Document:

Exhibit 10.1

ANNUAL DIRECTOR COMPENSATION

On  July 26, 2005, in connection with its
review of the compensation arrangements of Affiliated Managers Group, Inc.
(the “Company”), the Compensation Committee engaged an independent compensation
consultant to perform a survey of director compensation practices at companies
in the Company’s peer group.  This survey
found that compensation for lead directors and committee chairpersons, as well
as annual retainers, had increased throughout the peer group. On that basis,
the Board of Directors determined to increase lead director, committee
chairperson and annual fee compensation, and accordingly approved the following
compensation arrangements for non-employee directors of the Company:

	
  Board of
  Directors:

  	
   

  	
   

  	
   

  
	
  Board of Directors Annual Fee

  	
   

  	
  $

  	
  50,000

  	
   

  
	
  Board of Directors Quarterly Meeting Fee

  	
   

  	
  $

  	
  2,500

  	
   

  
	
  Board of Directors Annual Option Award

  	
   

  	
  11,250

  	
   

  
	
  Lead Director and
  Committee Service:

  	
   

  	
   

  	
   

  
	
  Lead Director Annual Fee

  	
   

  	
  $

  	
  50,000

  	
   

  
	
  Committee Membership Annual Fee

  	
   

  	
  $

  	
  10,000

  	
   

  
	
  Audit Committee Chair Annual Fee

  	
   

  	
  $

  	
  25,000

  	
   

  
	
  Compensation Committee Chair Annual Fee

  	
   

  	
  $

  	
  10,000

  	
   

  
	
  Nominating and
  Governance Committee Chair Annual Fee

  	
   

  	
  $

  	
  5,000Exhibit 10.17

 

AKSYS, LTD.

 

INCENTIVE STOCK OPTION
AGREEMENT

 

Employee Award

 

February 28, 2005

 

Aksys,
Ltd. (the “Company”) is pleased to advise that it has granted to you a
stock option (the “Option”) to acquire shares of the Common Stock, par
value $0.01 per share (the “Common Stock”), of the Company.  This Option shall be null and void unless you
accept the same below and return it to the Chief Financial Officer of the
Company at its office in Lincolnshire, Illinois within thirty (30) days from
the date the Option is granted.

 

THIS
OPTION IS SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS.  THIS OPTION IS SUBJECT TO VESTING.

 

1.             Option Grant.  The Company hereby grants to Laurence Birch (the “Employee”) the right to purchase
from the Company 150,000 shares of Common Stock
(the “Option Shares”) at a price per share of $4.65
(the “Option Price”)(1), to be
exercisable at the times and on the terms and subject to the conditions set
forth herein.  The Option will expire on
the tenth anniversary of the date hereof (the “Final Expiration Date”),
unless terminated earlier as provided under paragraphs 4, 5 or 6 hereof. To the
extent possible, your Option awarded under this Agreement is intended to be an “incentive
stock option” (an “ISO”) within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).  In order to qualify for special tax treatment
under Section 422 of the Code, you must not sell or otherwise transfer
your Option Shares within two years from the date of this Agreement and within
one year from the date you exercise your Option with respect to such Option
Shares.  Notwithstanding anything in this
Agreement to the contrary, your ISO shall be exercisable only during your
employment by the Company or any of its Subsidiaries (as such term is defined
in Section 424(f) of the Code); provided, however, that
your ISO may be exercised for a period ending no later than either (x) the
Final Expiration Date or (y) the date that is three months after termination of
your employment if and to the extent that (a) you were entitled to
exercise your ISO on the date of termination and (b) your ISO would not
have expired had you continued to be employed by the Company or any of its
Subsidiaries.  The aggregate fair market
value (as established by the Committee) of the Option Shares with respect to
which your Option is exercisable for the first time during any calendar year
shall not exceed $100,000 or such other amount as may subsequently be specified
by the Code; provided  that, to the extent such limitation is
exceeded with respect to your Option, any excess portion of your Option (as
determined under the Code) shall be deemed a nonqualified stock option.

