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| EX-10.1 - ARTHROCARE CORP | v168932_ex10-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): December 9, 2009
ARTHROCARE
CORPORATION
(Exact
name of registrant as specified in its charter)
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Delaware
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0-027422
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94-3180312
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(State
or other jurisdiction
of
Incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
Number)
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7500
Rialto Blvd., Building Two, Suite 100, Austin, TX 78735
(Address
of principal executive offices, including zip code)
(512)
391-3900
(Registrant’s
telephone number, including area code)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligations of the registrant under any of the following
provisions (see General Instruction A.2 below):
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 14e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 5.02. Departure of Directors or Certain
Officers; Election of Directors; Appointment of Certain Officers, Compensatory
Arrangements of Certain Officers.
2009
Executive Officer Bonus Plan
On December 9, 2009, the Board of
Directors of ArthroCare Corporation (the “Company”) adopted the 2009 Executive
Officer Bonus Plan, a copy of which is attached hereto as Exhibit 10.1, which is
a cash bonus plan that has named executive officers as participants. Under the
2009 Executive Officer Bonus Plan, all named executive officers, except the
Chief Executive Officer, are eligible to receive a cash bonus equal to up to 60%
of their base salary, subject to certain bonus multipliers. The Chief Executive
Officer is eligible to receive a bonus equal to up to 75% of his base salary
under this plan, subject to certain bonus multipliers. The actual bonus awarded
under this plan generally depends on the level of achievement attained by the
Company as it relates to the Company’s net product revenue and cash management
goals, as set forth in the Company’s operating forecast for the period of
January 1, 2009 through December 31, 2009, as approved by the Board of
Directors. The foregoing description of the 2009 Executive Officer Bonus Plan
does not purport to be complete and is qualified in its entirety by reference to
the full text of the 2009 Executive Officer Bonus Plan attached
hereto.
The Board of Directors also adopted a
cash bonus plan pursuant to which each of its eligible employees (which does not
include any executive officers) may receive a cash bonus equal to up to a
percentage of their base salary, subject to certain bonus multipliers. The total
bonus potential for any employee under the employee cash bonus plan may be
increased or decreased at the sole discretion of the Company’s management.
Similar to the 2009 Executive Officer Bonus Plan, the actual bonus awarded under
the employee bonus plan generally depends on the level of achievement attained
by the Company as it relates to the Company’s net product revenue and cash
management goals, as set forth in the Company’s operating forecast for the
applicable period, as approved by the Board of Directors.
David
Fitzgerald, President and Chief Executive Officer
On December 9, 2009, the Board of
Directors approved an amendment to the Company’s Employment Agreement dated
March 30, 2009 with David Fitzgerald. The expiration date of Mr.
Fitzgerald’s employment agreement has been changed from February 18, 2010 to
February 18, 2011. The Board of Directors approved an increase in the
salary for Mr. Fitzgerald to $535,000 a year, to be effective on January 1,
2010. This amendment provides that (i) Mr. Fitzgerald’s annual bonus
for the fiscal year ending on December 31, 2009 will include cash in an amount
up to 75% of his base salary and equity awards in an amount up to 25% of his
base salary, and (ii) Mr. Fitzgerald’s annual bonus for fiscal years commencing
on or after January 1, 2010 will include cash in an amount up to 80% of his base
salary. The exact amount of such annual performance bonus will be
determined by the Board of Directors or its Compensation Committee in
consultation with Mr. Fitzgerald, based upon mutually agreed performance
objectives, both personal and corporate. Mr. Fitzgerald’s base salary
was raised 11.5% and his target bonus was reduced by 20.0% (target cash and
equity) such that his total target cash compensation for 2010 is increased by
approximately 0.3% over 2009.
The Board of Directors also approved
granting Mr. Fitzgerald, effective on December 16, 2009, (i) an option to
purchase 170,000 shares of the Company’s common stock at the closing price on
the date of the grant, vesting in equal monthly increments over three years from
the vesting commencement date; and (ii) restricted stock units with respect to
30,000 shares of the Company’s common stock, vesting in equal annual increments
over three years from the vesting commencement date. In each case,
the vesting commencement date is February 18, 2009. Vesting of all
unvested shares covered by both the option and the restricted stock unit
referred to above will be accelerated, such that the option will be exercisable
in full, and all restricted stock will be vested in full, upon the occurrence
of (a) Mr. Fitzgerald’s death or disability, (b) a change of control (as
defined in the agreement), or (c) formal acceptance by the board of Mr.
