ABIOMED INC (Form: 10-Q, Received: 02/05/2016 16:11:08)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2015

o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-09585

ABIOMED, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

04-2743260

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

22 CHERRY HILL DRIVE

DANVERS, MASSACHUSETTS 01923

(Address of principal executive offices, including zip code)

(978) 646-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is, a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of January 31, 2016, 42,437,354 shares of the registrant’s common stock, $.01 par value, were outstanding.

ABIOMED, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION:

Item 1.	Condensed Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2015	3

	Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2015 and 2014	4

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2015 and 2014	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2015 and 2014	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II - OTHER INFORMATION:

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

SIGNATURES		34

NOTE REGARDING COMPANY REFERENCES

Throughout this report on Form 10-Q (the “Report”), “Abiomed, Inc.,” the “Company,” “we,” “us” and “our” refer to ABIOMED, Inc. and its consolidated subsidiaries.

NOTE REGARDING TRADEMARKS

ABIOMED, ABIOCOR, IMPELLA, IMPELLA CP, IMPELLA RP and Symphony are trademarks of ABIOMED, Inc., and are registered in the U.S. and certain foreign countries. BVS is a trademark of ABIOMED, Inc. and is registered in the U.S. AB5000, IMPELLA 2.5, IMPELLA 5.0, and IMPELLA LD are trademarks of ABIOMED, Inc. RECOVER is a trademark of Abiomed Europe GmbH, a subsidiary of ABIOMED, Inc., and is registered in certain foreign countries.

PART 1. FINANCI AL INFORMATION

ITEM 1:

FINANCIAL STATEMENTS

ABIOMED, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share data)

	December 31, 2015			March 31, 2015

ASSETS
Current assets:
Cash and cash equivalents	$	53,226		$	22,401
Short-term marketable securities		142,968			109,557
Accounts receivable, net		36,842			31,828
Inventories		25,535			16,774
Prepaid expenses and other current assets		4,115			4,479
Deferred tax assets, net		19,059			35,100
Total current assets		281,745			220,139
Long-term marketable securities		—			13,996
Property and equipment, net		15,020			9,127
Goodwill		31,697			31,534
In-process research and development		14,786			14,711
Long-term deferred tax assets, net		43,956			45,206
Other assets		4,422			3,654
Total assets	$	391,626		$	338,367
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	8,836		$	10,389
Accrued expenses		21,921			21,894
Deferred revenue		6,913			7,036
Total current liabilities		37,670			39,319
Other long-term liabilities		236			183
Contingent consideration		7,392			6,510
Long-term deferred tax liabilities		799			795
Total liabilities		46,097			46,807
Commitments and contingencies (Note 10)
Stockholders' equity:
Class B Preferred Stock, $.01 par value		—			—
Authorized - 1,000,000 shares; Issued and outstanding - none
Common stock, $.01 par value		424			413
Authorized - 100,000,000 shares; Issued - 43,777,675 shares at December 31, 2015 and 42,618,717 shares at March 31, 2015;
Outstanding - 42,437,354 shares at December 31, 2015 and 41,335,773 shares at March 31, 2015
Additional paid in capital		495,991			465,046
Accumulated deficit		(110,073	)		(137,222	)
Treasury stock at cost - 1,340,321 shares at December 31, 2015 and 1,282,944 shares at March 31, 2015		(23,255	)		(19,347	)
Accumulated other comprehensive loss		(17,558	)		(17,330	)
Total stockholders' equity		345,529			291,560
Total liabilities and stockholders' equity	$	391,626		$	338,367

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

ABIOMED, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2015			2014			2015		2014
Revenue:
Product revenue	$	85,789		$	61,966		$	235,569	$	162,400
Funded research and development		6			39			17		354
		85,795			62,005			235,586		162,754
Costs and expenses:
Cost of product revenue		12,744			9,838			35,756		29,139
Research and development		13,755			8,365			35,534		26,120
Selling, general and administrative		41,853			30,139			119,005		91,192
		68,352			48,342			190,295		146,451
Income from operations		17,443			13,663			45,291		16,303
Other income:
Investment income, net		84			48			209		128
Other (loss) income, net		(29	)		(10	)		111		(38	)
		55			38			320		90
Income before income taxes		17,498			13,701			45,611		16,393
Income tax provision		6,943			1,017			18,462		1,579
Net income	$	10,555		$	12,684		$	27,149	$	14,814

Basic net income per share	$	0.25		$	0.31		$	0.64	$	0.37
Basic weighted average shares outstanding		42,427			40,856			42,118		40,456

Diluted net income per share	$	0.23		$	0.30		$	0.61	$	0.35
Diluted weighted average shares outstanding		44,949			42,884			44,805		42,345

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

ABIOMED, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2015			2014			2015			2014
Net income	$	10,555		$	12,684		$	27,149		$	14,814

Other comprehensive (loss) income:
Foreign currency translation losses		(2,520	)		(2,944	)		(212	)		(8,184	)
Net unrealized losses on marketable securities		(32	)		(23	)		(16	)		(18	)
Other comprehensive loss		(2,552	)		(2,967	)		(228	)		(8,202	)

Comprehensive income	$	8,003		$	9,717		$	26,921		$	6,612

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

ABIOMED, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

	For the Nine Months Ended December 31,
	2015			2014
Operating activities:
Net income	$	27,149		$	14,814
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,214			1,796
Bad debt expense		78			43
Stock-based compensation		21,731			12,696
Write-down of inventory		1,356			1,135
Excess tax benefit from stock-based awards		(488	)		—
Deferred tax provision		17,382			675
Change in fair value of contingent consideration		882			365
Changes in assets and liabilities:
Accounts receivable		(5,084	)		(4,320	)
Inventories		(10,092	)		(3,582	)
Prepaid expenses and other assets		343			(180	)
Accounts payable		(1,740	)		368
Accrued expenses and other liabilities		632			(639	)
Deferred revenue		(125	)		1,856
Net cash provided by operating activities		54,238			25,027
Investing activities:
Purchases of marketable securities		(189,595	)		(72,411	)
Proceeds from the sale and maturity of marketable securities		170,195			57,890
Acquisition of ECP and AIS, net of cash assumed		—			(15,697	)
Purchase of other investment		(750	)		(1,250	)
Purchases of property and equipment		(7,933	)		(2,232	)
Net cash used for investing activities		(28,083	)		(33,700	)
Financing activities:
Proceeds from the exercise of stock options		8,237			8,624
Excess tax benefit from stock-based awards		488			—
Taxes paid related to net share settlement of vesting of stock awards		(3,908	)		(1,013	)
Proceeds from the issuance of stock under employee stock purchase plan		451			397
Net cash provided by financing activities		5,268			8,008
Effect of exchange rate changes on cash		(598	)		(773	)
Net increase (decrease) in cash and cash equivalents		30,825			(1,438	)
Cash and cash equivalents at beginning of period		22,401			20,916
Cash and cash equivalents at end of period	$	53,226		$	19,478
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	724		$	1,090
Supplemental disclosure of non-cash investing and financing activities:
Contingent consideration related to acquisition of ECP		—			6,000
Property and equipment in accounts payable and accrued expenses		471			501

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited)

ABIOMED, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(In thousands, except share data)

Note 1. Nature of Business and Basis of Preparation

Abiomed, Inc. (the “Company”) is a provider of mechanical circulatory support devices and offers a continuum of care to heart failure patients. The Company develops, manufactures and markets proprietary products that are designed to enable the heart to rest, heal and recover by improving blood flow and/or performing the pumping function of the heart. The Company’s products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists and in the heart surgery suite by heart surgeons for patients who are in need of hemodynamic support prophylactically or emergently before, during or after angioplasty or heart surgery procedures.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial reporting and in accordance with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015 that has been filed with the Securities and Exchange Commission (the “SEC”).

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature and are necessary for a fair presentation of results for the interim periods presented. The results of operations for any interim period may not be indicative of results for the full fiscal year or any other subsequent period.

There have been no changes in the Company’s significant accounting policies for the three and nine months ended December 31, 2015 as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2015 that has been filed with the SEC.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers to provide updated guidance on revenue recognition. ASU 2014-09 requires a company to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 will become effective for the Company beginning in fiscal 2019 under either full or modified retrospective adoption, with early adoption permitted as of the original effective date of ASU 2014-09. The Company is currently evaluating the impact of adopting ASU 2014-09 on its net income, financial position, cash flows and disclosures.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which applies to inventory that is measured using first-in, first-out or average cost methods. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, last-out. This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of adopting ASU 2015-11 on its condensed consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805)—Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this update require that an acquirer recognizes adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The Company is in the process of assessing the impact of the adoption of ASU 2015-16 on its financial position.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740)—Balance Sheet Classification of Deferred Taxes . This ASU requires an entity to classify deferred income tax assets and liabilities as n oncurrent on the entity’s classified statement of financial position. This amendment eliminates the current requirement to classify deferred tax assets and liabilities as either current or noncurrent on the entity’s balance sheet . This amendment may be app lied either prospectively to all deferred tax liabilities and assets or retrospective ly to all periods presented. If applied prospectively, the entity should disclose in the first interim and first annual period of change, the nature of and the reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted. If applied retrospectively, the entity should disclose in the first interim and first annual period of change, the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods. This ASU is effective for fiscal years beginning after December 15, 2016, and for interim periods within those fiscal years. Earlier applicati on is permitted as of the beginning of an interim or annual reporting period. The Company is in the process of assessing the impact of the adoption of ASU 2015-17 on its financial position.

The FASB is currently working on amendments to existing accounting standards governing a number of areas including, but not limited to, accounting for leases. In May 2013, the FASB issued an ASU (Revised), Leases (Topic 842) (the “Exposure Draft”), which would replace the existing guidance in ASC 840— Leases (“ASC 840”). Under the Exposure Draft, among other changes in practice, a lessee’s rights and obligations under most leases, including existing and new arrangements, would be recognized as assets and liabilities, respectively, on the balance sheet. Other significant provisions of the Exposure Draft include (i) defining the “lease term” to include the noncancellable period together with periods for which there is a significant economic incentive for the lessee to extend or not terminate the lease; (ii) defining the initial lease liability to be recorded on the balance sheet to contemplate only those variable lease payments that depend on an index or that are in substance “fixed”; and (iii) a dual approach for determining whether lease expense is recognized on a straight-line or accelerated basis, depending on whether the lessee is expected to consume more than an insignificant portion of the leased asset’s economic benefits. In November 2015, the FASB announced the final lease standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years but the final standard has not yet been issued. This Exposure Draft will likely have an impact on the Company’s consolidated financial statements. The Company is currently evaluating the impact of adopting this proposed standard and has not yet determined the impact that this proposed change in accounting standards will have on its consolidated financial statements.