 

(1)                                  For
ISOs, such exercise price is equal to the fair market value (as established by
the Committee) of the Common Stock of the Company on the date hereof.

 

 

2.             Vesting and
Exercise.  The Option may be
exercised only to the extent it is vested, provided Employee is employed by the
Company on such anniversary dates and events stated below and has served
continuously and without interruption in the employment of the Company from the
date of grant of the Option until such anniversary date and event, except that
any leave of absence for periods and purposes conforming to the personnel
policies of the Company or approved by the Compensation Committee (the “Committee”)
of the Board of Directors of the Company (the “Board”) shall not cause
Employee to fail to satisfy either of such conditions.

 

(a) Eighty
thousand (80,000) shares shall vest over four years:  On each of the first four anniversary dates
of the date of grant of the Option, 20,000 shares will vest and become
exercisable (any shares so vested, the “Vested Shares”) However, if the
Employee ceases to be employed with the Company after the first anniversary of
the date of grant of the Option, the Option will vest and become exercisable
with respect to the percentage of Option Shares equal to (i) the number of
full calendar months of service with the Company by the Employee from the date
of grant of the Option to the date of cessation of employment with the Company
divided by (ii) 48 (the shares so vested, also “Vested Shares”).  If the Employee ceases to be employed with
the Company before the first anniversary of the date of grant of the Option,
the Option will terminate and become null and void with no Option Shares
becoming Vested Shares.  The Option shall
be exercisable, and Employee shall have the right to purchase shares hereunder,
from time to time and in whole or in part, only if Employee is employed by the
Company on the exercise date (except as provided under paragraphs 5 and 6
hereof) and only with regard to Vested Shares.

 

(b) Twenty
thousand (20,000) shares will vest and become exercisable (any shares so
vested, the “Vested Shares”) when the Company secures funds to cover all of
2006.

 

(c) Twenty
thousand (20,000) shares will vest and become exercisable (any shares so
vested, the “Vested Shares”) at the end of the first quarter the Company has
positive gross profit.

 

(d) Thirty
thousand (30,000) shares will vest and become exercisable (any shares so
vested, the “Vested Shares”) at the end of the first quarter the Company has
positive cash flow.

 

3.             Acceleration of
Vesting on Sale of the Company.  If
the Employee has been continuously employed by the Company from the date of
grant of the Option until a Sale of the Company (as defined below), except that
any leave of absence for periods and purposes conforming to the personnel
policies of the Company or approved by the Committee shall not cause Employee
to fail to satisfy such condition, the portion of the Option which is not
vested and exercisable immediately prior to the Sale of the Company shall
immediately vest and become exercisable with respect to 100% of the Option
Shares simultaneously with the consummation of

 

2

 

the Sale of the Company.  “Sale
of the Company” shall mean (i) a merger or consolidation effecting a
change in control of the Company, (ii) a sale of all or substantially all
of the Company’s assets or (iii) a sale of a majority of the Company’s
outstanding voting securities other than to the public in a registered public
offering.  In any event, any portion of
the Option which has not been exercised prior to or in connection with the Sale
of the Company shall terminate and be forfeited by the Employee, unless
otherwise determined by the Committee or the Board.

 

4.             Termination of
Option upon Cessation of Employment for Cause.  Notwithstanding anything to the contrary in
this Agreement, if Employee resigns or is discharged for Cause (as defined
below), all of the Option not previously exercised will expire and be forfeited
whether or not vested and exercisable at the time of Employee’s resignation or
discharge for Cause.  “Cause”
means (i) the commission by Employee of a felony or a crime involving
moral turpitude or the commission of any other act by Employee involving
dishonesty, disloyalty or fraud with respect to the Company, (ii) conduct
of Employee tending to bring the Company into substantial public disgrace or
disrepute, (iii) the failure or inability of Employee to carry out
effectively Employee’s duties and obligations to the Company or to participate
effectively and actively in the management of the Company, as determined in the
good faith judgment of the Board or the Committee or (iv) gross negligence
or willful misconduct on the part of Employee with respect to the Company.

