Document:

Ex 10.60 D. Welch Employment Agreement

Exhibit 10.60

                         EMPLOYMENT AGREEMENT 

THIS AGREEMENT is made and entered into as of the 20th day of January, 2015, by and between Arrhythmia Research Technology, Inc. (“ART”), with its principal place of business located in Fitchburg, Massachusetts, and Derek Welch (“Employee”), who resides in Lunenberg, Massachusetts.  ART and Employee are collectively referred to herein as the “Parties.”

WHEREAS, ART desires to retain the services of Employee as Chief Financial Officer of ART and its subsidiary, Micron Products, Inc. (“Micron”) (collectively referred to herein as “the Companies”), and Employee desires to be employed by ART in such capacity, all upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the recitals and the mutual covenants and undertakings herein, each party agrees as follows:

1.    Employment and Duties.  ART hereby agrees to employ Employee, and Employee hereby accepts employment, as Chief  Financial Officer of the Companies, upon the terms and conditions hereinafter set forth, both Parties expressly revoking any and all prior employment agreements between them.  In his capacity as Chief Financial Officer, Employee, to the best of his abilities, shall be responsible for performing the duties commensurate with his position.  Employee shall report to ART’s President and Chief Executive Officer (the “CEO”), and Employee agrees to perform such duties as the CEO may assign to him.

Employee hereby represents and warrants that he is not now subject to any agreement which is or would be inconsistent or in conflict with his obligations hereunder.

2.    Exclusive Services.  Employee agrees that he will, during the employment term, devote his entire working time, attention and best efforts to the performance of the duties as aforesaid and to the business and interests of the Companies, and he shall perform such duties as may be assigned to him ably, faithfully and diligently.  Employee shall not at any time or in any manner, either directly or indirectly, be involved in any other occupation while he is employed by ART unless agreed to specifically by ART’s CEO.  

3.    Term of Employment.  The period of Employee’s employment under this Agreement shall commence as of January 1, 2015, and terminate on December 31, 2016, unless earlier terminated pursuant to the terms hereof.  

4.    Compensation.

(a)  Salary.  As compensation for the services to be rendered by Employee under this Agreement, ART agrees to pay, and Employee agrees to accept, a base salary at the annualized rate of $160,000.00, payable in accordance with the Company’s regular payroll practices, subject to withholding and other applicable taxes.  

 

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(b)  Bonus.  Employee shall be eligible to receive a discretionary performance bonus during the term of this Agreement.  The specific goals criteria for earning such bonus will be mutually agreed upon by the Parties as soon as possible after the Parties’ execution of this Agreement.

All of Employee’s compensation is subject to deductions for regular payroll taxes and withholding, as required by State and Federal law, as well as other deductions that Employee authorizes.

(c)       Options.  As of the date hereof, Employee shall be granted a stock option to exercise 10,000 shares of common stock of ART, which options shall vest over a five-year period in five equal installments of 20% per year, in accordance with the ART 2010 Equity Incentive Plan and pursuant to the terms of the Grant Agreement attached hereto as Exhibit A.  

(d)  Fringe Benefits.  Employee also shall be entitled to the following benefits in 
each year of this Agreement:

(i)  Employee shall be eligible to participate in the Company’s various benefit plans (including health, dental, life, disability and retirement) on the same basis as Micron’s other employees; and

(ii)  Employee shall be eligible to receive the Company’s various paid time off benefits (including paid vacations and holidays) on the same basis as the Company’s other employees.

5.    Confidentiality.  Employee is aware that the Companies develop and utilize, and that he has had and will continue to have, access to valuable technical and nontechnical trade secrets and confidential information including, but not limited to, knowledge, information and materials about the Companies’ trade secrets, mailing lists, methods of operation, advertiser lists, advertisers, customer lists, customers or clients, products, services, know-how, business plans and confidential information about financial, marketing, pricing, compensation and other proprietary matters relating to the Companies which are not in the public domain (“Confidential Information”), all of which constitutes a valuable part of the assets of the Companies which the Companies seek to protect.