Note 2. Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding are calculated by adding to the weighted average shares outstanding any potential dilutive securities outstanding for the period. Potential dilutive securities include stock options, restricted stock units, performance-based stock awards and shares to be purchased under the Company’s employee stock purchase plan. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same. The Company’s basic and diluted net income per share for the three and nine months ended December 31, 2015 and 2014 were as follows (in thousands, except per share data):

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
	2015		2014		2015		2014
Basic Net Income Per Share
Net income	$	10,555	$	12,684	$	27,149	$	14,814

Weighted average shares used in computing basic net income per share		42,427		40,856		42,118		40,456

Net income per share - basic	$	0.25	$	0.31	$	0.64	$	0.37

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
	2015		2014		2015		2014
Diluted Net Income Per Share
Net income	$	10,555	$	12,684	$	27,149	$	14,814

Weighted average shares used in computing basic net income per share		42,427		40,856		42,118		40,456
Effect of dilutive securities		2,522		2,028		2,687		1,889
Weighted average shares used in computing diluted net income per share		44,949		42,884		44,805		42,345

Net income per share - diluted	$	0.23	$	0.30	$	0.61	$	0.35

For the three and nine months ended December 31, 2015, approximately 14,000 and 7,000 shares, respectively, underlying out-of-the-money stock options were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. Also, approximately 226,000 restricted shares in each of the three and nine months ended December 31, 2015, related to performance-based awards for which milestones have not been met, were not included in the computation of diluted earnings per share.

For the three and nine months ended December 31, 2014, approximately 1,000 and 36,000 shares, respectively, underlying out-of-the-money stock options were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive. Also, approximately 460,000 restricted shares in each of the three and nine months ended December 31, 2014 related to performance-based awards for which milestones had not been met, were not included in the computation of diluted earnings per share.

Note 3. Acquisitions

Acquisition of ECP Entwicklungsgesellschaft mbH

On July 1, 2014, the Company entered into a share purchase agreement with its wholly owned German subsidiary, Abiomed Europe GmbH (“Abiomed Europe”) and Syscore GmbH (“Syscore”), a limited liability company located in Berlin, Germany, providing for the Company’s acquisition of all of the share capital of ECP Entwicklungsgesellschaft mbH (“ECP”), a limited liability company incorporated in Germany. ECP is engaged in research, development, prototyping and the production of a percutaneous expandable catheter pump which increases blood circulation from the heart with an external drive shaft. The Company’s acquisition of ECP closed on July 1, 2014.

The Company acquired ECP for $13.0 million in cash, with additional potential payouts totaling $15.0 million payable to Syscore based on the achievement of certain technical, regulatory and commercial milestones. These milestone payments may be made, at the Company’s option, by a combination of cash or the Company’s common stock.

With respect to such milestone payments, the share purchase agreement provides:

that, upon the earlier of (i) the Company’s receipt of European CE Marking approval relating to the sale of an expandable device based on certain patent rights acquired from ECP, or (ii) the Company’s bringing of a successful claim against a third party competitor (or reaching an economically equivalent settlement) for the infringement of certain patent rights acquired from ECP, it will pay Syscore an additional $7.0 million (provided that if such claim or settlement does not prohibit the third party competitor’s further marketing, production, sale, distribution, lease or use of any violating or infringing products, but only awards monetary damages to the Company or to Abiomed Europe, the amount payable to Syscore shall be limited to the lower of the amount of aggregate damages received and $7.0 million); and

that, upon the first to occur of (i) the Company’s successful commercialization of one or more rotatable and expandable devices based on certain patent rights acquired from ECP, where such devices achieve aggregate worldwide revenues of $125.0 million, including the revenues of third-party licensees, or (ii) the Company’s sale of (A) ECP, (B) all or substantially all of ECP’s assets, or (C) certain of ECP’s patent rights, the Company will pay to Syscore the lesser of (x) one-half of the profits earned from such sale described in the foregoing item (ii), after accounting for the costs of acquiring and operating ECP, or (y) $15.0 million (less any previous milestone payment).

ECP’s Acquisition of AIS GmbH Aachen Innovative Solutions

In connection with the Company’s acquisition of ECP, ECP acquired all of the share capital of AIS GmbH Aachen Innovative Solutions (“AIS”), a limited liability company incorporated in Germany, pursuant to a share purchase agreement dated as of June 30, 2014, by and among ECP and AIS’s four individual shareholders. AIS, based in Aachen, Germany, holds certain intellectual property useful to ECP’s business, and, prior to being acquired by ECP, had licensed such intellectual property to ECP.

The purchase price for the acquisition of AIS’s share capital was approximately $2.8 million in cash, which was provided by the Company, and the acquisition closed immediately prior to Abiomed Europe’s acquisition of ECP. The share purchase agreement contains representations, warranties and closing conditions customary for transactions of its size and nature.

Purchase Price Allocation

The acquisition of ECP and AIS was accounted for as a business combination. The purchase price for the acquisition has been allocated to the assets acquired and liabilities assumed based on their estimated fair values.

The acquisition-date fair value of the consideration transferred is as follows:

	Total Acquisition Date Fair Value (in thousands)
Cash consideration	$	15,750
Contingent consideration		6,000
Total consideration transferred	$	21,750

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on July 1, 2014, the date of acquisition (in thousands):

Acquired assets:
Cash and cash equivalents	$	53
Accounts receivable		25
Property and equipment		619
In-process research and development		18,500
Goodwill		1,964
Long-term deferred tax assets		1,874
Other assets acquired		141
Total assets acquired		23,176
Liabilities assumed:
Accounts payable		295
Accrued liabilities		131
Long-term deferred tax liabilities		1,000
Total liabilities assumed		1,426

Net assets acquired	$	21,750

In-process research and development (“IPR&D”) is the estimated fair value of the ECP and AIS technology that had either not reached commercial technological feasibility nor had alternative future use at the time of the acquisition. Therefore, the Company considered IPR&D, with assigned values to be allocated among the various IPR&D assets acquired.

Goodwill is calculated as the difference between the acquisition-date fair value of the consideration transferred and the fair values of the assets acquired and liabilities assumed. The goodwill resulting from these acquisitions arises largely from synergies expected from combining the operations of ECP and AIS with the Company’s existing operations. The goodwill is not deductible for income tax purposes.

The fo llowing unaudited pro forma information presents the combined results of operations for the three and nine months ended December 31, 2015 and 2014, as if the Company had completed the ECP and AIS acquisitions at the beginning of fiscal 2015 . The pro forma financial information is provided for comparative purposes only and is not necessarily indicative of what actual results would have been had the acquisition occurred on the date indicated, nor does it give effect to synergies, cost savings, fair market value adjustments, immaterial amortization expense and other changes expected to result from the acquisition. Accordingly, the pro forma financial results do not purport to be indicative of consolidated results of operations as of the date her eof, for any period ended on the date hereof, or for any other future date or period. The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for transaction-related cos ts, to eliminate revenues earned by AIS from ECP and expenses paid by ECP to AIS associated with a license agreement between the two parties, interest expense incurred by ECP related to bank loans accounted for as if the repayment of ECP debt had occurred and was not outstanding during the periods, and income tax provision of AIS due to the elimination of revenue on the license agreement with ECP.

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
		2015		2014		2015		2014
	(in $000's)				(in $000's)
Revenue	$	85,795	$	62,005	$	235,586	$	162,766
Income before income tax provision		17,498		13,665		45,611		16,409
Net income		10,555		12,686		27,149		14,920

The Company has no material revenues and incurred $2.8 million in net losses from July 1, 2014 through December 31, 2015 associated with the operations of ECP and AIS acquisitions.

Note 4. Marketable Securities and Fair Value Measurements

Marketable Securities

The Company’s marketable securities are classified as available-for-sale securities and, accordingly, are recorded at fair value. The difference between amortized cost and fair value is included in stockholders’ equity.

The Company’s marketable securities at December 31, 2015 and March 31, 2015 are invested in the following:


	Amortized		Gross Unrealized		Gross Unrealized			Fair Market
	Cost		Gains		Losses			Value
	(in $000's)
December 31, 2015:
US Treasury mutual fund securities	$	19,488	$	—	$	—		$	19,488
Short-term government-backed securities		123,499		16		(35	)		123,480
	$	142,987	$	16	$	(35	)	$	142,968


	Amortized		Gross Unrealized		Gross Unrealized			Fair Market
	Cost		Gains		Losses			Value
	(in $000's)
March 31, 2015:
US Treasury mutual fund securities	$	19,487	$	—	$	—		$	19,487
Short-term government-backed securities		90,070		9		(9	)		90,070
Long-term government-backed securities		13,999		2		(5	)		13,996
	$	123,556	$	11	$	(14	)	$	123,553

Fair Value Hierarchy

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Level 1 primarily consists of financial instruments whose values are based on quoted market prices such as exchange-traded instruments and listed equities.

Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Level 3 is comprised of unobservable inputs that are supported by little or no market activity. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flows, or similar techniques, and at least one significant model assumption or input is unobservable.

The following table presents the Company’s financial instruments recorded at fair value in the condensed consolidated balance sheets, classified according to the three categories described above:

	Level 1		Level 2		Level 3		Total
December 31, 2015:	(in $000's)
Assets
U.S. Treasury mutual fund securities	$	—	$	19,488	$	—	$	19,488
Short-term government-backed securities		—		123,480		—		123,480
Liabilities
Contingent consideration		—		—		7,392		7,392

	Level 1		Level 2		Level 3		Total
March 31, 2015:	(in $000's)
Assets
U.S. Treasury mutual fund securities	$	—	$	19,487	$	—	$	19,487
Short-term government-backed securities		—		90,070		—		90,070
Long-term government-backed securities		—		13,996		—		13,996
Liabilities
Contingent consideration		—		—		6,510		6,510

The Company’s investments in U.S. Treasury mutual fund securities, short-term government-backed securities and long-term government-backed securities are reported as Level 2 financial assets as they are not exchange-traded instruments.

