Exhibit 10.13

 

KEY EMPLOYEE AGREEMENT

 

To:

Gary Gillheeney

February 1, 2007

 

Dear Gary:

 

This Amended and Restated Key Employee Agreement (this “Agreement”) by and
between you and Organogenesis Inc. (the “Company”) amends and restates the Key
Employee Agreement dated as of September 18, 2003 by and between you and the
Company (the “Original Agreement”).  This Agreement will become effective on the
date first written above.  The Company and you agree that:

 

1.                                      Position and Responsibilities

 

1.1                               Title and Duties. You shall serve as Executive
Vice President, Chief Operating Officer and Chief Financial Officer of the
Company and shall perform the duties customarily associated with such position
as directed by the Chief Executive Officer or Board of Directors from time to
time and at such place or places as the Chief Executive Officer and/or Board of
Directors shall designate; provided, however, that you shall not be required to
relocate your place of employment to a place that is more than 65 miles from
Johnston, Rhode Island without your prior written consent.

 

1.2                               Outside Boards. With prior written consent,
which consent shall not be unreasonably withheld, you may serve on up to two
outside boards of profit making entities and you may participate without consent
on non-profit boards provided any such activities in the aggregate do not
detract from your duties hereunder.

 

2.                                      Term of Employment

 

2.1                               At Will Employment. Your employment will be as
an employee at will, meaning that you or the Company may end the employment
relationship at any time and for any reason (including no reason at all),
subject to the provisions of this agreement. The Company may terminate your
employment with the Company at any time as provided in Sections 2.2 or 2.3.  You
may terminate your employment without “Good Reason,” as defined in Section 2.4
below, at any time upon at least forty-five (45) days prior written notice, and
with Good Reason immediately upon written notice.  In the event that you
terminate your employment with the Company without Good Reason, and you provide
the Company with forty-five (45) days prior written notice, the Company shall
consider you an employee of the Company until the end of your forty-five (45)
day notice period.

 

2.2                               Termination. The Company shall have the right
to terminate your employment immediately at any time.  If the Company terminates
your employment for “Cause,” no

 

--------------------------------------------------------------------------------

 

compensation or continuation of benefits will occur unless required by law
(e.g., COBRA). “Cause” is defined as (a) gross negligence in the performance of
assigned duties; (b) refusal to perform or discharge the duties or
responsibilities assigned by the Chief Executive Officer and/or Board of
Directors, provided the same are not illegal and are consistent with the duties
customarily associated with your position; (c) conviction of a felony;
(d) willful or prolonged unexcused absence from work; (e) falseness of any
material statement in any employment application with, or resume or other
written communication to the Company; or (f) the material breach of your
obligations under this Agreement or the Invention, Nondisclosure and
Non-Competition Agreement to the material detriment of the Company.

 

2.3                               Severance.  In the event of any termination of
your employment by the Company other than for Cause, or your termination of your
employment for a “Good Reason”, as defined in Section 2.4, the Company hereby
agrees to provide you with the following:

 

2.3.1                     One-half of your then current annual base salary, less
applicable taxes.

 

2.3.2                     continuation for six months of your medical, dental
and life insurance benefits as of the date of your termination; and

 

2.3.3                     executive outplacement services with a mutually
agreeable outplacement provider for up to one year.

 

The salary due hereunder shall be paid to you in six equal monthly installments
commencing within ten (10) days after the date of your termination of employment
with the Company (the six month period from the date of termination of your
employment being referred to as the “Severance Period”), provided, however, that
such salary continuance shall be reduced dollar-for-dollar by the amount of
salary, wages and consulting fees you earn during the Severance Period in
respect of your employment with, or the performance of paid consulting services
as an independent contractor for, any entity or person.  During the Severance
Period and subject to any obligations you may have to a current employer at the
time, you will be required to provide to the Company reasonable transition
services upon request (not to exceed ten (10) hours per month) and the Company
will compensate you for any such transition services at a rate of $115 per
hour.  The Company’s obligation to provide you the severance benefits set forth
above is conditioned on the Company having received a release from you in form
and substance reasonably satisfactory to the Company.

 

2.4                               “Good Reason” means that there has been:

 

2.4.1                     a material diminution of the executive level
responsibilities that you assumed at the time you commenced performing the
duties of the position described in Section 1.1;

 

2.4.2                     a reduction in the rate of your base salary, or
failure by the Company to pay other material compensation due and payable to you
in connection with your employment;

 

2

--------------------------------------------------------------------------------

 

2.4.3                     relocation of your place of employment to a place that
is more than 65 miles from Johnston, Rhode Island without your prior written
consent; or

 

2.4.4                     a material breach by the Company of (i) this agreement
or (ii) any other employee benefit plan which materially and adversely affects
you.

 

3.                                      Compensation.

 

3.1                               Base Salary.  Your base salary shall be
$282,873 per annum, subject to revision following each performance review after
your first full year in the position described in Section 1.1 but at no time
less than $282,873.

 

3.2                               Bonus.  You shall be eligible to receive a
target bonus equal to 35% of your then current base salary.  The Company’s Chief
Executive Officer and you will mutually agree in writing on the criteria for
earning the bonus each year.