Accordingly, Employee shall not at any time during or after the termination of his employment by the Companies for any reason, reveal, disclose or make known to any person (other than as may be required by law or in the performance of his duties), or use for his own or another’s account or benefit, any such Confidential Information, whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee.

Employee represents and warrants that he has not revealed, disclosed or made known to any person (other than as may be required by law or in the performance of his duties), or used for his own or another’s account or benefit, any such Confidential Information, whether or not developed, devised or otherwise created in whole or in part by the efforts of Employee.

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Upon cessation of Employee’s employment, no documents, records or other matter or information belonging to the Companies, whether prepared by Employee or otherwise, and relating in any way to the business of the Companies, shall be taken or kept by Employee without the written consent of the Companies.
6.    Non-Competition.  Employee acknowledges that, in the course of his employment by ART, he will have access to the Companies’ Confidential Information; and he will be intimately and directly involved in developing and maintaining the Companies’ goodwill and serving the Companies’ customers and prospective customers.  Accordingly, Employee agrees that during his employment by ART and for a period of one (1) year after such employment has ceased for any reason, Employee shall not, without the prior written consent of ART:
     (a)  directly or indirectly engage in, assist or have an interest in (whether as proprietor, partner, investor, stockholder, officer, director of any type of principal), or enter the employment of or act as an agent for or advisor or consultant to, any person, firm, partnership, association, corporation, business organization, entity or enterprise which is, or is about to become, directly or indirectly engaged in any business which is directly or indirectly competitive with any of the Companies; provided that Employee may own less than five percent (5%) of the outstanding equity securities of a corporation that is engaged in such a competitive business if the equity securities of such corporation are publicly traded and registered under the Securities Exchange Act of 1934;
(b)  directly or indirectly solicit or accept any business substantially similar to that done by any of the Companies from any person, company, firm or organization, or any affiliate of the foregoing, which is or was a customer or active prospect of any of the Companies during the two (2) year period prior to the end of Employee’s employment at ART, for or on account of any individual, business enterprise, firm, partnership, association or corporation other than the Companies; or

(c)  directly or indirectly solicit the employment of, entice away, or in any other manner persuade or attempt to persuade any person employed by any of the Companies to leave such employment.

7.    Innovations.

(a)  Employee hereby assigns, transfers and conveys to ART and its successors and assigns the entire right, title, and interest in any and all inventions, processes, procedures, systems, discoveries, designs, configurations, technology, works of authorship, trade secrets and improvements (whether or not they are made, conceived or reduced to practice during working hours or using any of the Companies’ data or facilities) (collectively, “Innovations”) which Employee makes, authors, conceives, reduces to practice or otherwise acquires during any period of his/her employment by ART (either solely or jointly with others), and which are related to the Companies’ present or planned business, the Companies’ services or products, and any and all patents, copyrights, trademarks, trade names and applications therefor, in the United States and elsewhere, relating thereto.  The Innovations shall be the sole property of ART and shall at all times be held by Employee in a fiduciary capacity for the sole benefit of ART.

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(b)  All such Innovations that consist of works of authorship capable of protection under copyright laws shall be prepared by Employee as works made for hire, with the understanding that ART shall own all of the exclusive rights to such works of authorship under the United States copyright law and all international copyright conventions and foreign laws.  The foregoing notwithstanding, to the extent that any such Innovations is not deemed a work made for hire, Employee hereby assigns to ART the entire right, title, and interest in such Innovations and any and all patents, copyrights, trademarks, trade names and applications therefor, in the United States and elsewhere, relating thereto.
(c)  Employee shall maintain adequate and current written records of all such Innovations, which shall be available to and remain the sole property of ART at all times.  Employee shall promptly disclose to ART the details of any and all such Innovations and shall provide ART with all information relative thereto.  Employee, without further compensation, shall fully cooperate with and assist ART in obtaining and enforcing for its own benefit patents and copyright registrations on and in respect of such Innovations in all countries in all ways that ART may request, to secure and enjoy the full benefits and advantages of such Innovations, including executing any and all documents that ART deems necessary to obtain, maintain, and/or enforce its rights in such Innovations and providing any testimony required to obtain, maintain, and/or enforce such Innovations.  Employee agrees, for himself, and his heirs, legal representatives and assigns, without further compensation, to execute further assignments and other lawful documents as ART may reasonably request to effectuate fully this assignment. Employee understands that his obligations under this section shall continue after the termination of his employment by ART.    