The Company’s financial liabilities consisted of contingent consideration potentially payable to former ECP shareholders related to the acquisition of ECP in July 2014. This liability is reported as Level 3 as the estimated fair value of the contingent consideration related to the acquisition of the ECP requires significant management judgment or estimation and is calculated using the income approach, using various revenue and cost assumptions and applying a probability to each outcome.

The following table summarizes t he change in fair value, as determined by Level 3 inputs, of the contingent consideration for the nine months ended December 31, 2015 :

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
		2015		2014		2015		2014
	(in $000's)				(in $000's)
Level 3 liabilities, beginning balance	$	6,817	$	5,797	$	6,510	$	—
Additions		—		—		—		6,000
Payments		—		—		—		—
Change in fair value		575		568		882		365
Level 3 liabilities, ending balance	$	7,392	$	6,365	$	7,392	$	6,365

The change in fair value of the contingent consideration was due to an increase in fair value caused by the effect of the passage of time on the fair value measurement of milestones related to the ECP acquisition and continued progress on the development of the underlying technology. Adjustments associated with the change in fair value of contingent consideration are included in research and development expenses on the Company’s condensed consolidated statements of operations.

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements as of December 31, 2015 classified as Level 3:

	Fair Value at				Weighted Average
	December 31, 2015			Significant	(range, if
	(in $000's)		Valuation Methodology	Unobservable Input	applicable)
Contingent consideration	$	7,392	Probability weighted income approach	Milestone dates	2018 to 2021
				Discount rate	8% to 12%
				Probability of occurrence	Probability adjusted level of 40% for the base case scenario and 5% to 30% for various upside and downside scenarios

Other Investments

The Company periodically makes investments in private medical device companies that focus on heart failure and heart pump technologies. In July 2015, the Company invested $0.8 million for its participation in a preferred stock offering of a private medical technology company. The aggregate carrying amount of the Company’s other investments was $4.4 million and $3.6 million at each of December 31, 2015 and March 31, 2015, respectively, and is classified within other assets in the unaudited condensed consolidated balance sheets. These investments are accounted for using the cost method and are measured at fair value only if there are identified events or changes in circumstances that may have a significant adverse effect on the fair value of these investments.

Note 5. Inventories

The components of inventories are as follows:

	December 31, 2015		March 31, 2015
	(in $000's)
Raw materials and supplies	$	8,894	$	7,417
Work-in-progress		10,427		6,466
Finished goods		6,214		2,891
	$	25,535	$	16,774

The Company’s inventories relate to its circulatory care product lines, primarily its Impella® heart pump product platforms. Finished goods and work-in-process inventories consist of direct material, labor and overhead. During the three and nine months ended December 31, 2015, the Company recorded $0.4 million and $1.4 million, respectively, in write-downs of inventory. During the three and nine months ended December 31, 2014, the Company recorded $0.6 million and $1.1 million, respectively, in write-downs of inventory.

Note 6. Goodwill and In-Process Research and Development

Goodwill

The carrying amount of goodwill at December 31, 2015 and March 31, 2015 was $31.7 million and $31.5 million, respectively, and has been recorded in connection with the Company’s acquisition of Impella Cardiosystems AG (“Impella Cardiosystems”), in May 2005 and ECP and AIS in July 2014. The goodwill activity is as follows:

	(in $000's)
Balance at March 31, 2015	$	31,534
Foreign currency translation impact		163
Balance at December 31, 2015	$	31,697

The Company evaluates goodwill and IPR&D assets at least annually at October 31, as well as whenever events or changes in circumstances suggest that the carrying amount may not be recoverable. The Company has no accumulated impairment losses on goodwill or IPR&D assets.

As described in Note 3 “Acquisitions,” the Company acquired ECP and AIS in July 2014 and recorded $18.5 million of IPR&D assets. The estimated fair value of IPR&D assets at the acquisition date was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flows from the expandable catheter pump technology were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the acquisition date and the time and resources needed to complete development. The Company used a discount rate of 22.5% and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions.

The carrying value of the Company’s IPR&D assets and the change in the balance for the nine months ended December 31, 2015 are as follows:

	(in $000's)
Balance at March 31, 2015	$	14,711
Foreign currency translation impact		75
Balance at December 31, 2015	$	14,786

Note 7. Accrued Expenses

Accrued expenses consist of the following:

	December 31, 2015		March 31, 2015
	(in $000's)
Employee compensation	$	14,484	$	15,978
Research and development		2,495		1,744
Sales and income taxes		1,324		1,506
Professional, legal and accounting fees		1,155		710
Warranty		639		1,103
Other		1,824		853
	$	21,921	$	21,894

Employee compensation consists primarily of accrued bonuses, accrued commissions and accrued employee benefits at December 31, 2015 and March 31, 2015.

Note 8. Stock-Based Compensation

The following table summarizes stock-based compensation expense by financial statement line item in the Company’s condensed consolidated statements of operations for the three and nine months ended December 31, 2015 and 2014:

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
		2015		2014		2015		2014
	(in $000's)				(in $000's)
Cost of product revenue	$	216	$	160	$	671	$	517
Research and development		994		840		2,914		2,466
Selling, general and administrative		4,929		3,382		18,146		9,713
	$	6,139	$	4,382	$	21,731	$	12,696

The components of stock-based compensation for the three and nine months ended December 31, 2015 and 2014 were as follows:

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
		2015		2014		2015		2014
	(in $000's)				(in $000's)
Restricted stock units	$	5,133	$	3,640	$	17,482	$	10,394
Stock options		909		666		3,955		2,089
Employee stock purchase plan		97		76		294		213
	$	6,139	$	4,382	$	21,731	$	12,696

The Company’s former Chief Financial Officer retired effective July 31, 2015 and currently serves as a consultant to the Company through July 31, 2017. In connection with the former Chief Financial Officer’s retirement agreement, his unvested options and restricted stock units were modified such that they will continue to vest and he will be permitted to exercise any vested options until July 31, 2017, including any options that vest after his retirement date, other than such options that expire on the tenth anniversary of the grant date. The Company recorded costs of $2.5 million in stock compensation expense, which is recorded in selling, general and administrative expenses for the nine months ended December 31, 2015.

In June 2015, the Company’s Board of Directors adopted a non-employee director retirement policy that provides for the accelerated vesting of all stock options, restricted stock units and other equity awards held by a non-employee director if he or she permanently ceases his or her service on the Company’s Board of Directors by reason of death, disability, or the non-employee director’s retirement following at least five years of service and so long as his or her age plus service equals or exceeds 65. This retirement policy accelerated the recognition of stock-based compensation because the outstanding unvested restricted stock units held by retirement eligible non-employee directors are able to vest at their decision to retire. The Company recorded costs of $1.4 million in accelerated stock compensation expense, which is recorded in selling, general and administrative expenses for the nine months ended December 31, 2015.

In August 2015, the Company approved the annual equity award grant to non-employee directors in the form of restricted stock units covering 3,900 shares of the Company’s common stock, which vest on the earlier of: (a) the one year anniversary of the grant date; or (b) the next annual meeting of stockholders. In conjunction with the Company’s non-employee director retirement policy, the stock compensation expense for awards to retirement eligible non-employee directors was fully recognized upon grant. The Company recorded costs of $2.0 million in stock compensation expense, which is recorded in selling, general and administrative expenses for the nine months ended December 31, 2015.

Stock Options

The following table summarizes the stock option activity for the nine months ended December 31, 2015:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Options			Exercise		Contractual		Value
	(in thousands)			Price		Term (years)		(in thousands)
Outstanding at beginning of period		2,892		$	14.72		5.18
Granted		164			71.15
Exercised		(721	)		11.42
Cancelled and expired		(2	)		13.81
Outstanding at end of period		2,333		$	19.71		5.35	$	164,775
Exercisable at end of period		1,690		$	13.83		4.27	$	129,224
Options vested and expected to vest at end of period		2,273		$	19.33		5.27	$	161,336

The aggregate intrinsic value of options exercised was $50.7 million for the nine months ended December 31, 2015. The total fair value of options that vested during the nine months ended December 31, 2015 was $2.5 million.

The remaining unrecognized stock-based compensation expense for unvested stock option awards at December 31, 2015 was approximately $6.3 million, net of forfeitures, and the weighted-average period over which this cost will be recognized is 2.4 years.

The Company estimates the fair value of each stock option granted at the grant date using the Black-Scholes option valuation model. The weighted average grant-date fair values and weighted average assumptions used in the calculation of fair value of options granted during the three and nine months ended December 31, 2015 and 2014 was as follows:

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
		2015			2014			2015			2014
Weighted average grant-date fair value	$	34.05		$	15.36		$	28.91		$	9.18

Valuation assumptions:
Risk-free interest rate		1.50	%		1.70	%		1.60	%		1.60	%
Expected option life (years)		4.15			4.17			4.14			4.19
Expected volatility		49.6	%		49.7	%		49.7	%		49.3	%

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a term consistent with the expected life of the stock options. Volatility assumptions are calculated based on the historical volatility of the Company’s stock and adjustments for factors not reflected in historical volatility that may be more indicative of future volatility. The Company estimates the expected term of options based on historical exercise experience and estimates of future exercises of unexercised options. An expected dividend yield of zero is used in the option valuation model because the Company does not pay cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company estimates forfeitures based on an analysis of actual historical forfeitures, adjusted to the extent historic forfeitures may not be indicative of forfeitures in the future.

Restricted Stock and Restricted Stock Units

The following table summarizes the activity of restricted stock and restricted stock units for the nine months ended December 31, 2015:

	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)			(per share)
Restricted stock and restricted stock units at beginning of period		1,160		$	21.90
Granted		679		$	87.95
Vested		(465	)	$	22.65
Forfeited		(45	)	$	15.44
Restricted stock and restricted stock units at end of period		1,329		$	55.61

The weighted average grant-date fair value for restricted stock units granted, including performance and market-based awards, during the nine months ended December 31, 2015 and 2014 was $87.95 and $22.07 per share, respectively. This includes 322,980 market based awards which were valued at $107.10 per share based on a Monte Carlo simulation that was used to account for the market condition in valuing the award. See details below in “Market Based Awards”.