Fitzgerald’s resignation under circumstances acceptable to the
board. In the event of a formal acceptance by the board of Mr.
Fitzgerald’s resignation as described in clause (c) of the preceding sentence,
each stock option held by Mr. Fitzgerald which was granted to him while he was
serving as President and Chief Executive Officer of the Company shall remain
exercisable for one year after the effective date of Mr. Fitzgerald’s
resignation or, if earlier, the expiration date of such option.
Todd
Newton, Chief Financial Officer
On December 9, 2009, the Board of
Directors approved an increase in the base salary for Todd Newton to $328,320 a
year, to be effective on January 1, 2010. On December 9, 2009, the Board of
Directors also approved an amendment to the Company’s Employment Agreement with
Mr. Newton dated April 2, 2009. This amendment provides that Mr.
Newton shall have the opportunity to earn an annual performance bonus in an
amount up to (i) 60% of Mr. Newton’s base salary for the fiscal year ending on
December 31, 2009, and (ii) 50% of Mr. Newton’s base salary for fiscal years
commencing on or after January 1, 2010. The exact amount of such
annual performance bonus will be determined by the Board of Directors or its
Compensation Committee in consultation with the Chief Executive Officer and Mr.
Newton, based upon mutually agreed performance objectives, both personal and
corporate. Mr. Newton’s base salary was raised 15.2% and his target
bonus was reduced by 10.0% such that his total target cash compensation for 2010
is increased by approximately 8.0% over 2009. The Board of Directors also
approved granting Mr. Newton, effective on December 16, 2009, (i) an option to
purchase 80,000 shares of the Company’s common stock at the closing price at the
date of the grant, vesting over
four years with one fourth
(1/4) of the shares subject to the option vesting one year from the
vesting commencement date (April 2, 2009) and 1/48
of the shares vesting at the end of each full month thereafter until all shares
are vested; and (ii) restricted stock units with respect to 15,000 shares
of the Company’s common stock, vesting in equal annual increments over five
years from the vesting commencement date.
Richard
Rew, Senior Vice President and General Counsel
On December 9, 2009, the Board of
Directors approved an increase in the base salary for Richard Rew to $281,379 a
year, to be effective on January 1, 2010. Mr. Rew shall have the
opportunity to earn an annual performance bonus in an amount up to (i) 60% of
Mr. Rew’s base salary for the fiscal year ending on December 31, 2009, and (ii)
45% of Mr. Rew’s base salary for fiscal years commencing on or after January 1,
2010. The exact amount of such annual performance bonus will be
determined by the Board of Directors or its Compensation Committee in
consultation with the Chief Executive Officer and Mr. Rew, based upon mutually
agreed performance objectives, both personal and corporate. Mr. Rew’s
base salary was raised 20.7% and his target bonus was reduced by 15.0% such that
his total target cash compensation for 2010 is increased by approximately 9.4%
over 2009. The Board of Directors also approved granting Mr. Rew, effective on
December 16, 2009, an option to purchase 40,000 shares of the Company’s common
stock at the closing price on the date of the grant, vesting in equal
monthly increments over four years from the grant date.
Richard
Christensen, Senior Vice President of Operations
On December 9, 2009, the Board of
Directors approved an increase in the base salary for Richard Christensen to
$283,993 a year, to be effective on January 1, 2010. Mr. Christensen
shall have the opportunity to earn an annual performance bonus in an amount up
to (i) 60% of Mr. Christensen’s base salary for the fiscal year ending on
December 31, 2009, and (ii) 45% of Mr. Christensen’s base salary for fiscal
years commencing on or after January 1, 2010. The exact amount of
such annual performance bonus will be determined by the Board of Directors or
its Compensation Committee in consultation with the Chief Executive Officer and
Mr. Christensen, based upon mutually agreed performance objectives, both
personal and corporate. Mr. Christensen’s base salary was raised
14.8% and his target bonus was reduced by 15% such that his total target cash
compensation for 2010 is increased by approximately 4% over 2009. The Board of
Directors also approved granting Mr. Christensen, effective on December 16,
2009, an option to purchase 50,000 shares of the Company’s common stock at the
closing price on the date of the grant, vesting in equal monthly increments over
four years from the grant date.