8.    Injunctive Relief.  Employee acknowledges that the restrictions contained in paragraphs 5, 6 and 7 above, in view of the nature of the business in which the Companies are engaged, are reasonable and necessary to protect the legitimate interests of the Companies.  Employee understands that the remedies at law for his violation of any of the covenants or provisions of paragraphs 5, 6 or 7 may be inadequate, that such violations may cause irreparable injury within a short period of time, and that the Companies shall be entitled to seek preliminary injunctive relief and other injunctive relief against such violation.  Such injunctive relief shall be in addition to, and in no way in limitation of, any and all other remedies the Companies shall have in law and equity for the enforcement of those covenants and provisions.  

9.    Termination for Cause. This Agreement may be terminated by ART for cause.  No compensation shall be paid or other benefits furnished to Employee after termination for cause.  Such a termination shall be effective immediately upon written notice being issued to Employee.  “Cause” means  (i) willful and deliberate misconduct by Employee, such as being under the influence of drugs or alcohol on the job, dishonesty, misappropriation of assets, insubordination or refusal to follow reasonable directives and other misconduct of comparable magnitude and kind; (ii) willful neglect of duty or other material breach of this Agreement by Employee; (iii) commission of any act of fraud involving ART, involvement in any material conflict of interest or self-dealing involving ART, or conviction of a felony or any offenses involving moral turpitude or any criminal offense involving ART; (iv) any act or omission by Employee which has a material adverse effect on the business activities, financial condition, affairs or reputation of ART; (v) violation of any of ART’s policies or (vi) Employee’s failure or refusal to perform a substantial or important portion of his duties under this Agreement, which failure or refusal 

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continues for thirty (30) days after ART’s written notice to Employee, which notice reasonably informs him of such failure or refusal, and he fails to cure such failure within such 30-day period (the determination as to whether Employee has cured such failure will be determined by ART’s CEO in his/her sole discretion).

10.    Termination Other Than for Cause.

10.    Termination Other Than for Cause.

(a)  Change-in-Control.  In the event that Employee’s employment involuntarily terminates as a result of the ART’s “change in control” (as defined below), Employee will be paid severance in an amount which is equivalent to his regular bi-weekly salary (at the rate then in effect) for a period of twenty-four (24) months; provided, however, that Employee will not be entitled to such severance payments or the continuation of such severance payments, as the case may be, if Employee violates any of his obligations under Sections 5, 6 or 7 above.  For the purposes of this provision, a “change of control” is defined as (i) a merger or consolidation of ART in which the stockholders of the ART immediately prior to such transaction would own, in the aggregate, less than 50% of the total combined voting power of all classes of capital stock of the surviving entity normally entitled to vote for the election of directors of the surviving entity, and is a change of ownership under Treasury Regulations Section 1.409A-3(i)(5)(v) or a change in effective control of ART under Treasury Regulation Section 1.409A-3(i)(5)(vi) or (ii) the sale of a substantial portion of ART's assets, as defined under Treasury Regulation Section 1.409A-3(i)(5)(vii), in one transaction or in a series of related transactions. 

(b)  Separation Agreement.  As a prerequisite to receiving any severance pay under Section 10(a) above, Employee shall be required to sign a separation agreement, including a release of claims against ART and its affiliated entities, and their employees, officers, and directors.  Such severance payments shall be paid according to the ART’s regular payroll schedule and shall be subject to and reduced by regular payroll taxes and withholding.  