 

3.3                               Vacation.  You shall be entitled to four weeks
paid vacation per annum.

 

3.4                               Insurance and Benefits.  You shall be eligible
for participation in any health, dental, disability and other group insurance
plans which may be established and maintained by the Company from time to time. 
You shall also be entitled to life insurance paid for by the Company with a
death benefit of two times your base salary.

 

3.5                               Retirement Plan.  You will be eligible to
participate in the Company’s 401(k) Plan, if any.

 

3.6                               Other Benefits.  You shall be eligible for
such other benefits as are generally available to executives and employees of
the Company from time to time.

 

3.7                               Car Allowance.  You shall receive a car
allowance of not less than $9,129 per year.

 

3.8                               Stock Options.

 

3.8.1                     Performance-Based Stock Option.   The Company has
previously granted you an incentive stock option (the “Performance Option”) to
purchase 0.30% of the Company’s outstanding common stock, par value $0.001 per
share (“Common Stock”) (the option is for 3,000 shares based on the Company
having 1,000,000 shares of Common Stock outstanding).  The Performance Option
has an exercise price of $10.00 per share and vests in full on the fifth (5th)
anniversary of the date of the grant, subject to accelerated vesting as follows:

 

(a)                                 one-third of the option will vest upon the
Company achieving revenue of $7,449,000 or greater during any given thirteen
(13) week period;

 

3

--------------------------------------------------------------------------------

 

(b)                                 an additional one-sixth of the option will
vest upon the Company achieving revenue of $11,173,500 or greater during any
given thirteen (13) week period;

 

(c)                                  an additional one-sixth of the option will
vest upon the Company achieving revenue of $14,898,000 or greater during any
given thirteen (13) week period;

 

(d)                                 an additional one-sixth of the option will
vest upon the Company achieving revenue of $18,622,500 or greater during any
given thirteen (13) week period; and

 

(e)                                  the final sixth of the option will vest
upon the Company achieving revenue of $22,347,000 or greater during any given
thirteen (13) week period.

 

Satisfaction of the preceding milestones will be based upon the Company’s
consolidated revenue calculated in accordance with generally accepted accounting
principles, consistently applied.   If your employment with the Company is
terminated by the Company without Cause or by you for Good Reason and within six
months thereafter, one or more of the preceding milestones is achieved, then you
shall be entitled to exercise the options that vest upon achievement of such
milestone(s). Vested options may be exercised, in whole or in part, at any time
prior to the tenth anniversary of the date of grant.

 

3.8.2                     Time-Based Stock Option.   The Company has previously
granted you an incentive stock option (the “Time-Based Option”) to purchase
0.45% of the Company’s outstanding Common Stock (the option is for 4,500 shares
based on the Company having 1,000,000 shares of Common Stock outstanding).  The
Time-Based Option has an exercise price of $44.16 per share and vests 25% on
June 15, 2006, and 25% at the end of each year thereafter over the following
three years.  Vested options may be exercised, in whole or in part, at any time
prior to the tenth anniversary of the date of grant.

 

3.8.3                     Prohibition on Self-Dealing.  The Company agrees that
for as long as the Performance Option or the Time-Based Option is outstanding,
the Company shall not issues shares of Common Stock or other securities of the
Company convertible into shares of Common Stock (collectively, “Securities”) to
Insiders (as hereinafter defined) at a per share price lower than the exercise
price for such option, unless either (a) the issuance of the Securities to the
Insiders is part of a transaction in which persons who are not Insiders are
purchasing a majority of the Securities in such transaction or (b) the price of
such Securities is no less than the value of such Securities as determined by an
independent third-party valuation expert.  For these purposes, “Insiders” shall
mean Alan Ades, Albert Erani and Glenn Nussdorf, each of their immediate family
members, Organo Investors LLC and Organo PFG LLC, and any entity in which any of
the foregoing, either individually or together, own a controlling interest.  
Notwithstanding the

 

4

--------------------------------------------------------------------------------

 

foregoing, the Company shall not be prohibited from issuing any of the following
Securities that have been approved in good faith by the Board of Directors of
the Company: (i) Securities that are issued upon conversion or exercise of
Securities that are outstanding on the date of grant of such option pursuant to
conversion or exercise provisions that are part of such Securities on the date
of grant of such option and (ii) Securities issued or issuable as a dividend,
stock-split or split-up.

