Exhibit 10.5
NxStage Medical, Inc.
2005 EMPLOYEE STOCK PURCHASE PLAN
     The purpose of this Plan is to provide eligible employees of NxStage
Medical, Inc. (the “Company”) and certain of its subsidiaries with opportunities
to purchase shares of the Company’s common stock, $.001 par value (the “Common
Stock”), commencing January 1, 2006 (the “Commencement Date”). An aggregate of
50,000 shares of Common Stock1 have been approved for this purpose. This Plan is
intended to qualify as an “employee stock purchase plan” as defined in
Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”), and
the regulations promulgated thereunder, and shall be interpreted consistent
therewith.
     1.      Administration. The Plan will be administered by the Company’s
Board of Directors (the “Board”) or by a Committee appointed by the Board (the
“Committee”). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
     2.      Eligibility. All employees of the Company, including Directors who
are employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a “Designated Subsidiary”), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
               (a)      they are customarily employed by the Company or a
Designated Subsidiary for more than 20 hours a week and for more than five
months in a calendar year; and
               (b)      they have been employed by the Company or a Designated
Subsidiary for at least three months prior to enrolling in the Plan; and
               (c)      they are employees of the Company or a Designated
Subsidiary on the first day of the applicable Plan Period (as defined below).
     No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
     3.      Offerings. The Company will make one or more offerings
(“Offerings”) to employees to purchase stock under this Plan. Offerings will
begin each January 1 and July 1, or the first business day thereafter (the
“Offering Commencement Dates”). Each Offering Commencement Date will begin a
six-month period (a “Plan Period”) during which payroll deductions will be made
and held for the purchase of Common Stock at the end of the Plan Period. The
Board or the Committee may, at its discretion, choose a different Plan Period of
twelve (12) months or less for subsequent Offerings.
 

1   After giving effect to the proposed reverse stock split of the Company’s
Common Stock in anticipation of the initial public offering.

 

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     4.      Participation. An employee eligible on the Offering Commencement
Date of any Offering may participate in such Offering by completing and
forwarding a payroll deduction authorization form to the employee’s appropriate
payroll office at least five business days prior to the applicable Offering
Commencement Date. The form will authorize a regular payroll deduction from the
Compensation received by the employee during the Plan Period. Unless an employee
files a new form or withdraws from the Plan, his deductions and purchases will
continue at the same rate for future Offerings under the Plan as long as the
Plan remains in effect. The term “Compensation” means the amount of money
reportable on the employee’s Federal Income Tax Withholding Statement, excluding
overtime, shift premium, incentive or bonus awards, allowances and
reimbursements for expenses such as relocation allowances for travel expenses,
income or gains on the exercise of Company stock options or stock appreciation
rights, and similar items, whether or not shown on the employee’s Federal Income
Tax Withholding Statement, but including, in the case of salespersons, sales
commissions to the extent determined by the Board or the Committee.
     5.      Deductions. The Company will maintain payroll deduction accounts
for all participating employees. With respect to any Offering made under this
Plan, an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 10% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made. Payroll
deductions may be at the rate of 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, 9% or 10% of
Compensation with any change in compensation during the Plan Period to result in
an automatic corresponding change in the dollar amount withheld. The minimum
payroll deduction is such percentage of compensation as may be established from
time to time by the Board or the Committee.
     6.      Deduction Changes. An employee may decrease or discontinue his
payroll deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
     7.      Interest. Interest will not be paid on any employee accounts,
except to the extent that the Board or the Committee, in its sole discretion,
elects to credit employee accounts with interest at such per annum rate as it
may from time to time determine.
     8.      Withdrawal of Funds. An employee may at any time prior to the close
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee’s account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.