(c)  Section 409A.  This Agreement is intended to meet the requirements of Section 409A of the Internal Revenue Code, and shall be interpreted and construed and administered consistent with that intent.  Without limiting the foregoing, the use of the concept of “termination of employment” shall mean a “separation from service with the employer” within the meaning of Treasury Regulation Section 1.409A-3(a)(1).  

(d)  Death or Disability.  If Employee dies or becomes totally disabled during the term of this Agreement, Employee’s employment and salary shall terminate at the end of the month during which death or total disability occurs, and no other compensation or benefits shall be paid to Employee.  For the purposes of this Agreement, Employee shall be deemed to be “totally disabled” if he has been unable to perform his duties by reason of medical condition for 90 days in any 365-day period, all as determined in good faith by ART’s Board.

(e)  Resignation.  Notwithstanding any other provision of this Agreement, Employee shall have the right to terminate this Agreement, without cause, upon thirty (30) days’ written notice to the Chairman of ART’s Board.  Upon such notice of termination, no further 

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compensation or benefits, other than payment for the 30 day notice period, shall be paid to Employee.

11.    Mediation/Arbitration of Disputes.   In the event of a dispute between the Parties, Employee and ART agree to work cooperatively to resolve the dispute amicably at appropriate, mutually determined management levels.  In the event that a resolution at such management levels does not occur, either party may submit the dispute to mediation.  Both Parties shall agree on one mediator and participate in said mediation in good faith.  If the matter has not been resolved pursuant to mediation within sixty (60) days of the commencement of such procedure, which may be extended by mutual agreement of the Parties, the dispute shall be settled by final and binding arbitration in Worcester, Massachusetts in accordance with the rules then prevailing of the American Arbitration Association.  Judgment upon the award rendered by the arbitrators may be entered in any court of competent jurisdiction, and each party shall bear his or its own costs, including attorneys’ fees.  Notwithstanding the foregoing, any dispute relating Employee’s obligations pursuant to Paragraphs 5, 6, and 7 above shall not be subject to the mediation/arbitration provisions set forth in this Paragraph 11.

12.    Agreement Binding Upon Successors.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors, assigns, personal representatives, heirs, legatees and beneficiaries, provided, however, that Employee may not delegate his duties and obligations hereunder to any other person, and further provided that no assignment of this Agreement by ART shall relieve ART of any of its obligations under the terms of this Agreement.

13.    Waiver of Breach.  The waiver of either party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either ART or Employee.  The failure to enforce any provision(s) of this Agreement shall not be construed as a waiver of such provision(s).

14.    Severability.  It is the desire and intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Each provision of this Agreement or part thereof shall be severable.  If for any reason any provision or part thereof of this Agreement is finally determined to be invalid and contrary to, or in conflict with any existing or future law or regulation of a court or agency having valid jurisdiction, such determination shall not impair the operation or affect the remaining provisions of this Agreement, and such remaining provisions will continue to be given full force and effect and bind each party.

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15.    Notices.  Any notices or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally, or sent by registered or certified mail, return receipt requested, postage prepaid, to the address listed below for the Parties, or to such other address as any party may hereafter direct in writing to the other party.

To ART:                            To Employee:
Salvatore Emma, Jr.
President & Chief Executive Officer                Derek Welch
 Arrhythmia Research Technology, Inc.            [Address]                    25 Sawyer Passway                        
Fitchburg, MA 01420                            
                    
16.    Entire Agreement; Amendment.  This Agreement contains the entire agreement of the Parties and supersedes any and all prior agreements between the Parties.  It may not be changed orally but only by an agreement in writing signed by both Parties hereto.

17.    Governing Law.  This Agreement is made in, and shall be governed by, the laws of the Commonwealth of Massachusetts without reference to its conflict of laws provisions.

IN WITNESS WHEREOF, the Parties hereto, individually or by their duly authorized representatives, have executed and delivered this Agreement to be effective as of the day and year first above written.

ARRHYTHMIA RESEARCH 
TECHNOLOGY, INC.