The total fair value of restricted stock units that vested during the nine months ended December 31, 2015 and 2014 was $10.3 million and $9.5 million, respectively. The remaining unrecognized compensation expense for outstanding restricted stock units, including performance and market-based awards, as of December 31, 2015 was $33.9 million and the weighted-average period over which this cost will be recognized is 2.4 years.

Performance and Market-Based Awards

Included in the restricted stock units activity are certain awards that vest subject to certain performance and market-based criteria. The remaining unrecognized compensation expense for outstanding performance and market-based restricted stock units as of December 31, 2015 was $23.2 million and the weighted-average period over which this cost will be recognized is 2.4 years.

Performance-Based Awards

In May 2015, performance-based awards of restricted stock units for the potential issuance of 183,940 shares of common stock were issued to certain executive officers and employees, all of which vest upon achievement of prescribed service milestones by the award recipients and performance milestones by the Company. As of December 31, 2015, the Company is recognizing compensation expense based on the probable outcome related to the prescribed performance targets on the outstanding awards.

In May 2014, performance-based awards of restricted stock units for the potential issuance of 379,752 shares of common stock were issued to certain executive officers and employees, all of which vest upon achievement of prescribed service milestones by the award recipients and performance milestones by the Company. The Company met the prescribed performance milestones in fiscal 2015. As of December 31, 2015, approximately 200,000 shares of common stock underlying restricted stock units remain unvested and such restricted stock units will vest subject to service requirements for vesting for these employees.

In May 2013, performance-based awards of restricted stock units for the potential issuance of 268,988 shares of common stock were issued to certain executive officers and employees, all of which vest upon achievement of prescribed service milestones by the award recipients and performance milestones by the Company. The Company met the prescribed performance milestones in fiscal 2014. As of December 31, 2015, approximately 70,000 shares of common stock underlying restricted stock units remain unvested and such restricted stock units will vest subject to service requirements for vesting for these employees.

In June 2011, performance-based awards of restricted stock units for the potential issuance of 100,000 shares of common stock was issued to a certain senior executive officer of the Company that would vest upon achievement of prescribed service milestones by the award recipient and performance milestones by the Company. As of December 31, 2015, the Company has met the prescribed milestones for 50,000 shares of this award. The Company modified the performance condition on the 50,000 remaining restricted stock units that were related to this performance award in March 2014 and December 2015, all of which will vest upon achievement of a prescribed service milestone by the award recipients and a performance milestone by the Company. The Company recorded $0.5 million in stock compensation expense related to this accounting modification, which is recorded in selling, general and administrative expenses for the three and nine months ended December 31, 2015. The Company believes that it is probable that the prescribed performance milestones will be met and the compensation expense is being recognized accordingly.

Market-Based Awards

In June 2015, the Company awarded certain executive officers a total of up to 322,980 market-based restricted share units. These restricted stock units will vest and result in the issuance of common stock based on continuing employment and the relative ranking of the total shareholder return (“TSR”) of the Company’s common stock in relation to the TSR of the component companies in the S&P Health Care Equipment Select Industry Index over a three-year performance period based on a comparison of average closing stock prices between June 2015 and June 2018. The actual number of market-based restricted stock units that may be earned can range from 0% to 300% of the target number of shares. One-half of the market-based restricted stock units earned will vest in June 2018 and the remaining restricted stock units will vest one year thereafter.

The Company used a Monte Carlo simulation model to estimate that the grant-date fair value of the restricted stock units. The fair value related to the restricted stock units will be recorded as stock compensation expense over the period from date of grant to June 2019 regardless of the actual TSR outcome achieved.

The table below sets forth the assumptions used to value the awards and the estimated grant-date fair value:

Risk-free interest rate		1.10	%
Dividend yield		0	%
Remaining performance period (years)		2.45
Expected volatility		47.2	%
Estimated grant date fair value (per share)	$	107.10
Target performance (number of shares)		107,660

Note 9. Income Taxes

The income tax provision represents the Company’s federal and state income tax obligations as well as foreign tax provisions. The Company’s income tax provision was $6.9 million and $18.5 million for the three and nine months ended December 31, 2015, respectively. The Company’s income tax provision was $1.0 million and $1.6 million for the three and nine months ended December 31, 2014, respectively. The estimated annual effective income tax rate is based upon estimated income before income taxes for the year, the geographical composition of the estimated income before taxes and estimated permanent differences. The estimated annual effective income tax rate can fluctuate and may differ from the actual tax rate recognized in fiscal 2016 for various reasons, including estimates of income before taxes, tax legislation, permanent differences, discrete items, and any adjustments between tax provision calculations and filed tax returns.

The significant differences between the statutory tax rate and effective tax rate for the three and nine months ended December 31, 2015 and 2014 were as follows:

	For the Three Months Ended December 31,					For the Nine Months Ended December 31,
		2015		2014			2015		2014
Statutory income tax rate		35.0	%	34.0	%		35.0	%	34.0	%
Increase (decrease) resulting from:
Losses not benefited		—		(26.6	)		—		(24.4	)
Credits		(1.7	)	—			(1.5	)	—
State taxes, net		3.2		—			3.4		—
Permanent differences		3.2		—			3.4		—
Other		—		—			0.2		—
Effective tax rate		39.7	%	7.4	%		40.5	%	9.6	%

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax in multiple states and Germany. All tax years remain subject to examination by the Internal Revenue Service and state and foreign tax authorities. The Company has net operating loss and tax credit carryforwards which may be utilized in future years to offset taxable income, and those years may also be subject to review by relevant taxing authorities if the carryforwards are utilized. Fiscal years 2012 through 2015 remain open to examination in Germany.

Note 10. Commitments and Contingencies

Commitments

The Company’s headquarters is located at 22 Cherry Hill Drive in Danvers, Massachusetts and consists of approximately 120,500 square feet of space under an operating lease.

The monthly lease payments over the remaining term of the lease are as follows:

The base rent for May 2014 through December 2015 was $74,050 per month; and

The base rent for January 2016 through February 2016 will be $85,818 per month; and

The base rent for March 2016 through February 2018 will be $82,518 per month; and

The base rent for March 2018 through February 2021 will be $85,030 per month.

This facility encompasses most of the Company’s U.S. operations, including research and development, manufacturing, sales and marketing and general and administrative departments. On December 9, 2015, the Company entered into a purchase and sale agreement (the “P&S Agreement”) to acquire its existing corporate headquarters space. Pursuant to the P&S Agreement, the Company will, among other things and subject to closing conditions, acquire the real estate commonly known as 18-22 Cherry Hill Drive, located in Danvers, Massachusetts. Subject to the terms and conditions of the P&S Agreement, the purchase price of the property will be $16.5 million. On January 19, 2016, the Company entered into an amendment of the P&S Agreement to extend the due diligence period until April 19, 2016. The Company expects to close the transaction in April 2016.

The Company’s European headquarters is located in Aachen, Germany and consists of approximately 33,000 square feet of space under an operating lease. In July 2013, the Company entered into a lease agreement to continue renting its existing space in Aachen, Germany through July 31, 2023. In October 2015, the Company entered into an amendment to this lease agreement to lease 9,000 square feet of additional space effective July 1, 2015. The Company also entered into another lease agreement in October 2015 to lease approximately 30,000 square feet of additional space adjacent to its Aachen facility from July 1, 2015 through June 30, 2016. This agreement also provided the Company with options to extend the lease through July 31, 2033. The lease payments under these agreements are approximately 64,500€ (euro) (approximately U.S. $70,000 at December 31, 2015 exchange rates) per month. The building houses most of the manufacturing operations for the Impella product lines as well as certain research and development functions and the sales, marketing and general and administrative functions for most of its product lines sold in Europe and the Middle East.

License Agreements

In April 2014, the Company entered into an exclusive license agreement with Opsens, Inc. for the rights to certain optical sensor technologies in the field of cardio-circulatory assist devices. The Company made a $1.5 million upfront payment upon execution of the agreement and could make additional payments of up to $4.5 million upon the achievement of certain development milestones.

In November 2015, the Company entered into an exclusive license agreement for the rights to certain vascular closure device technologies. The Company made a $0.5 million upfront payment upon execution of the agreement and a milestone payment of $0.6 million in December 2015. The Company could make additional payments of up to $2.8 million upon the achievement of certain development milestones.

Litigation

From time to time, the Company is involved in legal and administrative proceedings and claims of various types. In some actions, the claimants seek damages, as well as other relief, which, if granted, would require significant expenditures. The Company records a liability in its condensed consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its condensed consolidated financial statements.

On October 26, 2012, the Company was informed that the Department of Justice, United States Attorney’s Office for the District of Columbia was conducting an investigation (“Marketing and Labeling Investigation”) focused on the Company’s marketing and labeling of the Impella 2.5™ heart pump. On October 31, 2012, the Company accepted service of a subpoena related to this investigation seeking documents and other materials related to the Impella 2.5. The Company cooperated fully with the Marketing and Labeling Investigation, and on June 29, 2015, the Company received confirmation that the Department of Justice had closed the Marketing and Labeling Investigation without taking enforcement action.

On April 25, 2014, the Company received a subpoena from the Boston regional office of the United States Department of Health and Human Services, or HHS, Office of Inspector General requesting materials relevant to the Company’s reimbursement of expenses and remuneration to healthcare providers for a six month period from July 2012 through December 2012 in co nnection with a civil investigation under the False Claims Act (the “FCA Investigation”). The Company submitted the requested documents to HHS and believes that it substantially complied with the subpoena. On November 6, 2014, the Company received notice f rom the Department of Justice, United States Attorney’s Office for the District of Massachusetts in the form of a Civil Investigative Demand (“CID”) requesting additional materials relating to this matter for the time period of January 1, 2012 through Dece mber 31, 2013. The Company is currently in the process of responding to the additional requests for information contained in the CID, and other informal requests, and intends to continue to cooperate with the U.S. Attorney’s Office in connection with the F CA Investigation.