 

5.             Cessation of
Employment.  This Option shall expire
and permanently terminate upon, and shall not be exercisable or exercised,
after cessation of Employee’s employment with the Company for any reason other
than death, except that any leave of absence for periods and purposes
conforming to the personnel policies of the Company or approved by the
Committee shall not be deemed cessation of employment; provided that (a) Employee
may exercise the Option with respect to Vested Shares (if any) within 12 months
from the date of cessation of employment with the Company if employment ceases
due to the total and permanent disability of Employee (determined in the good
faith judgment of the Board or Committee) and (b) Employee may exercise
the Option with respect to Vested Shares (if any) within 3 months from the date
of cessation of employment with the Company if employment ceases for any other
reason, but under no circumstance may exercise occur after the Final Expiration
Date.

 

6.             Death of Employee.  If Employee dies (a) while employed by
the Company or (b) after cessation of employment with the Company but (i) within
12 months of the date of cessation if cessation from the Company was due to the
total and permanent disability of Employee (determined in the good faith
judgment of the Board or the Committee) or (ii) within 3 months of the
date of cessation if employment with the Company ceased for any other reason,
the Option may be exercised for Vested Shares (if any) by the beneficiary
designated for such purpose or by the estate of the Employee as provided for in
this Agreement, but only within 12 months from the date of death of Employee;
provided that under no circumstance may exercise occur after the Final
Expiration Date.

 

7.             Payment.
Subject to the limitations herein set forth, exercise of the Option shall be by
delivery of written notice to the Chief Executive Officer of the Company
specifying

 

3

 

the number of shares to be purchased (provided, however, that no
fractional shares may be purchased hereunder at any time, and the Company shall
not be obligated to make any payment in lieu of fractional shares) and the
desired manner of payment of the aggregate exercise price.  Payment of the aggregate exercise price shall
be made (i) in cash or by check, bank draft or money order to the order of
Aksys, Ltd. (collectively, “cash”), (ii) at the discretion of the
Employee and with the consent of the Committee (which consent may be denied for
any reason in the sole discretion of the Committee), by electing to have shares
of Common Stock otherwise issuable upon exercise of the Option withheld by the
Company having a fair market value (valued as of the close of trading on the
date of the notice of exercise or, if such date is not a trading day, the last
trading day immediately preceding such date) equal to or less than the
aggregate exercise price, plus cash in the amount, if any, by which the
aggregate exercise price exceeds the fair market value of the shares of Common
Stock withheld, (iii) at the discretion of the Employee and with the
consent of the Committee (which consent may be denied for any reason in the
sole discretion of the Committee), by delivery to the Company of an executed
irrevocable option exercise notice together with irrevocable instructions to a
broker-dealer to sell a sufficient portion of the shares issuable upon such
exercise and to deliver the sale proceeds or the requisite portion thereof
directly to the Company immediately following settlement of such sale in
payment of the aggregate exercise price or (iv) at the discretion of the
Employee and with the consent of the Committee (which consent may be denied for
any reason in the sole discretion of the Committee), in previously-acquired
shares of Common Stock (valued as of the close of trading on the date of the
notice of exercise or, if such date is not a trading day, the last trading day
immediately preceding such date) having a fair market value equal to or less
than the aggregate exercise price, plus cash in the amount, if any, by which
the aggregate exercise price exceeds the value of such shares of Common
Stock.  Payment with respect to options
exercised for cash only shall be delivered with the written notice specifying
the number of shares being purchased. 
Payment with respect to options exercised for previously-acquired shares
of Common Stock and cash, if any, shall be delivered to the Chief Executive
Officer of the Company not later than the end of the third business day after
the exercise date; such payment shall be made by delivery of the necessary
share certificates, with executed stock powers attached, to the Chief Executive
Officer of the Company as above provided or, if such certificates have not yet
been delivered to the Employee, by written notice to the Chief Executive
Officer of the Company requesting that the shares represented by such
certificates be applied toward payment as hereinabove provided.