_____________________            By:/s/ Salvatore Emma, Jr.
Witness                                    Salvatore Emma, Jr.
       President & Chief Executive Officer         

                    
EMPLOYEE

______________________            /s/ Derek T. Welch
Witness                                                            Derek Welch

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EXHIBIT A

ARRHYTHMIA RESEARCH TECHNOLOGY, INC
2010 EQUITY INCENTIVE PLAN

Grant Agreement

This Grant Agreement evidences the grant of an Option pursuant to the provisions of the Arrhythmia Research Technology, Inc. 2010 Equity Incentive Plan (the “Plan”) to the individual whose name appears below (the “Participant”), covering the specific number of shares of Company Stock set forth below, and on the following express terms and conditions (capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Plan):

1.    Name of Participant:            Derek Welch                

		
	2.
	Number of Shares of Company Stock:  10,000

		
	3.
	Exercise Price per Share:                      $_______.__

		
	4.
	Date of Grant of this Option:                 January ____2015

		
	5.
	Vesting:                                                 5 year vesting and a 10 year term 

		
	6.
	Termination of Option: This Option shall terminate in accordance with Section 7(d) of the Plan. 

		
	7.
	Type of Option:                                    Incentive Stock Option

 
The Participant hereby acknowledges receipt of a copy of the Plan document.  The text and all of the terms and provisions of the Plan are incorporated herein by reference, and this option grant is subject to these terms and provisions in all respects.  At any time when the Participant wishes to exercise this option, in whole or in part, the Participant shall submit to the Company a written notice of exercise, specifying the exercise date and the number of shares of Company Stock to be exercised.  Upon exercise, the Participant shall remit to the Company the exercise price in cash or in such other form as permitted under the Plan, plus (if deemed necessary by the Committee) an amount sufficient to satisfy any withholding tax obligation of the Company that arises in connection with such exercise.

The Participant hereby agrees that the terms of this option grant are confidential, and any disclosure of its terms by him to anyone other than his spouse, attorney, or accountant except as required by law may be grounds for its forfeiture. 

ARRHYTHMIA RESEARCH TECHNOLOGY, INC.    Agreed to and Accepted by:

 /s/ E. P. Marinos                                                    /s/ Derek Welch
 E.P. Marinos, Chairman of the Board                        Derek Welch

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{Practice Areas/LABOR/23832/00001/A2818938.DOC}Exhibit 10.10

 

SUNSHINE HEART, INC.
 FORM OF STOCK OPTION GRANT NOTICE
 (2013 NON-EMPLOYEE DIRECTORS’ EQUITY INCENTIVE PLAN)

 

Sunshine Heart, Inc. (the “Company”), pursuant to its 2013 Non-Employee Directors’ Equity Incentive Plan (the “Plan”), hereby grants to the Participant an Option to purchase the number of shares of the Company’s Common Stock set forth below (this “Option”). This Option is subject to all of the terms and conditions set forth in this Stock Option Grant Notice (this “Grant Notice”), the related Option Agreement and Notice of Exercise, and the Plan, all of which are attached hereto and incorporated herein in their entireties. Capitalized terms not explicitly defined herein but defined in the Plan or the related Option Agreement will have the same definitions as in the Plan or the related Option Agreement. If there is any conflict between the terms in this Grant Notice and the Plan, the terms of the Plan will control.

 

	
Participant:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date   of Grant:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Vesting   Commencement Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Number   of Shares Subject to Option:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Exercise   Price (Per Share):
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Expiration   Date:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Type of Grant:
    	
 
    	
Nonstatutory   Stock Option 
    	
o
    
	
 
    	
 
    	
 
    
	
Vesting Schedule:
    	
 
    	
1/48th of the shares will vest on the twelfth day   of each month commencing the Vesting Commencement Date.
    
	
 
    	
 
    	
 
    
	
Payment:
    	
 
    	
By   one or a combination of the following items (in each case, as described in   the related Option Agreement):
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
o By cash,   check, bank draft or money order payable to the Company;

 

o By delivery   of already-owned shares;

 

o By a “net   exercise” arrangement; or

 

o Pursuant to   a broker assisted cashless exercise.
    