In July and August 2015, Thoratec Corporation (“Thoratec”), acquired by St. Jude Medical, Inc. in October 2015, brought actions in connection with two Company patents relevant to Thoratec’s HeartMate PHP medical device (“PHP”). In those proceedings, which are in the United Kingdom and Germany, Thoratec asserts that the two patents are invalid. In September 2015, the Company filed counterclaims in the action in Germany asserting that the PHP product infringes the two patents and a third patent owned by the Company. Both the Germany and United Kingdom proceedings are ongoing.

The Company is unable to estimate a potential liability with respect to the legal matters noted above. There are numerous factors that make it difficult to meaningfully estimate possible loss or range of loss at this stage of the legal proceedings, including that the FCA Investigation and patent dispute with Thoratec remain in relatively early stages, there are significant factual and legal issues to be resolved and information obtained or rulings made during any potential lawsuits or investigations could affect the methodology for calculation. Therefore, the Company is unable at this time to estimate a possible loss or range of possible loss, and no adjustment has been made to the financial statements to reflect the outcome of these uncertainties.

Note 11. Segment and Enterprise Wide Disclosures

The Company operates in one business segment—the research, development and sale of medical devices to assist or replace the pumping function of the failing heart. The Company’s chief operating decision maker (determined to be the Chief Executive Officer) does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based on the Company’s consolidated operating results. Approximately 79% and 77% of the Company’s total consolidated assets were located within the U.S. as of December 31, 2015 and March 31, 2015, respectively. The remaining assets were located primarily in Germany and included goodwill and IPR&D assets of $46.5 million and $46.2 million at December 31, 2015 and March 31, 2015, respectively, associated with the Impella Cardiosystems acquisition in May 2005 and the ECP acquisition in July 2014. Total assets outside of the U.S. excluding goodwill and IPR&D assets amounted to 9% and 10% of total consolidated assets as of December 31, 2015 and March 31, 2015, respectively. International sales (primarily in Europe) accounted for 8% of total revenue for each of the three and nine months ended December 31, 2015, and 9% and 10% of total revenue for the three and nine months ended December 31, 2014, respectively.

ITEM 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Report may contain “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “will” and other words and terms of similar meaning. These forward-looking statements address various matters including, among others, future actions related to ongoing investigations and expenditures related thereto; our expectations with respect to submissions to and approvals from regulatory bodies, such as the FDA, including our expectation that the Impella CP®, Impella 5.0® and Impella LD® devices will retain their 510(k) clearances until completion of the FDA review process of our Pre-Market Approval (“PMA”) supplemental submissions for those devices, the expectation that the PMA supplements will receive regulatory approval by the FDA in the summer of 2016 and the expectation that the application for the Impella 2.5 in Japan will receive regulatory approval during calendar 2016; the development and commercialization of new and existing products and anticipated costs, including research and development, sales and marketing and training costs associated with product development and commercialization; expected capital expenditures for the fiscal year ending March 31, 2016; commercial plans for our products into new markets such as Japan; demand and expected shipments of our products; anticipated shifts in the revenue mix associated with our products; and our ability to increase revenues from our Impella line of products and the sufficiency of revenues to fund future operations. Each forward-looking statement in this Report is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, our inability to predict the outcome of investigations and litigation and associated expenses; possible delays in our research and development programs; our ability to obtain regulatory approvals and market our products, and uncertainties related to regulatory processes; greater government scrutiny and regulation of the medical device industry and our ability to respond to changing laws and regulations affecting our industry, including any reforms to the regulatory approval process administered by the FDA, including the 510(k) process and 515 Program Initiative, and changing enforcement practices related thereto; the inability to manufacture products in commercial quantities at an acceptable cost; the acceptance by physicians and hospitals of our products; the impact of competitive products and pricing; uncertainties associated with future capital needs and the risks identified under Item 1A of Part I of our Annual Report on Form 10-K, for the year ended March 31, 2015, as well as the other information we file with the Securities and Exchange Commission. Readers are cautioned not to place considerable reliance on any forward-looking statements contained in this Report, which speak only as of the date of this Report. We undertake no obligation to update or revise these forward-looking statements whether as a result of new information, future events or otherwise, unless required by law. Our business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

Overview

We are a leading provider of temporary percutaneous mechanical circulatory support devices and we offer a continuum of care to heart failure patients. We develop, manufacture and market proprietary products that are designed to enable the heart to rest, heal and recover by improving blood flow to the coronary arteries and end-organs and/or temporarily performing the pumping function of the heart. Our products are used in the cardiac catheterization lab, or cath lab, by interventional cardiologists, the electrophysiology lab, the hybrid lab and in the heart surgery suite by heart surgeons. A physician may use our devices for patients who are in need of hemodynamic support prophylactically or emergently before, during or after angioplasty or heart surgery procedures. We believe heart recovery is the optimal clinical outcome for patients experiencing heart failure because it enables patients to go home with their own native heart and restores their quality of life. In addition, we believe that for the care of such patients, heart recovery is the most cost-effective solution for the healthcare system.

Our strategic focus and the driver of the majority of our revenue growth is the market penetration of our family of Impella products. Revenues from our non-Impella products, largely focused on the heart surgery suite, have been lower over the past several years as we have strategically shifted our sales and marketing efforts towards our Impella products and the cath lab. We expect that most of our product and service revenues in the near future will be from our Impella products.

The Impella product portfolio, which includes the Impella 2.5™, Impella CP ® , Impella RP ® , Impella LD™ and Impella 5.0™, has supported over 25,000 patients in the U.S. Our Impella 2.5, Impella 5.0, Impella LD, Impella CP and Impella RP products also have CE Mark approval and Health Canada approval which allows us to market these devices in the European Union and Canada. We have submitted an application for the Impella 2.5 in Japan and we are hopeful of receiving regulatory approval in calendar 2016.

In July 2014, we acquired all of the issued shares of ECP, a German limited liability company, for $13.0 million in cash, with additional potential payments up to a maximum of $15.0 million based on the achievement of certain technical, regulatory and commercial milestones. ECP, based in Berlin, Germany, is engaged in research, development, prototyping and the pre-serial production of a percutaneous expandable catheter pump which increases blood circulation from the heart with an external drive shaft. In connection with our acquisition of ECP, ECP acquired all of the issued shares of AIS, a German limited liability company, for $2.8 million in cash which was provided by us. AIS, based in Aachen, Germany, holds certain intellectual property useful to ECP’s business, and, prior to being acquired by ECP, had licensed such intellectual property to ECP.

Our Products

Impella 2.5 ™

The Impella 2.5 catheter is a percutaneous micro heart pump with an integrated motor and sensors. The device is designed primarily for use by interventional cardiologists to support patients in the cath lab who may require assistance to maintain their circulation. The Impella 2.5 catheter can be quickly inserted via the femoral artery to reach the left ventricle of the heart where it is directly deployed to draw blood out of the ventricle and deliver it to the circulatory system. This function is intended to reduce ventricular work and provide flow to vital organs. The Impella 2.5 is introduced with normal interventional cardiology procedures and can pump up to 2.5 liters of blood per minute.

The Impella 2.5 product received 510(k) clearance in June 2008 from the FDA for partial circulatory support for up to six hours. In March 2015, we received PMA from the FDA for Impella 2.5 during elective and urgent high-risk PCI procedures. Impella 2.5 is the first hemodynamic support device to receive a PMA indication for use during high-risk PCI procedures, demonstrating its safety and effectiveness for this complex patient population. With this approval, the Impella 2.5 is a temporary (up to six hours) ventricular support device indicated for use during high-risk PCI performed in elective or urgent hemodynamically stable patients with severe coronary artery disease and depressed left ventricular ejection fraction, when a heart team, including a cardiac surgeon, has determined high-risk PCI is the appropriate therapeutic option. Use of the Impella 2.5 in these patients may prevent hemodynamic instability that may occur during planned temporary coronary occlusions and may reduce periprocedural and post-procedural adverse events. The product labeling allows for the clinical decision to leave Impella 2.5 in place beyond the intended duration of up to six hours due to unforeseen circumstances. Per our PMA approval, we will conduct a single-arm, post-approval study on the Impella 2.5, collecting data on high-risk PCI patients. The study will be a prospective, multi-center study comprised of 369 patients from 70 sites supported with the Impella 2.5 system. The Impella 2.5 device has CE mark approval in Europe for up to five days of use and is approved for use in over 40 countries.

In August 2015, we submitted the PMA supplement submissions requesting to expand our current Impella 2.5 PMA approval for additional indications for Impella 2.5 and for most of our other Impella devices (Impella CP, Impella 5.0 and Impella LD). The submissions are for a set of indications related to the use of the Impella devices in patients suffering cardiogenic shock following acute myocardial infarction or cardiac surgery and for a longer duration of support. We anticipate receiving regulatory approval on the PMA supplements from the FDA in the summer of 2016.

A November 2011 update to the American College of Cardiology Foundation, or ACCF, / American Heart Association, or AHA, Task Force on Practice Guidelines and the Society for Cardiovascular Angiography and Interventions Guidelines for Percutaneous Coronary Intervention , for the first time, included Impella devices in both the emergent and prophylactic hemodynamic support settings. In addition, a December 2012 update to the AHA’s Recommendations for the Use of Mechanical Circulatory Support: Device Strategies and Patient Selection recommended Impella devices for use in mechanical circulatory support; a December 2012 update to the ACCF/AHA Guidelines for the Management of ST-Elevation Myocardial Infarction (STEMI) included Impella 2.5 for use in patients requiring urgent coronary artery bypass grafting with STEMI and in treatment of patients with cardiogenic shock complications after STEMI; and a January 2013 update to the International Society for Heart and Lung Transplantation Guidelines for Mechanical Circulatory Support included Impella devices for the first time for patients with multi-organ failure. In addition, Impella devices were included in a January 2013 update to the ACCF /AHA Task Force on Practice Guidelines for the Management of ST-Elevation Myocardial Infarction and a September 2014 AHA /the American College of Cardiology (ACC) Task Force on Practice Guidelines for the Management of Patients with Non-ST-Elevation Acute Coronary Syndromes .