 

3.8.4                     Change of Control Definition.   In the event of a
Change of Control of the Company (as hereinafter defined), all outstanding and
unvested options shall immediately accelerate and become fully vested and
exercisable in full, provided that either (a) you are an employee of the Company
at the time of the Change of Control and your employment with the Company
terminates for any reason within six months after the Change of Control or
(b) your employment with the Company is terminated by the Company without Cause
or by you for Good Reason, in either case within six months prior to the Change
of Control.  “Change of Control” means any one of the following: (i) the closing
of the sale of all or substantially all of the Company’s assets as an entirety;
(ii) the merger or consolidation of the Company with or into another entity or
the merger or consolidation of another entity with or into the Company, in
either case with the effect that immediately after such transaction the
stockholders of the Company immediately prior to such transaction hold less than
a majority in interest of the total voting power of the outstanding voting
securities of the entity surviving such merger or consolidation; (iii) the
closing of a transaction pursuant to which beneficial ownership of more than 50%
of the Company’s outstanding common stock (assuming the issuance of common stock
upon conversion or exercise of all then exercisable conversion or purchase
rights of holders of outstanding convertible securities, options, warrants,
exchange rights and other rights to acquire Common Stock), is transferred to a
single person or entity, or a “group” (within the meaning of
Rule 13d-5(b)(1) under the Securities Exchange Act of 1934) of persons or
entities, in a single transaction or a series of related transactions; or
(iv) individuals who, as of the date of this Agreement, constitute the Board of
Directors of the Company (as of the date thereof, the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date thereof whose election, or
nomination for election by the company’s stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be, for purposes of this Agreement, considered as though such person were a
member of the Incumbent Board.  A transaction shall not constitute a Change in
Control if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities
immediately before such transaction.  A Change of Control shall not be deemed to
have occurred if the Company becomes subject to bankruptcy proceedings.

 

5

--------------------------------------------------------------------------------

 

4.                                      Payment of Legal Fees. To the extent
permitted by law, the Company shall pay up to $51,000 of legal fees, costs of
arbitration, prejudgment interest, and other expenses incurred in good faith by
you as a result of the Company’s unsuccessfully contesting the validity,
enforceability, or interpretation of this Agreement, or as a result of any
conflict (including conflicts related to the calculation of any payments)
between the parties pertaining to this Agreement in which you prevail.

 

5.                                      Former Employers. You represent and
warrant that your employment by the Company will not conflict with and will not
be constrained by any prior or current employment, consulting agreement or
relationship whether oral or written, including without limitation any
non-disclosure, non-solicitation or non-competition agreement you may have
signed with a prior employer or other person or entity.

 

6.                                      Complete Agreement; Amendments.  This
Agreement, the Invention, Nondisclosure and Non-Competition Agreement and the
stock option agreements evidencing the Performance Option and the Time-Based
Option are the entire agreement of the parties with respect to the subject of
your employment with the Company, including, without limitation, any agreements
between you and the Company concerning bonuses or other compensation.  This
Agreement supersedes and replaces the Original Agreement.  Any amendment to this
agreement or waiver by the Company of any right hereunder shall be effective
only if evidenced by a written instrument executed by the parties hereto.

 

7.                                      Governing Law.  This agreement shall be
governed by and construed under Massachusetts law.

 

8.                                      Arbitration. The parties agree to
attempt to settle any dispute under this agreement by mutual discussion and
consent.  Any dispute or claim arising out of this agreement that cannot be so
settled shall be settled by arbitration conducted in accordance with rules, then
obtaining, of the American Arbitration Association, and judgment upon the award
rendered may be entered by any court of competent jurisdiction.  Any arbitration
shall take place in Boston, Massachusetts.  The arbitrator is not empowered to
award punitive damages, or damages in excess of compensatory damages, and each
party irrevocably waives any right to recover such damages with respect to any
dispute resolved by arbitration. The arbitrator shall have the authority and
discretion to award costs and reasonable attorneys’ fees to the prevailing
party. Neither party shall commence any action in any court to resolve any
dispute hereunder except to confirm such an arbitrator’s award.  Nothing in this
Section 8 shall be construed to require the arbitration of disputes arising
under the Invention, Nondisclosure and Non-Competition Agreement, which instead
shall be resolved in the manner described therein.

 

9.                                      Indemnification.  The Company covenants
and agrees to indemnify and hold you harmless against and in respect to any and
all actions, suits, proceedings, claims, demands, judgments, costs, expenses
(including reasonable attorneys’ fees), losses, and damages resulting from your
good faith performance of your duties and obligations under the terms of this
agreement. With respect to any act, omission or event, or any alleged act,
omission or event,

 

6

--------------------------------------------------------------------------------

 

which occurred or is alleged to have occurred during your employment with the
Company, the Company shall provide you with directors and officers
indemnification as provided in the Company’s Certificate of Incorporation and
bylaws, and directors and officers liability insurance coverage in commercially
reasonable amounts.  This Section 9 shall survive the termination of your
employment with the Company.

 

10.                               Assignment.  This agreement shall inure to the
benefit of and be enforceable by your personal or legal representatives,
executors, and administrators, successors, heirs, distributees, devisees, and
legatees.

 

If you agree with the foregoing, please sign your name below, whereupon this
Agreement shall become binding in accordance with its terms.  Please then return
this agreement to the Company. You may retain for your records the accompanying
counterpart of this agreement enclosed herewith.

 

 

Very truly yours,

 

 

 

ORGANOGENESIS INC.

 

 

 

By:

/s/ Albert Erani

 

 

Co-Chair of the Board

 

Accepted and agreed:

 

 

 

 

 

/s/ Gary Gillheeney

 

 

Gary Gillheeney

 

 

 

7

--------------------------------------------------------------------------------