunder, if the exercise hereof or the issuance or transfer of
such shares shall constitute a violation by the Optionee or the Company of any
provision of any law or regulation of any governmental authority. Any
determination in this connection by the Board or the Committee (as the case may
be) shall be final, binding and conclusive. In addition, the Board or
the Committee (as the case may be) may require the Optionee purchasing shares of
Common Stock pursuant to this Agreement to represent to and agree with the
Company in writing that such Optionee is purchasing the shares Common Stock for
investment purposes and not with a view to the distribution
thereof.
SECTION
14. Issuance of Share
Certificates. As soon as is reasonably practical after its
receipt of a proper notice of exercise and payment of the exercise price for the
number of shares with respect to which the Options are exercised, the Company
shall deliver to the Optionee, at the principal office of the Company or at such
other location as may be acceptable to the Company and the Optionee, one or more
stock certificates for the appropriate number of shares of Common Stock issued
in connection with such exercise. Such shares of Common Stock shall
be fully paid and nonassessable and shall be issued in the name of the
Optionee. All certificates for shares of Common Stock delivered under
this Agreement shall be subject to such stock-transfer orders and other
restrictions as the Board or the Committee (as the case may be) may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any exchange upon which shares of Common Stock are then
listed, and any applicable securities law, and the Board or the Committee (as
the case may be) may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
SECTION
15. Notice. Every
notice or other communication relating to this Agreement shall be in writing,
and shall be mailed to or delivered to the party for whom it is intended at such
address as may from time to time be designated by it in a notice mailed or
delivered to the other party as herein provided, provided that, unless and until
some other address be so designated, all notices or communications by the
Optionee to the Company shall be mailed or delivered to the Company at its
principal executive office, and all notices or communications by the Company to
the Optionee may be given to the Optionee personally or may be mailed to
Optionee at the Optionee’s last known address, as reflected in the Company’s
records.
SECTION
16. Non-Qualified
Options. The Options are not an “incentive stock option”
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended or any successor provision thereto.
SECTION
17. Binding
Effect. Subject to Section 7 hereof, this Agreement shall be
binding upon the heirs, executors, administrators and successors of the parties
hereto.
SECTION
18. Determinations;
Liability. All determinations by the Board or the Committee
(as the case may be) in construing and interpreting this Agreement shall be
final, binding and conclusive for all purposes and upon all persons interested
herein. No member of the Board or Committee shall be liable for any
action or determination made in connection with the operation or interpretation
of this Agreement and the Company shall indemnify, defend and hold harmless each
such person from any liability arising from or in connection with this
Agreement, except where such liability results directly from such person’s
fraud, willful misconduct or failure to act in good faith. In the
performance of its responsibilities with respect to this Agreement, the Board
and the Committee shall be entitled to rely upon information and advice
furnished by the Company’s officers, the Company’s accountants, the Company’s
counsel and any other party the Board or the Committee deems necessary, and no
member of the Board or the Committee shall be liable for any action taken or not
taken in reliance upon any such advice.
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SECTION
19. Amendments. The
Board and the Committee each shall have the power to alter or amend the terms of
the Options as set forth herein from time to time, and any alteration or
amendment of the terms of the Options by the Board or the Committee shall, upon
adoption, become and be binding on all persons affected thereby without
requirement for consent or other action with respect thereto by any such person,
provided, however, that no
amendment or modification shall materially and adversely alter or impair the
rights of the Optionee in the Options granted pursuant to this Agreement without
the consent of the holder thereof. The Committee shall give written
notice to the Optionee of any such alteration or amendment as promptly as
practicable after the adoption thereof. The foregoing shall not
restrict the ability of the Optionee and the Company by mutual consent to alter
or amend the terms of the Options in any manner approved by the Board or the
Committee.
SECTION
20. Governing
Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York.
SECTION
21. Counterparts. This
Agreement may be signed in counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION
22. Code
Section 409A. This Agreement and the Options are intended to
comply with Section 409A of the Internal Revenue Code of 1986, as
amended. Notwithstanding any provision of this Agreement to the
contrary, this Agreement shall be interpreted and construed consistent with this
intent. Notwithstanding the foregoing, the Company shall not be
required to assume any increased economic burden. Accordingly,
notwithstanding anything in this Agreement or the Options to the contrary, if
the Company determines that the Optionee is a “specified employee” (as defined
in Code Section 409A(a)(2)(B)(i)) at the time of his termination of employment
and any amount payable to the Optionee under this Agreement or the Options would
be considered a payment upon the Optionee’s termination of employment, then such
amount shall not be paid before the date that is the earlier of (i) six months
and one day after the Optionee’s termination of employment or (ii) Optionee’s
death (the “Delay Period”). Upon the expiration of the Delay Period,
the initial payment following the Delay Period shall include a lump sum payment
equal to those payments that otherwise would have been paid if the delay had not
applied, and any remaining payments due shall be payable in accordance with
their original payment schedule.
SECTION
23. Prohibition on
Acceleration. The time or schedule of any payment or amount
scheduled to be paid pursuant to the terms of this Agreement and the Options may
not be accelerated except as otherwise permitted under Code Section 409A and the
guidance and Treasury Regulations issued thereunder.
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first above written.
|
ORTHOFIX
INTERNATIONAL N.V.
|
|
| /s/ Xxxx X. Xxxxxxxxx | |
|
By:
Xxxx X. Xxxxxxxxx
|
|
|
Title:
Chief Executive Officer
|
|
| /s/ Xxxxxxx X. Xxxxx | |
|
By: Xxxxxxx
X. Xxxxx
|
|
|
Title: Group
President, North
America
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