In addition to the U.S. clinical trial data, the Impella 2.5 PMA submission included clinical and scientific supporting evidence from more than 215 publications, covering 1,638 Impella 2.5 patients and incorporated a medical device reporting (MDR) analysis from 13,981 Impella 2.5 patients. In addition to PROTECT I and PROTECT II, further data was provided in the submission from 637 high-risk patients enrolled in the U.S. Impella Registry or cVAD Registry™. The cVAD Registry™ is an ongoing multicenter, observational retrospective registry that includes 49 centers that collects data on the Impella 2.5, Impella 5.0 and Impella CP. The data collection from the registry includes Institutional Review Board, or IRB, approval, complete data monitoring and Clinical Events Committee adjudication. Additionally, the PMA analysis included hemodynamic science described in the literature and validated with a series of pre-clinical and clinical studies.

Impella CP ®

In September 2012, we announced that the Impella CP received 510(k) clearance from the FDA. The Impella CP provides blood flow of approximately one liter more per minute than the Impella 2.5 and is primarily used by either interventional cardiologists to support patients in the cath lab or by surgeons in the heart surgery suite. The Impella CP is indicated for up to six hours of partial circulatory support using an extracorporeal bypass control unit. It is also intended to be used to provide partial circulatory support, for up to six hours, during procedures not requiring cardiopulmonary bypass. The Impella CP received CE Mark approval to be marketed in the European Union in April 2012 and Health Canada approval to be marketed in Canada in June 2012.

In August 2015, we submitted the PMA supplement submissions request ing to expand our current Impella 2.5 PMA approval for additional indications for Impella 2.5 and for most of our other Impella devices (Impella CP, Impella 5.0 and Impella LD). The submissions are for a set of indications related to the use of the Impella devices in patients suffering cardiogenic shock following acute myocardial infarction or cardiac surgery and for a longer duration of support. We anticipate receiving regulatory approval on the PMA supplements from the FDA in the summer of 2016.

We expect the Impella CP to retain its 510(k) clearance until completion of the FDA process.

Impella 5.0 ™ and Impella LD ™

The Impella 5.0 and Impella LD are percutaneous micro heart pumps with integrated motors and sensors for use primarily in the heart surgery suite. These devices are designed to support patients who require higher levels of circulatory support as compared to the Impella 2.5. The Impella 5.0 and Impella LD devices received 510(k) clearance in April 2009, for circulatory support for up to six hours and have CE Mark approval in Europe for up to ten days’ duration and are approved for use in over 40 countries.

The Impella 5.0 can be inserted into the left ventricle via femoral cut down or through the axillary artery. The Impella 5.0 pump goes through the ascending aorta, across the valve and into the left ventricle. The Impella LD is similar to the Impella 5.0 but is implanted directly through an aortic graft. The Impella 5.0 and Impella LD can pump up to five liters of blood per minute, providing full circulatory support.

Impella RP ®

The Impella RP is a percutaneous catheter-based axial flow pump that is designed to allow greater than four liters of flow per minute and is intended to provide the flow and pressure needed to compensate for right side heart failure.

In November 2012, we announced that the Impella RP received U.S. investigational device exemption, or IDE, approval from the FDA for use in RECOVER RIGHT, a pivotal clinical study in the U.S. In March 2014, we completed enrollment of 30 patients at sites that present with signs of right side heart failure, require hemodynamic support, and are being treated in the catheterization lab or cardiac surgery suite. The study collected safety and effectiveness data on the percutaneous use of the Impella RP and was submitted to the FDA in connection with the HDE application towards the submission of an HDE. In January 2015, we received FDA approval for Impella RP under an HDE. As part of the HDE approval, we are required to conduct two post approval studies (PAS) for Impella RP. One includes an adult patient population of 30 patients and the other, a pediatric patient population for a maximum of 15 patients. These studies will be conducted to monitor the post-market safety and probable benefit of the Impella RP device. Both studies will be single-arm multicenter studies that will follow the respective patients at 30 and 180 days post device explant.

Impella RP is the first percutaneous single access heart pump designed for right heart support to receive FDA approval. An HDE is similar to a PMA application but is intended for patient populations of 4,000 or less per year in the U.S. and is subject to certain profit and use restrictions. The Impella RP is a percutaneous device approved to provide support of the right heart during times of acute failure for certain patients who have received a left ventricle assist device or have suffered heart failure due to acute myocardial infarction, or AMI, or a failed heart transplant. An HDE requires demonstration of the safety and probable benefit of the product, which is a lower standard than is applied to a PMA. In order to receive an HDE, there must be no comparable devices approved under PMA that are available to treat the targeted population. An approved HDE authorizes sales of the device to any hospital after Institutional Review Board review and approval by the hospital. In April 2014, the Impella RP received CE Marking approval which allows for commercial sales of Impella RP in the EU and other countries that require a CE Marking approval for sales.

AB5000 ™

We manufacture and sell the AB5000 Circulatory Support System for the temporary support of acute heart failure patients in profound shock, including patients suffering from cardiogenic shock after a heart attack, post-cardiotomy cardiogenic shock, or myocarditis. We believe the AB5000 is the only commercially available cardiac assist device that is approved by the FDA for all indications where heart recovery is the desired outcome, including patients who have undergone successful cardiac surgery and subsequently develop low cardiac output, or patients who suffer from acute cardiac disorders leading to hemodynamic instability. We expect revenues from the AB5000 to be a smaller part of our business in the future as we focus our efforts on the Impella family of products.

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies during the three and nine months ended December 31, 2015, as compared to the critical accounting policies disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015.

Recent Accounting Pronouncements

Information regarding recent accounting pronouncements is included in “Note 1. Nature of Business and Basis of Preparation” to our condensed consolidated financial statements and are incorporated herein by reference.

Results of Operations

The following table sets forth certain condensed consolidated statements of operations data for the periods indicated as a percentage of total revenues:

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2015			2014			2015			2014
Revenues:
Product revenue		100.0	%		99.9	%		100.0	%		99.8	%
Funded research and development		-			0.1			-			0.2
Total revenues		100.0			100.0			100.0			100.0

Costs and expenses as a percentage of total revenues:
Cost of product revenue		14.9			15.9			15.2			17.9
Research and development		16.0			13.5			15.1			16.1
Selling, general and administrative		48.8			48.6			50.5			56.0
Total costs and expenses		79.7			78.0			80.8			90.0
Income from operations		20.3			22.0			19.2			10.0
Other income and income tax provision		8.0			1.5			7.7			0.9
Net income as a percentage of total revenues		12.3	%		20.5	%		11.5	%		9.1	%

Three and nine months ended December 31, 2015 compared with the three and nine months ended December 31, 2014

Revenue

Our revenues are comprised of the following:

	For the Three Months Ended December 31,				For the Nine Months Ended December 31,
		2015		2014		2015		2014
	(in $000's)				(in $000's)
Impella product revenue	$	81,022	$	57,424	$	221,528	$	149,309
Service and other revenue		4,025		3,447		12,107		10,024
Other products		742		1,095		1,934		3,067
Total product revenues		85,789		61,966		235,569		162,400
Funded research and development		6		39		17		354
Total revenues	$	85,795	$	62,005	$	235,586	$	162,754

Impella product revenue encompasses Impella 2.5™, Impella CP ® , Impella 5.0™, Impella LD™ and Impella RP ® product sales. Other product revenue includes AB5000™ and product accessory revenue. Service and other revenue represents revenue earned on service maintenance contracts and preventive maintenance calls.

Total revenues for the three months ended December 31, 2015 increased $23.8 million, or 38%, to $85.8 million from $62.0 million for the three months ended December 31, 2014. Total revenues for the nine months ended December 31, 2015 increased by $72.8 million, or 45%, to $235.6 million from $162.8 million for the nine months ended December 31, 2014. The increase in total revenues was primarily due to higher Impella product revenue from increased utilization in the U.S., which was attributable to increased use of Impella 2.5 as a result of PMA approval in March 2015 and higher utilization of Impella CP for those interventional cardiologists who prefer higher blood flow.

Impella product revenues for the three mont hs ended December 31, 2015 increased by $23.6 million, or 41%, to $81.0 million from $57.4 million for the three months ended December 31, 2014. Impella product revenues for the nine months ended December 31, 2015 increased by $72.2 million, or 48%, to $22 1.5 million from $149.3 million for the nine months ended December 31, 2014. Most of the increase in Impella product revenue was from Impella CP and Impella 2.5 catheter sales in the U.S., as we focus on increasing utilization of our disposable catheter pr oducts through continued investment in our field organization and physician training programs. We also experienced an increase in Impella RP revenue after receiving HDE approval in the U.S. in January 2015. We expect Impella product revenues to continue to increase with our recent PMA approval in the U.S. as we increase utilization at existing customer sites, add new customer sites, continue our commercial launch of Impella CP, begin our controlled launch of Impella RP in the U.S. and expand our efforts in Europe.

Service and other revenue for the three months ended December 31, 2015 increased by $0.6 million, or 18%, to $4.0 million from $3.4 million for the three months ended December 31, 2014. Service and other revenue for the nine months ended December 31, 2015 increased by $2.1 million, or 21%, to $12.1 million from $10.0 million for the nine months ended December 31, 2014. The increase in service revenue was primarily due to an increase in preventative maintenance service contracts. We have expanded the use of our Impella AIC consoles to additional sites and placed more consoles at existing higher using sites. Many customers are entering into maintenance service contracts as these AIC consoles are being delivered.

Other product revenues for the three months ended December 31, 2015 decreased by $0.4 million, or 36%, to $0.7 million from $1.1 million for the three months ended December 31, 2014. Other product revenues for the nine months ended December 31, 2015 decreased by $1.2 million, or 39%, to $1.9 million from $3.1 million for the nine months ended December 31, 2014. Most of the decrease was due to lower AB sales in the U.S. We expect that AB5000 revenue will continue to decline in fiscal 2016 as we focus our sales efforts in the surgical suite on Impella 5.0 and Impella LD and we focus more of our attention on the cath lab.

Costs and Expenses

Cost of Product Revenue

Cost of product revenue for the three months ended December 31, 2015 increased by $2.9 million, or 30%, to $12.7 million from $9.8 million for the three months ended December 31, 2014. Gross margin was 85% for the three months ended December 31, 2015 and 84% for the three months ended December 31, 2014. Cost of product revenue for the nine months ended December 31, 2015 increased by $6.7 million, or 23%, to $35.8 million from $29.1 million for the nine months ended December 31, 2014. Gross margin was 85% for the nine months ended December 31, 2015 and 82% for the nine months ended December 31, 2014. The increase in cost of product revenues was related to increased demand for Impella products and higher production volume and costs to support growing demand for our Impella products. Gross margin has been impacted favorably in fiscal 2016 by higher manufacturing production volume, fewer shipments of Impella AIC consoles and improved efficiencies in manufacturing production.