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     9.      Purchase of Shares.
               (a)      Number of Shares. On the Offering Commencement Date of
each Plan Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option (“Option”) to purchase on the last business
day of such Plan Period (the “Exercise Date”) at the applicable purchase price
(the “Option Price”) the largest number of whole shares of Common Stock of the
Company as does not exceed the employee’s accumulated payroll deductions as of
the Exercise Date divided by the Option Price for such Plan Period; provided,
however, that no employee may be granted an Option which permits his rights to
purchase Common Stock under this Plan and any other employee stock purchase plan
(as defined in Section 423(b) of the Code) of the Company and its subsidiaries,
to accrue at a rate which exceeds $25,000 of the fair market value of such
Common Stock for each calendar year in which the Option is outstanding at any
time.
               (b)      Option Price. The Board or the Committee shall determine
the Option Price for each Plan Period, including whether such Option Price shall
be determined based on the lesser of (i) the closing price of the Common Stock
on the first business day of the Plan Period or (ii) the Exercise Date, or shall
be based solely on the closing price of the Common Stock on the Exercise Date;
provided, however, that such Option Price shall be at least 85% of the
applicable closing price. In the absence of a determination by the Board or the
Committee, the Option Price will be 95% of the closing price of the Common Stock
on the Exercise Date. The closing price shall be (x) the closing price on any
national securities exchange on which the Common Stock is listed, (y) the
closing price of the Common Stock on the Nasdaq National Market or (z) the
average of the closing bid and asked prices in the over-the-counter-market,
whichever is applicable, as published in The Wall Street Journal. If no sales of
Common Stock were made on such a day, the price of the Common Stock for purposes
of clauses (x) and (y) above shall be the reported price for the next preceding
day on which sales were made.
               (c)      Exercise of Option. Each employee who continues to be a
participant in the Plan on the Exercise Date shall be deemed to have exercised
his Option at the Option Price on such date and shall be deemed to have
purchased from the Company the number of whole shares of Common Stock reserved
for the purpose of the Plan that his accumulated payroll deductions on such date
will pay for, but not in excess of the maximum number determined in the manner
set forth above.
               (d)      Return of Unused Payroll Deductions. Any balance
remaining in an employee’s payroll deduction account at the end of a Plan Period
will be automatically refunded to the employee, except that any balance which is
less than the purchase price of one share of Common Stock will be carried
forward into the employee’s payroll deduction account for the following
Offering, unless the employee elects not to participate in the following
Offering under the Plan, in which case the balance in the employee’s account
shall be refunded.
     10.     Issuance of Certificates. Certificates representing shares of
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or (in the Company’s sole discretion) in
the name of a brokerage firm, bank or other nominee holder designated by the
employee. The Company may, in its sole discretion and in compliance with

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applicable laws, authorize the use of book entry registration of shares in lieu
of issuing stock certificates.
     11.     Rights on Retirement, Death or Termination of Employment. In the
event of a participating employee’s termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee’s account shall be
paid to the employee or, in the event of the employee’s death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee’s estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
     12.     Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
     13.     Rights Not Transferable. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee’s lifetime
only by the employee.
     14.     Application of Funds. All funds received or held by the Company
under this Plan may be combined with other corporate funds and may be used for
any corporate purpose.
     15.     Adjustment for Changes in Common Stock and Certain Other Events.
               (a)      Changes in Capitalization. In the event of any stock
split, reverse stock split, stock dividend, recapitalization, combination of
shares, reclassification of shares, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than an ordinary cash dividend, (i) the number and class of securities available
under this Plan, (ii) the share limitations set forth in Section 9, and
(iii) the Option Price shall be appropriately adjusted to the extent determined
by the Board or the Committee.
               (b)      Reorganization Events.
                         (1)      Definition. A “Reorganization Event” shall
mean: (a) any merger or consolidation of the Company with or into another entity
as a result of which all of the Common Stock of the Company is converted into or
exchanged for the right to receive cash, securities or other property or is
cancelled, (b) any exchange of all of the Common Stock of the Company for cash,
securities or other property pursuant to a share exchange transaction or (c) any
liquidation or dissolution of the Company.

