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):
January 22,
2009
CardioNet, Inc.
(Exact name of registrant as specified in its charter)
Delaware
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001-33993
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33-0604557
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(State or other jurisdiction
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(Commission
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(I.R.S. Employer
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of incorporation)
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File Number)
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Identification No.)
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227 Washington Street #300
Conshohocken, PA
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19428
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(Address of principal executive offices)
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(Zip Code)
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Registrants
telephone number, including area code:
(610)
729-7000
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
Item
2.02
Results of Operations
and Financial Condition.
On
January 26, 2009, CardioNet, Inc. (we, us, our or the Company)
issued a press release describing, among other things, the appointment of Randy
Thurman as Interim President and Chief Executive Officer (see Item 5.02
below). In the press release, we
reconfirmed our full year 2008 revenue guidance at the high end of the range of
$117.0 million to $120.0 million. A copy
of the press release is furnished herewith as Exhibit 99.1.
Item
5.02
Departure of Directors
or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
Cohen Employment Agreement
On January 26, 2009,
we announced that, effective January 22, 2009, Arie Cohen, the Companys
President and Chief Executive Officer, left the Company to pursue other
interests. Mr. Cohens departure
constituted a termination without cause under the employment agreement, dated
November 14, 2008, between us and Mr. Cohen. In connection with his departure, Mr. Cohen
resigned from our Board of Directors as well as all other positions as an
officer or director of our subsidiaries.
Under his employment
agreement, because Mr. Cohen was terminated without cause, he is
entitled to receive a severance payment of $1,710,000, to be paid in
twenty-four (24) monthly installments of $71,250, that consists of the
following:
(i) an
amount equal to $900,000, which represents two times (2.0x) Mr. Cohens
base salary of $450,000, plus (ii) an amount equal to $810,000, which
represents two times (2.0x) his on-target annual performance incentive bonus of
$405,000. We also agreed to pay Mr. Cohen
$400,000 for his contributions to the Company during 2008. The payment of these amounts is subject to Mr. Cohens
execution and non-revocation of a Release and Waiver of Claims, which Mr. Cohen
executed on January 25, 2009. This release
and waiver is attached hereto as Exhibit 99.2 and is incorporated by
reference herein.
Under his employment
agreement, Mr. Cohen will also receive an amount equal to his accrued base
salary and unused vacation through January 22, 2009, and reimbursement for
certain taxes arising from the relocation
benefits he received. Mr. Cohen
will also be eligible for continued participation in our medical, dental and
vision plans for a period ending on the earlier of: (i) January 22,
2011, or (ii) the date on which Mr. Cohen becomes eligible to enroll
in any similar plan offered by another employer, at the same premium rates and
cost sharing as may be charged from time to time for our employees generally,
as if Mr. Cohen had continued to be employed by the Company during such
period.
The foregoing description
of certain terms of Mr. Cohens employment agreement is qualified in its
entirety by reference to the copy of the employment agreement which is attached
as Exhibit 99.3 to this report and is incorporated by reference herein.
Thurman Letter Agreement
On January 28, 2009,
we entered into a letter agreement with Randy Thurman pursuant to which Mr. Thurman,
who currently serves as the Executive Chairman of our Board of Directors, has
agreed to also serve as our interim President and Chief Executive Officer
(interim CEO). The term of the letter
agreement commences on January 28, 2009 and continues until terminated in
accordance with the terms of the letter agreement. Except with respect to the continued vesting
of equity grants previously made to Mr. Thurman while serving as Executive
Chairman of our Board of Directors, the letter agreement supersedes and
replaces the letter agreement we previously entered into with Mr. Thurman
dated July 7, 2008 (the Chairman Agreement) regarding the terms and
conditions of Mr. Thurmans service as Executive Chairman of our Board of
Directors. Upon our selection and hiring
of a permanent Chief Executive Officer, Mr. Thurman will cease to serve as
interim CEO but will continue as Executive Chairman and the terms and
conditions provided by the Chairman Agreement will be fully reinstated.