Research and Development Expenses

Research and development expenses for the three months ended December 31, 2015 increased by $5.4 million, or 64%, to $13.8 million from $8.4 million for the three months ended December 31, 2014. Research and development expenses for the nine months ended December 31, 2015 increased by $9.4 million, or 36%, to $35.5 million from $26.1 million for the nine months ended December 31, 2014. The increase in research and development expenses was primarily due to product development initiatives on our existing products and new technologies, increased clinical spending primarily related to our cVAD Registry™ and post approval studies and a focus on quality initiatives for our Impella products.

We expect research and development to increase for the remainder of fiscal 2016 as we continue to increase clinical spending related to our cVAD Registry™, apply for regulatory approval for our Impella products in Japan and support the PMA supplements for Impella CP, Impella 5.0 and Impella LD which were submitted in August 2015. In addition, we expect to incur additional costs as we continue to focus on engineering initiatives to improve our existing products and develop new technologies.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended December 31, 2015 increased by $11.8 million, or 39%, to $41.9 million from $30.1 million for the three months ended December 31, 2014. The increase in selling, general and administrative expenses was primarily due to the hiring of additional U.S. field sales and clinical personnel, increased spending on marketing initiatives as we continue to educate physicians on the benefits of hemodynamic support after receiving PMA approval for Impella 2.5, higher legal expenses on patent related activities, higher stock-based compensation expense and higher professional fees to support the growth of our business.

Selling, general and administrative expenses for the nine months ended December 31, 2015 increased by $27.8 million, or 30%, to $119.0 million from $91.2 million for the nine months ended December 31, 2014. The increase in selling, general and administrative expenses was primarily due to the hiring of additional U.S. field sales and clinical personnel, increased spending on marketing initiatives as we continue to educate physicians on the benefits of hemodynamic support after receiving PMA approval for

Impe lla 2.5, higher s tock-based compensation expense and higher professional fees to support the growth of our business. In the nine months ended December 31, 2015, we recorded stock compensation expense amounts totaling $5.9 million which consist of $1.4 mil lion recorded in the three months ended June 30, 2015 due to the non-employee director retirement policy that was adopted in June 2015, which upon occurrence of certain specified events, provides for the accelerated vesting of outstanding unvested restrict ed stock units held by retirement eligible non-employee directors and $4.5 million in expense recorded in the three months ended September 30, 2015 related to the acceleration of vesting of equity awards upon retirement of our former Chief Financial Office r and related to equity awards granted in August 2015 to retirement eligible non-employee directors which was fully recognized upon grant.

We expect to continue to incur legal expenses for the foreseeable future related to the FCA Investigation and patent related matters discussed in “Note 10. Commitments and Contingencies—Litigation,” to our condensed consolidated financial statements. Additionally, we expect to continue to increase our expenditures on sales and marketing activities, with particular investments in field sales and clinical personnel with cath lab expertise to drive recovery awareness for acute heart failure patients. We also plan to increase our marketing, service and training investments as a result of PMA approval in the U.S. for Impella 2.5™ and as we expand to new markets outside of the U.S., such as Japan. We expect that this increase in selling, general and administrative expense will be offset somewhat by the moratorium of the medical device tax in the U.S. for the next two calendar years beginning in January 2016.

Income Tax Provision

We recorded an income tax provision of $6.9 million and $18.5 million for the three and nine months ended December 31, 2015, respectively, compared to $1.0 million and $1.6 million for the three and nine months ended December 31, 2014, respectively. The increase in income tax provision for the three and nine months ended December 31, 2015 was due to the fact that we had a full valuation allowance on most of our federal, state and certain foreign deferred tax assets prior to March 31, 2015, at which time most of the valuation allowance was reversed. The income tax provision for the three and nine months ended December 31, 2015 was primarily due to the income generated in the U.S. and Germany. The income tax provision for the three and nine months ended December 31, 2014 was primarily due to income taxes related to our deferred tax liability associated with tax deductible goodwill that is not amortized for U.S. GAAP purposes.

Net Income

For the three months ended December 31, 2015, we recognized net income of $10.6 million, or $0.25 per basic share and $0.23 per diluted share, compared to $12.7 million, or $0.31 per basic share and $0.30 per diluted share for the three months ended December 31, 2014. For the nine months ended December 31, 2015, we recognized net income of $27.1 million, or $0.64 per basic share and $0.61 per diluted share, compared to a net income of $14.8 million, or $0.37 per basic share and $0.35 diluted share for the nine months ended December 31, 2014. Our net income for the three and nine months ended December 31, 2015 was driven primarily to higher Impella product revenue due to greater utilization of our Impella products in the U.S. and Europe, partially offset by the increase in income tax provision for the three and nine months ended December 31, 2015 due to the fact that we had a full valuation allowance on most of our federal, state and certain foreign deferred tax assets prior to March 31, 2015, at which time most of the valuation allowance was reversed.

Liquidity and Capital Resources

At December 31, 2015, our total cash, cash equivalents, and short and long-term marketable securities totaled $196.2 million, an increase of $50.2 million compared to $146.0 million at March 31, 2015. The increase in our cash, cash equivalents, and short and long-term marketable securities was due primarily to positive cash flows from operations in the nine months ended December 31, 2015 and proceeds from stock option exercises.

Following is a summary of our cash flow activities:

	For the Nine Months Ended December 31,
	2015			2014
Net cash provided by operating activities	$	54,238		$	25,027
Net cash used for investing activities		(28,083	)		(33,700	)
Net cash provided by financing activities		5,268			8,008
Effect of exchange rate changes on cash		(598	)		(773	)
Net increase (decrease) in cash and cash equivalents	$	30,825		$	(1,438	)

Cash Provided by Operating Activities

For the nine months ended December 31, 2015, cash provided by operating activities consisted of net income of $27.1 million, adjustments for non-cash items of $43.2 million and cash used in working capital of $16.1 million. The increase in net income was primarily due to higher Impella product revenues from increased utilization of our Impella products. Adjustments for non-cash items consisted primarily of $21.7 million of stock-based compensation expense, a $17.4 million change in deferred tax provision and $2.2 million of depreciation and amortization of property, plant and equipment. The decrease in cash from changes in working capital included a $5.1 million increase in accounts receivable associated with our higher revenues, a $10.1 million increase in inventory as we build up our inventory safety stock to support growing demand for our Impella products and $1.1 million decrease in accounts payable and accrued expenses.

For the nine months ended December 31, 2014, cash provided by operating activities consisted of net income of $14.8 million, adjustments for non-cash items of $16.7 million and cash used in working capital of $6.5 million. Adjustments for non-cash items primarily consisted of $12.7 million of stock-based compensation expense and $1.8 million of depreciation and amortization of property, plant and equipment. The decrease in cash from changes in working capital included a $4.3 million increase in accounts receivable associated with our higher revenues, a $3.6 million increase in inventory to support growing demand for our Impella products and a $1.1 million for changes in accounts payable and accrued expenses. These amounts were partially offset by an increase in deferred revenue of $1.9 million.

Cash Used for Investing Activities

For the nine months ended December 31, 2015, net cash provided by investing activities included $19.4 million in purchases (net of maturities) of marketable securities and $7.9 million for the purchase of property and equipment mostly related to expansion of manufacturing capacity and office space in Danvers, Massachusetts and Aachen, Germany. We also made a $0.8 million investment in a private medical technology company during the nine months ended December 31, 2015.

For the nine months ended December 31, 2014, net cash used for investing activities included $14.5 million in purchases (net of maturities) of marketable securities, $15.7 million for our acquisition of ECP and AIS, $2.2 million for the purchase of property and equipment mostly related to expansion of manufacturing capacity in Aachen, Germany and $1.3 million of investments in private medical technology companies.

Capital expenditures for fiscal 2016 are estimated to range from $10.0 to $15.0 million, assuming that we do not complete the purchase of our Danvers facility on or before March 31, 2016. The purchase price of the property is expected to be $16.5 million. These expenditures are expected to be for manufacturing capacity expansions in both our Danvers, Massachusetts and Aachen, Germany facilities, leasehold improvements associated with build-out of additional rental office space and software development projects.

Cash Provided by Financing Activities

For the nine months ended December 31, 2015, net cash provided by financing activities included $8.2 million in proceeds from the exercise of stock options, $0.5 million in proceeds from the issuance of stock under the employee stock purchase plan and $0.5 million in excess tax benefits on stock-based awards. These amounts were partially offset by $3.9 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards.

For the nine months ended December 31, 2014, net cash provided by financing activities included $8.6 million in proceeds from the exercise of stock options and $0.4 million in proceeds from the issuance of stock under the employee stock purchase plan. These amounts were partially offset by $1.0 million in payments in lieu of issuance of common stock for payroll withholding taxes upon vesting of certain equity awards.

Operating Capital and Liquidity Requirements

We believe that our revenue from product sales together with existing resources will be sufficient to fund our operations for at least the next twelve months, exclusive of activities involving any future acquisitions of products or companies that complement or augment our existing line of products.

Our primary liquidity requirements are to fund the expansion of our commercial infrastructure in the U.S., increase our manufacturing capacity, incur add itional capital expenditures as we expand our office s pace in Danvers and Aachen, Germany, increase our inventory levels in order to meet growing customer demand for our Impella products, fund new product development initiatives, prepare for commercial lau nches of Impella products in new markets in the future, such as Japan, increased clinical spending associated with our cVAD Registry™ , as well as post approval study on Impella 2.5 related to our PMA approval and the Impella RP post approval study, costs o f legal fees related to the FCA Investigation and ongoing patent litigation and to provide for general working capital needs. To date, we have primarily funded our operations principally from product sales and through the sale of equity securities.