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                         (2)      Consequences of a Reorganization Event on
Options. In connection with a Reorganization Event, the Board or the Committee
shall take any one or more of the following actions as to outstanding Options on
such terms as the Board or the Committee determines: (i) provide that Options
shall be assumed, or substantially equivalent Options shall be substituted, by
the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon
written notice to employees, provide that all outstanding Options will be
terminated as of the effective date of the Reorganization Event and that all
such outstanding Options will become exercisable to the extent of accumulated
payroll deductions as of a date specified by the Board or the Committee in such
notice, which date shall not be less than ten (10) days preceding the effective
date of the Reorganization Event, (iii) upon written notice to employees,
provide that all outstanding Options will be cancelled as of a date prior to the
effective date of the Reorganization Event and that all accumulated payroll
deductions will be returned to participating employees on such date, (iv) in the
event of a Reorganization Event under the terms of which holders of Common Stock
will receive upon consummation thereof a cash payment for each share surrendered
in the Reorganization Event (the “Acquisition Price”), make or provide for a
cash payment to an employee equal to (A) the Acquisition Price times the number
of shares of Common Stock subject to the employee’s Option (to the extent the
Option Price does not exceed the Acquisition Price) minus (B) the aggregate
Option Price of such Option, in exchange for the termination of such Option,
(v) provide that, in connection with a liquidation or dissolution of the
Company, Options shall convert into the right to receive liquidation proceeds
(net of the Option Price thereof) and (vi) any combination of the foregoing.
     For purposes of clause (i) above, an Option shall be considered assumed if,
following consummation of the Reorganization Event, the Option confers the right
to purchase, for each share of Common Stock subject to the Option immediately
prior to the consummation of the Reorganization Event, the consideration
(whether cash, securities or other property) received as a result of the
Reorganization Event by holders of Common Stock for each share of Common Stock
held immediately prior to the consummation of the Reorganization Event (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if the consideration received as a result of the
Reorganization Event is not solely common stock of the acquiring or succeeding
corporation (or an affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the consideration to be
received upon the exercise of Options to consist solely of common stock of the
acquiring or succeeding corporation (or an affiliate thereof) equivalent in
value (as determined by the Board) to the per share consideration received by
holders of outstanding shares of Common Stock as a result of the Reorganization
Event.
     16.     Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
     17.     Insufficient Shares. In the event that the total number of shares
of Common Stock specified in elections to be purchased under any Offering plus
the number of shares purchased

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under previous Offerings under this Plan exceeds the maximum number of shares
issuable under this Plan, the Board or the Committee will allot the shares then
available on a pro rata basis.
     18.     Termination of the Plan. This Plan may be terminated at any time by
the Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
     19.     Governmental Regulations. The Company’s obligation to sell and
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market (to the extent the Common
Stock is then so listed or quoted) and the approval of all governmental
authorities required in connection with the authorization, issuance or sale of
such stock.
     20.     Governing Law. The Plan shall be governed by Delaware law except to
the extent that such law is preempted by federal law.
     21.     Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
     22.     Notification upon Sale of Shares. Each employee agrees, by entering
the Plan, to promptly give the Company notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
     23.     Withholding. Each employee shall, no later than the date of the
event creating the tax liability, make provision satisfactory to the Board for
payment of any taxes required by law to be withheld in connection with any
transaction related to Options granted to or shares acquired by such employee
pursuant to the Plan. The Company may, to the extent permitted by law, deduct
any such taxes from any payment of any kind otherwise due to an employee.
     24.     Effective Date and Approval of Shareholders. The Plan shall take
effect on the Commencement Date subject to approval by the shareholders of the
Company as required by Section 423 of the Code, which approval must occur within
twelve months of the adoption of the Plan by the Board.

     
 
  Adopted by the Board of Directors
on September 7, 2005
 
   
 
  Approved by the stockholders on
October 15, 2005

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AMENDMENT NO. 1 TO 2005 EMPLOYEE STOCK PURCHASE PLAN
The 2005 Employee Stock Purchase Plan (the “Plan”) of NxStage Medical, Inc. is
hereby amended as follows:
The Number of shares available for issuance under the Plan is hereby increased
from 50,000 to 100,000.
Except as set forth above, the remainder of the Plan remains in full force and
effect.
Adopted by the Board of Directors on April 26, 2007. Adopted by the Stockholders
on May 30, 2007 (the “Stockholder Approval Date”)

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