2
Pursuant to the terms of
the letter agreement, Mr. Thurman is entitled to a base salary of
$500,000. Mr. Thurman will be
eligible to participate in our Management Incentive Plan (the MIP) in
accordance with its terms. Mr. Thurmans
target annual bonus opportunity under the Management Incentive Plan will be
100% of base salary. Any bonus Mr. Thurman
earns will be paid based on actual performance for the year in question, in
accordance with the MIP; provided that there will be no requirement that Mr. Thurman
be employed on the payment date of such bonus and such bonus (if earned) will
be prorated for 2009 and any other partial year of employment on the basis of a
three hundred sixty-five (365) day fiscal year.
In addition, Mr. Thurman will be eligible to participate in our
Long Term Incentive Plan (the LTIP) for the period he serves as interim CEO
at level commensurate with the position of Chief Executive Officer. His receipt of awards under the LTIP will be
subject in all respects to the terms and conditions of the LTIP, as in effect from
time to time; provided any award under the LTIP will be prorated for 2009 and
any other partial year of employment on the basis of a three hundred sixty-five
(365) day fiscal year. If Mr. Thurman
voluntarily resigns from the position of interim CEO prior to the time a
permanent Chief Executive Officer has been hired or otherwise materially
breaches the letter agreement, he will not be entitled to any bonus or LTIP
payment, pro rata or otherwise.
Mr. Thurman will
receive the restricted stock unit award under our 2008 Equity Incentive Plan (the
2008 Plan) with respect to a number of shares of common stock of the Company
representing eight thousand dollars ($80,000) made to all directors and
approved by the Board on January 22, 2009.
In consideration for accepting the interim CEO role and, in addition to
the foregoing base salary, bonus and LTIP opportunity, as soon as practicable
following the date of the letter (and in lieu of any award made to directors of
the Company in May 2009), Mr. Thurman will receive an additional
restricted stock unit award with respect to a number of shares of common stock
of the Company representing eighty thousand dollars ($80,000) as of the date of
grant. The restricted stock units will
be subject to the same terms and will vest on substantially the same terms as
restricted stock unit awards granted to non-employee members of our board.
Other than the January 22, 2009 director grant, for so long as Mr. Thurman is
employed by the Company, he will no longer be eligible for grants under
compensatory arrangements in place for non-employee members of the Board on and
after January 28, 2009.
As a condition of Mr. Thurmans
employment as interim CEO, he must execute and abide by the Companys
Proprietary Information and Inventions Agreement will be subject to non-competition
restrictions during his employment and for a period of one-year following the
termination of his employment with the Company for any reason.
Mr. Thurmans
employment with us is at will and may be terminated by us at any time and for
any reason, or for no reason. Upon any
termination by us, Mr. Thurman agrees to resign all positions, including
as an officer and, if applicable, as a director or member of the board or any
committee thereof. Unless otherwise
determined by our board, termination of Mr. Thurmans employment as
interim CEO will not affect his status as a director.
The foregoing description
of the letter agreement between us and Mr. Thurman is qualified in its
entirety by reference to the copy of the letter agreement which is attached as Exhibit 99.4
and which is incorporated by reference herein.
Mr. Thurman, 59, has
served as our Executive Chairman and a member of our Board of Directors since July 2008.
Since May 2008 Mr. Thurman has served as a Senior Advisor to New
Mountain Capital, LLC, a private and public equity investment firm. From July 2007
through June 2008 Mr. Thurman served as a consultant to Cardinal
Health, Inc., a global healthcare provider. From April 2001 until its
acquisition by Cardinal Health, Inc. in July 2007, Mr. Thurman
served as Chief Executive Officer of VIASYS Healthcare Inc., a healthcare
technology company. Mr. Thurman also served as Chairman of the Board of
Directors and President of VIASYS Healthcare Inc. from November 2001
and July 2004, respectively, until the time of its acquisition by Cardinal
Health, Inc. From 1996 to April 2001, Mr. Thurman served as
Chairman and Chief Executive Officer of Strategic Reserves LLC, a
privately held company providing funding and strategic direction to healthcare
technology companies. From 1993 to 1996, Mr. Thurman was Chairman and CEO
of Corning Life Sciences, Inc., which was a global leader in clinical
laboratory testing, pharmaceutical research and esoteric reference testing.
Concurrent with the aforementioned positions, Mr. Thurman served as
Chairman of the Board of Directors of Enzon Pharmaceuticals, Inc. from
1994 to 2001. From 1984 to 1993, Mr. Thurman held various positions at
Rhone-Poulenc Rorer Pharmaceuticals, Inc., a global pharmaceutical
company.