 

8.             Tax Withholding.  The Committee shall have the power to
withhold, or require the Employee to remit to the Company, an amount sufficient
to satisfy any withholding or other tax due relating to any exercise of the
Option, and the Committee may defer issuance of Common Stock hereunder unless
indemnified to its satisfaction.  Subject
to the consent of the Committee, the Employee may make an irrevocable election
to have shares of Common Stock otherwise issuable under the Option withheld or
deliver to the Company previously-acquired shares of Common Stock having a fair
market value (valued as of the close of trading on the date of the notice of
exercise or, if such date is not a trading day, the last trading day
immediately preceding such date) sufficient to satisfy all or part of the
estimated tax obligations of Employee associated with the transaction.  Such election must be made by the Employee
prior to the date on

 

4

 

which the relevant tax obligation arises.  The Committee may disapprove of any election
and may limit, suspend or terminate the right to make such elections.

 

9.             Delivery of Option
Shares.  Upon the exercise of the
Option in whole or in part, the Company shall promptly deliver a certificate or
certificates representing the number of shares purchased against full payment
therefor and the Company shall pay all original issue or transfer taxes and all
other fees and expenses incident to such delivery, other than federal, state or
local income and other withholding taxes.

 

10.           Transferability.  The Option shall not be sold, assigned,
pledged, transferred or otherwise disposed of, except by will or the laws of
descent and distribution.  Any purported
transfer contrary to this provision will nullify the Option.  The Option shall be exercisable during the
Employee’s lifetime only by the Employee or the Employee’s legal
representative.  If the Employee dies and
the Option is exercisable with respect to any Option Shares at the date of
death, then the Employee’s estate or the beneficiary or beneficiaries to whom
the Employee’s rights under the Option shall pass by reason of the Employee’s
death, shall have the right to exercise the Option as provided in and subject
to the terms of this Agreement and the Plan. 
The Option shall not be subject to execution, attachment or other
process, and no person shall be entitled to exercise any rights of the Employee
or possess any rights of the Employee by virtue of any attempted execution or
other process.  The Company shall not be
required to transfer on its books any shares of Common Stock with respect to
which the Option shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement, or to treat as owner of such shares, to
accord the right to vote to such owner or to pay dividends to any transferee to
whom such options shall have been so transferred.

 

11.           Adjustments.  In the event of a reorganization,
recapitalization, stock dividend, stock split or reverse stock split, or a
combination or other change in the shares of Common Stock, the Board or the
Committee shall, in order to prevent the dilution or enlargement of rights
under the Option, make such adjustments in the number and type of shares
covered by the Option and the Option Price specified herein as may be
determined by the Board or the Committee to be appropriate and equitable.  Any adjustment pursuant to this paragraph shall
be effected in such manner that the difference between the aggregate fair
market value of the shares or other securities subject to the Option
immediately after giving effect to such adjustment and the aggregate Option
Price of such shares or other securities shall be substantially equal to (but
shall not be more than) the difference between the aggregate fair market value
of the shares subject to the Option immediately prior to such adjustment and
the aggregate Option Price of such shares. 
The decision of the Board or the Committee as to the exact manner,
amount and timing of any such adjustment shall be conclusive and binding upon
the Employee.