 

Additional Terms/Acknowledgements: The Participant acknowledges receipt of, and understands and agrees to, the terms and conditions of this Grant Notice, the related Option Agreement and the Plan. The Participant acknowledges and agrees that this Grant Notice and the related Option Agreement may not be modified, amended or revised except as provided in the Plan. The Participant further acknowledges that as of the Date of Grant, this Grant Notice, the

 

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related Option Agreement, and the Plan set forth the entire understanding between the Participant and the Company regarding this Option and supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) other Options previously granted and delivered to the Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and (iii) any written service or severance arrangement that would provide for vesting acceleration of this Option upon the terms and conditions set forth therein.

 

By accepting this Option, the Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

This Grant Notice may be executed in one or more counterparts, each of which will be deemed to be an original, and all of which will constitute one document.

 

	
SUNSHINE   HEART, INC.
    	
 
    	
PARTICIPANT
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    

 

 

ATTACHMENTS: Option Agreement, including Notice of Exercise, and 2013 Non-Employee Directors’ Equity Incentive Plan

 

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ATTACHMENT I

 

SUNSHINE HEART, INC.
 2013 NON-EMPLOYEE DIRECTORS’ EQUITY INCENTIVE PLAN

 

FORM OF OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS

(NONSTATUTORY STOCK OPTION)

 

Pursuant to your Stock Option Grant Notice (the “Grant Notice”) and this Option Agreement (this “Agreement”), Sunshine Heart, Inc. (the “Company”) has granted you an Option (your “Option”) under its 2013 Non-Employee Directors’ Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in the Grant Notice at the Exercise Price indicated in the Grant Notice. Capitalized terms not explicitly defined in this Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.  If there is any conflict between the terms in this Agreement and the Plan, the terms of the Plan will control.

 

The details of your Option are as follows:

 

1.                                      VESTING.  Subject to the provisions contained herein, your Option will vest as provided in the Grant Notice.  Vesting will cease upon the termination of your Continuous Service.

 

2.                                      NUMBER OF SHARES AND EXERCISE PRICE.  The number of shares of Common Stock subject to your Option and the Exercise Price per share set forth in the Grant Notice will be adjusted for Capitalization Adjustments.

 

3.                                      EXERCISE.

 

(a)                                 You may exercise the vested portion of your Option during its term by (i) delivering the Notice of Exercise attached hereto as EXHIBIT A and by completing such other documents and/or procedures designated by the Company for exercise and (ii) paying the Exercise Price per share set forth in the Grant Notice and any applicable withholding taxes to the Company’s Secretary, stock plan administrator, or such other person as the Company may designate.  You may exercise your Option only for whole shares of Common Stock; the Company will not be required to issue any fractional shares of Common Stock under any circumstances.

 

(b)                                 By exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of your Option.

 

(c)                                  The exercise of your Option must comply with all applicable laws and regulations governing your Option, and you may not exercise your Option if the Company determines that such exercise would not be in material compliance with such laws and regulations.  Notwithstanding anything to the contrary contained herein, the Committee may suspend your right to exercise your Option for any period of up to 180 days in any 365-day

 

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period for which the Committee determines, in good faith, that such suspension is necessary or advisable in order to comply with the requirements of (i) any applicable federal securities law or rule or regulation thereunder; (ii) any rule of a national securities exchange, national securities association, or other self-regulatory organization; or (iii) any other federal or state law or regulation (each an “Option Exercise Suspension”).  Notwithstanding the foregoing, no Option Exercise Suspension will extend the term of your Option in a manner that would result in your Option becoming nonqualified deferred compensation subject to Section 409A of the Code.

 

4.                                      METHOD OF PAYMENT.  Payment of the Exercise Price set forth in the Grant Notice is due in full upon exercise of all or any part of your Option. You may elect to make payment of the Exercise Price by cash, check, bank draft or money order payable to the Company or in any one or more of the following manners unless otherwise provided in the Grant Notice:

 

(a)                                 Provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate Exercise Price set forth in the Grant Notice to the Company from the sales proceeds.