3
Compensation Program for
Non-Employee Directors
Also on January 22,
2009, the Board adopted the Compensation Program for Non-Employee Directors
(the Non-Employee Director Compensation Program), effective as of the date of
the 2009 annual meeting of the Companys stockholders for new and continuing
Non-Employee Directors. All capitalized
terms used in the following description of the Non-Employee Director
Compensation Program have the meanings set forth in the 2008 Plan.
Initial
Restricted Stock Unit Award
. Upon his or
her first election or appointment as a member of the Board, a Non-Employee
Director will receive a Restricted Stock Unit Award under the 2008 Plan
representing the right to receive that number of shares of Common Stock
determined by dividing $80,000 by the Fair Market Value of a share of Common
Stock on the award date. The Restricted
Stock Units will be fully vested as of the award date and will be distributed
in the form of Common Stock on the earliest to occur of the non-employee
directors death, Disability or separation from service (as defined in the
Internal Revenue Code of 1986, as amended (the Code)), or a 409A Change in
Control, which means a change in the ownership or effective control of the
Company, or in the ownership of a substantial portion of the Companys assets,
as provided in the Code.
Annual
Awards
. For each year of service as a Non-Employee
Director beginning with 2009, each Non-Employee Director continuing in service
as a Non-Employee Director after the annual meeting will receive the following:
Annual Retainer
. At the individuals election, each
Non-Employee Director will receive either a cash award of $50,000 (the Retainer
Amount) (paid in four quarterly installments over the calendar year as of the
last day of each calendar quarter beginning with the first calendar quarter
following the date of the annual meeting) or a Nonstatutory Stock Option to
purchase that number of shares of Common Stock equal to (a) 300% of the
portion, if any, of the Retainer Amount the Non-Employee Director elects to
have converted into a Nonstatutory Stock Option divided by (b) the stock
option value used by the Company for financial reporting purposes under SFAS
123(R). For example, if the SFAS 123(R) stock
option value on the award date is $10 and the Non-Employee Director elects to
convert the full retainer amount, then the Non-Employee Director would receive
a Nonstatutory Stock Option to purchase 15,000 shares of Common Stock. To the extent a Non-Employee Director elects
to receive his retainer in the form of a Nonstatutory Stock Option, the
Nonstatutory Stock Option will be awarded under the 2008 Plan as of the date of
the annual meeting of the Companys stockholders and will vest in four quarterly
installments as of the last day of each calendar quarter beginning with the
first calendar quarter following the date of the annual meeting so long as the
Non-Employee Director remains in the Continuous Service of the Board as of each
vesting date. Each such Nonstatutory
Stock Option will have a ten-year term
and once vested, will remain
exercisable for the entire ten-year term except in the event a Non-Employee
Director is terminated for cause in which case the option will immediately
terminate
. Each Non-Employee Director must irrevocably
elect the form of in which his or her retainer for each year will be paid prior
to the date of the annual meeting of the Companys stockholders in that
year. The election may be made in 50%
increments (ranging from 0% to 100%) and the increments may vary from year to
year. If a Non-Employee Director fails
to make an election, such Non-Employee Directors retainer shall be paid in
cash.
Annual Restricted Stock
Unit Award
. Each Non-Employee Director will receive a Restricted
Stock Unit Award under the 2008 Plan as of the date of the annual meeting of
the Companys stockholders representing the right to receive that number of
shares of Common Stock determined by dividing $80,000 by the Fair Market Value
on the award date. The Restricted Stock
Units will be fully vested as of the award date and will be distributed on the
earliest to occur of the Non-Employee Directors death, Disability or separation
from service, or a 409A Change in Control.
Committee Chairperson Retainer
.
Non-Employee Directors serving as chairpersons of the Audit Committee,
Compensation Committee, Nominating and Corporate Governance Committee and the
Medical Advisory Board will receive additional annual cash compensation as
follows:
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Audit Committee Chair: $15,000
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Compensation Committee Chair: $10,000
·
Nominating and Corporate Governance
Committee Chair: $10,000
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Medical Advisory Board Chair: $10,000
4
Committee Member Retainer
.