 

12.           Registration.  The Option is subject to the condition that
if at any time the Committee shall determine, in its discretion, that the
listing of the shares subject hereto on any securities exchange, or the
registration or qualification of such shares under any federal or state

 

5

 

law, or the consent or approval of any regulatory body, shall be necessary
or desirable as a condition of, or in connection with, the granting of the
Option or the purchase or delivery of shares hereunder, the Option may not be
exercised, in whole or in part, and the shares hereunder may not be delivered,
as the case may be, unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.  The
Company agrees to make every reasonable effort to effect or obtain any such
listing, registration, qualification, consent or approval.

 

13.           Beneficiary
Designation.  Subject to the
restrictions on transfer and the other terms and conditions set forth in this
Agreement, the Employee may name, from time to time, beneficiaries (who may be
named contingently or successively) who may exercise the Option in the event of
the death of the Employee before he or she exercises the Option.  Each designation will revoke all prior
designations by the Employee, shall be in a form approved by the Board or the
Committee and will be effective only when filed by the Employee in writing with
the Board or the Committee during the Employee’s lifetime.  In the absence of any such designation, any
portion of the Option remaining unexercised at the Employee’s death may be
exercised by the Employee’s estate, subject to the terms and conditions set
forth in this Agreement.

 

14.           Reservation.  The Company shall at all times prior to the
expiration or termination of the Option reserve and keep available, either in
its treasury or out of its authorized but unissued shares of Common Stock, the
full number of shares subject hereto from time to time; provided that following
the cessation of Employee’s employment with the Company or the death of
Employee, the Company shall only be required to reserve and keep available a
number of shares equivalent to the number of Vested Shares subject hereto from
time to time.

 

15.           No Privileges.  The Employee shall not be entitled to any
privileges of ownership with respect to the shares subject to the Option unless
and until purchased and delivered upon the exercise in whole or in part of the
Option.

 

16.           Rights of Employee.  In no event shall the granting of the Option
or its acceptance by the Employee interfere with or limit in any way the right
of the Company to terminate the Employee’s employment at any time with or
without cause or confer upon the Employee any right to continue in the employ
of the Company for any period of time or to continue his or her present or any
other rate of compensation.

 

17.           Section 83(b) Election.  Within 30 days after the exercise of the
Option in whole or in part, Employee may make an effective election with the
Internal Revenue Service under Section 83(b) of the Code relative to
the Option Shares received pursuant to such exercise of the Option.

 

18.           Committee Resolution.  The Committee shall have the right and
discretion to resolve all questions which may arise in connection with the
Option and with its vesting and

 

6

 

exercise.

 

19.           Miscellaneous.

 

(a)           The Option
shall be binding upon and inure to the benefit of any successor or successors
of the Company and any person or persons who shall, upon the death of the
Employee, acquire any rights hereunder.

 

(b)           The
parties agree to execute such further instruments and to take such further
actions as may reasonably be required to carry out the intent of the Option.

 

(c)           Any notice
required or permitted hereunder shall be given in writing and shall be deemed
effectively given when personally delivered or five 5 business days after
deposit in the United States Post Office, by certified mail with postage and
fees prepaid, return receipt requested. 
Notices shall be addressed, in the case of the Employee, to the address
set forth below his or her signature on the signature page hereto and in
the case of the Company, to it at its principal executive office, or at such
other address as such party may designate by 10 days’ advance written notice to
the other party.

 

(d)           The Option
constitutes the entire agreement of the parties with respect to the subject
matter hereof.

 

(e)           The Option
shall be governed by and construed under the internal laws of the State of
Illinois.

 

(f)            The
captions used herein are for convenience of reference only and shall not be
considered in the interpretation of the provisions hereof.

 

*     *    
*     *     *

 

7

 

Granted
this 28th day of February, 2005.

 

 

	
  AKSYS, LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  By: /s/ William C.
  Dow

  	
   

  	
   

  	
   

  
	
  Its:

  	
  President and Chief
  and Executive Officer

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and
  acknowledged this 11 day of March, 2005.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: /s/ Laurence P. Birch

  	
   

  	
   

  
	
  Laurence Birch

  	
   

  
						

 

8

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