 

(b)                                 Provided that at the time of exercise the Common Stock is publicly traded, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your Option, will include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your Option by delivery to the Company of Common Stock if doing so would violate the provisions of the applicable listing rules, any law, regulation or agreement restricting the redemption of the Company’s stock.

 

(c)                                  Subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your Option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate Exercise Price per share set forth in the Grant Notice.  You must pay any remaining balance of the aggregate Exercise Price not satisfied by the “net exercise” in cash or other permitted form of payment.  Shares of Common Stock will no longer be outstanding under your Option and will not be exercisable thereafter if those shares are (i) used to pay the Exercise Price pursuant to the “net exercise,” (ii) delivered to you as a result of such exercise, and (iii) withheld to satisfy tax withholding obligations.

 

5.                                      TERM.  You may not exercise your Option before the Date of Grant or after the Expiration Date set forth in the Grant Notice. Subject to Section 7 below, the term of your Option commences on the Date of Grant and terminates upon the earliest of the following:

 

(a)                                 immediately upon the termination of your Continuous Service for Cause;

 

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(b)                                 three months after the termination of your Continuous Service other than for Cause or upon your Disability or death or as of, or within 12 months following a Change in Control;

 

(c)                                  12 months after the termination of your Continuous Service due to your Disability;

 

(d)                                 18 months after your death if you die either during your Continuous Service or within three months after your Continuous Service terminates for any reason other than Cause;

 

(e)                                  12 months after the termination of your Continuous Service as of, or within 12 months following a Change in Control;

 

(f)                                   the Expiration Date indicated in your Grant Notice; or

 

(g)                                 the day before the tenth anniversary of the Date of Grant.

 

6.                                      TRANSFERABILITY.  Your Option is not transferable, except (a) by will or by the laws of descent and distribution, (b) pursuant to a domestic relations order and (c) with the prior written approval of the Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which your Option is to be passed to beneficiaries upon the death of the trust (or settlor).

 

7.                                      INVOLUNTARY TERMINATION FOLLOWING A CHANGE IN CONTROL.

 

(a)                                 If, as a condition of a Change in Control, you are required to resign your position as a Non-Employee Director, all of your outstanding Options will become fully vested and exercisable immediately prior to the effectiveness of such resignation (and contingent upon the effectiveness of such Change in Control).  Additionally, upon a Change in Control event (other than due to a change in the Incumbent Board) and subject to your Continuous Service through the effective date of such Change in Control, all of your outstanding Options will automatically become fully vested and  immediately exercisable in full.

 

(b)                                 Any payment to which you may be entitled pursuant to the Grant Notice or this Agreement will be subject to Section 11(e) of the Plan, as if it were included herein.

 

8.                                      OPTION NOT A SERVICE CONTRACT.  Your Option is not a service contract, and nothing in your Option will be deemed to create in any way whatsoever any obligation on your part to continue in the service of the Company or an Affiliate, or of the Company or an Affiliate to continue your service. In addition, nothing in your Option will obligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or Employees to continue any relationship that you might have as a director or Consultant for the Company or an Affiliate.

 

9.                                      WITHHOLDING OBLIGATIONS.

 

(a)                                 At the time you exercise your Option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any

 

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other amounts payable to you, and otherwise agree to make adequate provision for, any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with your Option.

 

(b)                                 Upon your request and subject to approval by the Company, in its sole discretion, and in compliance with any applicable conditions or restrictions of law, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your Option as a liability for financial accounting purposes). Any adverse consequences to you arising in connection with such share withholding procedure will be your sole responsibility.

 

(c)                                  You may not exercise your Option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Option when desired even though your Option is vested, and the Company will have no obligation to issue a certificate for such shares of Common Stock unless such obligations are satisfied.