Non-Employee Directors serving as chairpersons of the Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee will
receive additional annual cash compensation as follows:
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Audit Committee Member: $7,500
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Compensation Committee Member: $5,000
·
Nominating and Corporate Governance
Committee Member: $5,000
Non-Employee
Director Sale Restrictions and Holding Requirements
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The Non-Employee Director Compensation Program also provides that each
Non-Employee Director will be required to hold any Common Stock acquired by
such Non-Employee Director on or after January 22, 2009, whether pursuant
to the terms of an award of equity compensation by the Company or purchased by
the Non-Employee Director
on the open market
, through the date of the Non-Employee Directors
separation from service with Board for any reason
(for the avoidance of
doubt, this policy does not apply to shares acquired by a Non-Employee Director
prior to January 22, 2009 whether pursuant to the terms of an award of
equity compensation by the Company or purchased by the Non-Employee Director on
the open market)
. Sales made by a Non-Employee Director
pursuant to the terms of a valid 10b5-1 plan or in connection with a broker
assisted exercise of a Stock Option (as defined in the 2008 Plan) where shares
of Common Stock are sold to satisfy payment of the exercise price will not be
deemed to violate this requirement. To
the extent a Non-Employee Director is employed by a fund and such Non-Employee
Directors equity compensation from the Company is treated as the funds
compensation (or otherwise as an economic right of the fund) pursuant to the
terms of the arrangement in place between the Non-Employee Director and the
fund, the foregoing restrictions will not apply.
Equity awards issued under the
2008 Plan may be transferred in accordance with the applicable provisions of the
2008 Plan, subject to Board approval, if applicable. If shares or equity awards are transferred
(subject to any required approval) for estate planning or gift purposes, such
transfers will not be deemed to violate this requirement.
In addition, each
Non-Employee Director must hold $200,000 worth of Common Stock within two years
of the date such Non-Employee Director joins the Board. The foregoing requirement maybe satisfied
through restricted stock units, vested options or personal holdings.
The foregoing description
of the Non-Employee Director Compensation Program is qualified in its entirety
by reference to the description of the Non-Employee Director Compensation
Program which is attached as Exhibit 99.5 to this report and is
incorporated by reference herein.
Restricted Stock Unit Grants
The Board approved a
grant of 3,781 restricted stock units under the 2008 Plan to each of following
directors: Ronald A. Ahrens, Fred Middleton, Kirk E. Gorman, Woodrow A. Myers
Jr., M.D., Randy H. Thurman, Eric N. Prystowsky, M.D and Robert J. Rubin,
M.D. These grants were fully vested upon issuance and will be distributed
in the form of common stock on the earliest to occur of the non-employee
directors death, Disability (as defined in the 2008 Plan), separation from
service (within the meaning of such term under section 409A(a)(2)(A)(i) of
the Code or a 409A Change in Control (as defined below). For purposes of
this program, a 409A Change in Control is a change in the ownership or
effective control of the Company, or in the ownership of a substantial portion
of the Companys assets, as provided in section 409A(a)(2)(A)(v) of the
Code.
Upon adoption of the
Non-Employee Director Compensation Program, the Board determined that, unless
it determines otherwise, no further grants shall be made after January 22,
2009 under the Companys 2008 Non-Employee Directors Stock Option Plan.
5
Item
9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits.
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Exhibit Number
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Exhibit Title
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99.1
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Press Release by the
Company, dated January 26, 2009
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99.2
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Release and Waiver of
Claims, dated January 25, 2009, by Arie Cohen
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99.3
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Employment Agreement,
dated November 14, 2008, between Arie Cohen and the Company
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99.4
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Letter Agreement, dated
January 28, 2009, between Randy Thurman and the Company
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99.5
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Compensation Program
for Non-Employee Directors
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6
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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CardioNet, Inc.
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January 28, 2009
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By:
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/s/ Martin P. Galvan
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Name: Martin P. Galvan
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Title: Chief Financial
Officer
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7
Exhibit Index
Exhibit Number
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Exhibit Title
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99.1
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Press Release by the
Company, dated January 26, 2009
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99.2
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Release and Waiver of
Claims, dated January 25, 2009, by Arie Cohen
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99.3
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Employment Agreement,
dated November 14, 2008, between Arie Cohen and the Company
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99.4
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Letter Agreement, dated
January 28, 2009, between Randy Thurman and the Company
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99.5
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Compensation Program
for Non-Employee Directors
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8
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