James
Pacek, Senior Vice President of Strategic Business Units
On December 9, 2009, the Board of
Directors approved an increase in the base salary for James Pacek to $290,000 a
year, to be effective on January 1, 2010. Mr. Pacek shall have the
opportunity to earn an annual performance bonus in an amount up to (i) 60% of
Mr. Pacek’s base salary for the fiscal year ending on December 31, 2009, and
(ii) 50% of Mr. Pacek’s base salary for fiscal years commencing on or after
January 1, 2010. The exact amount of such annual performance bonus
will be determined by the Board of Directors or its Compensation Committee in
consultation with the Chief Executive Officer and Mr. Pacek, based upon mutually
agreed performance objectives, both personal and corporate. Mr.
Pacek’s base salary was raised 11.5% and his target bonus was reduced by 10.0%
such that his total target cash compensation for 2010 is increased by
approximately 4.5% over 2009. The Board of Directors also approved granting Mr.
Pacek, effective on December 16, 2009, an option to purchase 50,000 shares of
the Company’s common stock at the closing price on the date of the grant,
vesting in equal monthly increments over four years from the grant
date.
Please
note that ArthroCare’s management has chosen to disclose in this Current Report
on Form 8-K information about equity-based awards to executive officers under
its previously disclosed stock plan that is not required to be disclosed on Form
8-K. Management has chosen to make this disclosure, after a
period of time during which the Company was unable to meet its disclosure
obligations or issue equity-based awards, in order to provide a more complete
picture of recent executive compensation actions in a single
report. The Company does not intend to make such additional
disclosure in the future other than as, and to the extent,
required.
FORWARD-LOOKING
STATEMENTS
The
information provided herein includes forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Statements that are not historical facts are forward-looking statements.
Forward-looking statements are based on beliefs and assumptions by management
and on information currently available to management. Forward-looking statements
speak only as of the date they are made, and the Company undertakes no
obligation to update any of them publicly in light of new information or future
events. Additional factors that could cause actual results to differ materially
from those contained in any forward-looking statement include, without
limitation: the ability of the Company to fulfill its obligations with respect
to the rights of the holders of the Series A Convertible Preferred Stock,
including but not limited to the redemption rights and registration rights of
the holders of the Series A Convertible Preferred Stock; the resolution of
litigation pending against the Company including the arbitration between Gyrus
Group, PLC, Ethicon, Inc. and ArthroCare; the Company’s ability to design or
improve internal controls to address issues detected in its reviews of internal
controls and insurance reimbursement practices (collectively, the “Reviews”) or
by management in its reassessment of the Company’s internal controls; the impact
upon the Company’s operations of the Reviews, legal compliance matters or
internal controls, improvement and remediation; the ability of the Company to
control expenses, legal compliance matters or internal controls review,
improvement and remediation; the Company’s ability to remain current in its
periodic reporting requirements under the Exchange Act and to file required
reports with the SEC on a timely basis; the results of the investigations being
conducted by the Staff of the Division of Enforcement of the Securities and
Exchange Commission and the United States Department of Justice; the impact on
the Company of additional civil and criminal investigations by state and federal
agencies and civil suits by private third parties involving the Company’s
financial reporting and its previously announced restatement and its insurance
billing and healthcare fraud-and-abuse compliance practices; the ability of the
Company to attract and retain qualified senior management and to prepare and
implement appropriate succession planning for its Chief Executive Officer;
general business, economic and political conditions; competitive developments in
the medical devices market; changes in applicable legislative or regulatory
requirements; the Company’s ability to effectively and successfully implement
its financial and strategic alternatives, as well as business strategies, and
manage the risks in its business; and the reactions of the marketplace to the
foregoing.
Item 9.01.
Financial
Statements and Exhibits
Exhibits
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Exhibit
Number
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Title
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10.1
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2009
Executive Officer Bonus
Plan
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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ARTHROCARE
CORPORATION
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Date:
December 14, 2009
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By:
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/s/
David Fitzgerald
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David
Fitzgerald
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President
and Chief Executive Officer
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ARTHROCARE
CORPORATION
INDEX
TO EXHIBITS
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Exhibit
Number
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Title
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10.1
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2009
Executive Officer Bonus Plan
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