 

10.                               TAX CONSEQUENCES. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its officers, Directors, Employees or Affiliates related to tax liabilities arising from your Option or your other compensation. In particular, you acknowledge that your Option is exempt from Section 409A of the Code only if the Exercise Price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with your Option.

 

11.                               NOTICES. Any notices provided for in your Option or the Plan must be given in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the U.S. mail, postage prepaid, addressed to you at the last address you provided to the Company.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and your Option by electronic means or to request your consent to participate in the Plan by electronic means. By accepting your Option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 

12.                               GOVERNING PLAN DOCUMENT. Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. If there is any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan will control. In addition, your Option (and any compensation paid, shares issued under your Option, or proceeds received upon the sale of such shares) is subject to recoupment in accordance with The Dodd—Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback or

 

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compensation recovery policy adopted by the Company and any compensation recovery policy otherwise required by applicable law.

 

13.                               EFFECT ON OTHER EMPLOYEE BENEFIT PLANS.  The value of your Option will not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.

 

14.                               VOTING RIGHTS.  You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to your Option until such shares are issued to you. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in your Option, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.

 

15.                               SEVERABILITY.  If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

 

16.                               CONSENT TO TRANSFER OF PERSONAL DATA.  In administering the Plan, or to comply with applicable legal, regulatory, tax, or accounting requirements, it may be necessary for the Company to transfer certain Participant data to an Affiliate or to its outside service providers or governmental agencies. By accepting your Option, you consent, to the fullest extent permitted by law, to the use and transfer, electronically or otherwise, of your personal data to such entities for such purposes.

 

17.                               MISCELLANEOUS.

 

(a)                                 The rights and obligations of the Company under your Option will be transferable by the Company to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.

 

(b)                                 You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Option.

 

(c)                                  You acknowledge and agree that you have reviewed your Option in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Option, and fully understand all provisions of your Option.

 

(d)                                 This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

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(e)                                  All obligations of the Company under the Plan and this Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

 

*     *     *

 

This Agreement will be deemed to be signed by you upon the signing by you of the Grant Notice to which it is attached.

 

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EXHIBIT A

 

NOTICE OF EXERCISE

 

	
SUNSHINE HEART, INC.
    	
 
    	
 
    
	
12988 Valley View Road
    	
 
    	
 
    
	
Eden Prairie, MN 55344
    	
 
    	
Date   of exercise:
    	
 
    

 

This constitutes notice to Sunshine Heart, Inc. (the “Company”) under my Option that I elect to purchase the below number of shares of Common Stock of the Company (the “Shares”) for the price set forth below.

 

	
Type   of Option:
    	
 
    	
Nonstatutory
    
	
 
    	
 
    	
 
    
	
Stock   Option dated:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Number   of Shares as to which Option is exercised:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Certificates   to be issued in name of:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Total   exercise price:
    	
 
    	
$
    
	
 
    	
 
    	
 
    
	
Cash   payment delivered herewith:
    	
 
    	
$
    
	
 
    	
 
    	
 
    
	
[Value   of                        Shares delivered herewith(1):
    	
 
    	
$]
    
	
 
    	
 
    	
 
    
	
[Value   of                        Shares pursuant to net exercise(2):
    	
 
    	
$]
    
	
 
    	
 
    	
 
    
	
[Regulation   T Program (cashless exercise)(3):
    	
 
    	
$]
    

 

(1)                                 Shares must meet the public trading requirements set forth in the related Option Agreement. Shares must be valued in accordance with the terms of the Option being exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate.

(2)                                 The Company must have established net exercise procedures at the time of exercise, in order to utilize this payment method.

(3)                                 Shares must meet the public trading requirements set forth in the related Option Agreement.

 

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EXHIBIT A

 

By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Sunshine Heart, Inc. 2013 Non-Employee Directors’ Equity Incentive Plan, and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of my Option.

 

 

	
Very   truly yours,
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    

 

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ATTACHMENT II

 

2013 NON-EMPLOYEE DIRECTORS’ EQUITY INCENTIVE PLAN

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