Our liquidity is influenced by our ability to sell our products in a competitive industry and our customers’ ability to pay for our products. Factors that may affect liquidity include our ability to penetrate the market for our products, maintain or reduce the length of the selling cycle for our products, capital expenditure requirements, investments in collaborative arrangements with other partners, and our ability to collect cash from customers after our products are sold. We also expect to continue to incur legal expenses for the foreseeable future related to the FCA Investigation and our response to requests for information, as well as ongoing patent litigation. We continue to review our short-term and long-term cash needs on a regular basis. At December 31, 2015 we had no long-term debt outstanding.

Marketable securities at December 31, 2015 and March 31, 2015 consisted of $143.0 million and $123.6 million held in funds that invest in U.S. Treasury and government-backed securities, respectively. We are not a party to any interest rate swaps, currency hedges or derivative contracts of any type and have no exposure to commercial paper or auction rate securities markets.

Cash and cash equivalents held by our foreign subsidiaries totaled $5.7 million and $3.6 million at December 31, 2015 and March 31, 2015, respectively. Our operating income outside the U.S. is deemed to be permanently reinvested in foreign jurisdictions. We do not intend or currently foresee a need to repatriate cash and cash equivalents held by our foreign subsidiaries. If these funds are needed in the U.S., we believe that the potential U.S. tax impact to repatriate these funds would be immaterial.

ITEM 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Primary Market Risk Exposures

Our cash, cash equivalents and marketable securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10 percent from levels at December 31, 2015, we believe the decline in fair market value of our investment portfolio would be immaterial.

Currency Exchange Rates

We have foreign currency exposure to exchange rate fluctuations and particularly with respect to the euro, British pound sterling and Japanese yen. Therefore, our investment in our subsidiaries is sensitive to fluctuations in currency exchange rates. The effect of a change in currency exchange rates on our net investment in international subsidiaries is reflected in the accumulated other comprehensive income (loss) component of stockholders’ equity. If rates of exchange for the euro, British pound and Japanese yen were to have depreciated immediately and uniformly by 10% relative to the U.S. dollar from levels at December 31, 2015, the result would have been a reduction of stockholders’ equity of approximately $5.8 million.

Fair Value of Financial Instruments

At December 31, 2015, our financial instruments consist primarily of cash and cash equivalents, short-term marketable securities, accounts receivable, accounts payable and contingent consideration. The carrying amounts of accounts receivable and accounts payable are considered reasonable estimates of their fair value, due to the short maturity of these instruments. The estimated fair values of the financial instruments have been determined by us using available market information and appropriate valuation techniques. Considerable judgment is required, however, to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of December 31, 2015. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, 2015, these disclosure controls and procedures are effective to provide reasonable

assurance that m aterial information required to be disclosed by us, including our consolidated subsidiaries, in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Changes in Internal Control over Financial Reporting

During the third quarter of our fiscal year ending March 31, 2016, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PA RT II — OTHER INFORMATION

Item 1.

Legal Proceedings

We are from time to time involved in various legal actions, the outcomes of which are not within our complete control and may not be known for prolonged periods of time. In some actions, the claimants seek damages, as well as other relief, which, if granted, would require significant expenditures. We record a liability in our condensed consolidated financial statements for these actions when a loss is known or considered probable and the amount can be reasonably estimated. We review these estimates each accounting period as additional information is known and adjust the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the condensed consolidated financial statements. Material legal proceedings are discussed in “Note 10. Commitments and Contingencies—Litigation” to our condensed consolidated financial statements and are incorporated herein by reference.

It em 1A.

Risk Factors

Investing in our common stock involves a high degree of risk. In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2015, which could materially affect our business, financial condition or future results. As of the date of this Report there has been no material change in any of the risk factors described in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015, except as noted below:

We own patents, trademarks, trade secrets, copyrights and other intellectual property and know-how that we believe gives us a competitive advantage. If we cannot protect our intellectual property and develop or otherwise acquire additional intellectual property, competition could force us to lower our prices, which could hurt our profitability.

Our intellectual property rights are and will continue to be a critical component of our success. We rely and expect to continue to rely on a combination of intellectual property, including patent, trademark, copyright, trade secret and domain name protection laws, as well as confidentiality agreements with our employees and others, to protect our intellectual property and proprietary rights. If we fail to obtain and maintain adequate intellectual property protection, we may not be able to prevent third parties from using our proprietary technologies or from marketing products that are very similar or identical to ours.

A substantial portion of our intellectual property rights relating to the Impella ® products and other products under development is in the form of trade secrets, rather than patents. Unlike patents, trade secrets are only recognized under applicable law if they are kept secret by restricting their disclosure to third parties. We protect our trade secrets and proprietary knowledge in part through confidentiality agreements with employees, consultants and other parties. However, certain consultants and third parties with whom we have business relationships, and to whom in some cases we have disclosed trade secrets and other proprietary knowledge, may also provide services to other parties in the medical device industry, including companies, universities and research organizations that are developing competing products. In addition, some of our former employees who were exposed to certain of our trade secrets and other proprietary knowledge in the course of their employment may seek employment with, and become employed by, our competitors. We cannot be assured that consultants, employees and other third parties with whom we have entered into confidentiality agreements will not breach the terms of such agreements by improperly using or disclosing our trade secrets or other proprietary knowledge, that we will have adequate remedies for any such breach, or that our trade secrets will not become known to or be independently developed by our competitors. The loss of trade secret protection for technologies or know-how relating to our product portfolio and products under development could adversely affect our business and our prospects.

Our business position also depends in part on our ability to maintain and defend our existing patents and obtain, maintain, and defend additional patents and other intellectual property rights. We intend to seek additional patents, but our pending and future patent applications may not result in issued patents or be granted on a timely basis. In addition, issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or provide us with any competitive advantage, including exclusivity in a particular product area. The scope of our patent claims also may vary between countries, as individual countries have distinctive patent laws. We may be subject to challenges by third parties regarding our intellectual property, including, among others, claims regarding validity, enforceability, scope and effective term. Patent prosecution, related proceedings, and litigation in the U.S. and in other countries may be expensive, time consuming and ultimately unsuccessful. In addition, patents issued by foreign countries may afford less protection than is available under U.S. patent law and may not adequately protect our proprietary information. Our competitors may independently develop proprietary technologies and processes that are the same as or substantially equivalent to ours or design around our patents. Our competition may also hold or obtain intellectual property rights that would threaten our ability to develop or commercialize our product offerings. The expiration of patents on which we rely for protection of key products could diminish our competitive advantage and adversely affect our business and our prospects.

Companies in the medical device industry typically obtain patents and frequently engage in substantial intellectual property litigation. Our products and technologies could infringe on t he rights of others. If a third-party successfully asserts a claim for infringement against us, we may be liable for substantial damages, be unable to sell products using that technology, or have to seek a license or redesign the related product. These alt ernatives may be uneconomical or impossible. Intellectual property litigation could be costly, result in product development delays and divert the efforts and attention of management from our business.

In July and August 2015, Thoratec Corporation (“Thoratec”), acquired by St. Jude Medical, Inc. in October 2015, brought actions in connection with two of our patents relevant to Thoratec’s HeartMate PHP medical device (“PHP”). In those proceedings, which are in the United Kingdom and Germany, Thoratec asserts that the two patents are invalid. In September 2015, we filed counterclaims in the action in Germany asserting that the PHP product infringes the two patents and a third patent owned by us. Both the Germany and United Kingdom proceedings are ongoing.

In December 2015, we received a letter from Maquet Cardiovascular LLC, a subsidiary of the Getinge Group (“Maquet”) and maker of the intra-aortic balloon pump, requesting that we discuss the option for a license for two patents and one pending patent application in the United States and elsewhere, which they believe read on certain features of our Impella products. After comprehensive review, in January 2016, we sent Maquet a response letter informing them that we believe that Maquet’s listed patents are not infringed by our Impella products and that the cited claims are invalid. We, accordingly, declined the offer to take a license from Maquet to such patents.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None

Item 6.

Exhibits

Exhibit No.	Description	Filed with This Form 10-Q	Incorporated by Reference
			Form	Filing Date	Exhibit No.

2.1	Agreement on the Sale and Transfer of all shares in ECP Entwicklungsgellschaft mbH		8-K	July 7, 2014 (File No. 001-09585)	2.1

2.2	Agreement on the Sale and Transfer of all shares in AIS GmbH Aachen Innovation Solutions		8-K	July 7, 2014 (File No. 001-09585)	2.2

3.1	Restated Certificate of Incorporation.		S-3	September 29, 1997	3.1

3.2	Restated By-Laws, as amended.		10-K	May 27, 2004 (File No. 001-09585)	3.2

3.3	Certificate of Designations of Series A Junior Participating Preferred Stock.		S-3	September 29, 1997	3.3

3.4	Amendment to the Company’s Restated Certificate of Incorporation to increase the authorized shares of common stock from 25,000,000 to 100,000,000.		8-K	March 21, 2007 (File No. 001-09585)	3.4

4.1	Specimen Certificate of common stock.		S-1	June 5, 1987	4.1

10.1	Purchase and Sale Agreement dated as of December 9, 2015 between Abiomed, Inc. and Thibeault Nominee Trust.	X

10.2	First Amendment to Purchase and Sale Agreement dated as of January 19, 2016 between Abiomed, Inc. and Thibeault Nominee Trust	X

10.3	Form of Employee Time-Based RSU Agreement under the 2015 Omnibus Incentive Plan	X

10.4	Form of Non-Employee Director Time-Based RSU Agreement under the 2015 Omnibus Incentive Plan	X

10.5	Form of Performance-Based RSU Agreement under the 2015 Omnibus Incentive Plan	X

10.6	Form of Employee Time-Based Option Agreement under the 2015 Omnibus Incentive Plan	X

10.7	Form of Non-Employee Director Time-Based Option Agreement	X

31.1	Principal Executive Officer Certification pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X

31.2	Principal Financial Officer Certification pursuant to Securities Exchange Act Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X

Exhibit No.	Description	Filed with This Form 10-Q	Incorporated by Reference
			Form	Filing Date	Exhibit No.
32.1	Principal Executive Officer and Principal Financial Officer Certifications pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X

101	The following financial information from the ABIOMED, Inc. Quarterly Report on Form 10-Q for the quarter ended December 31, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of December 31, 2015 and March 31, 2015; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2015 and 2014; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2015 and 2014; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2015 and 2014; and (v) Notes to Condensed Consolidated Financial Statements.	X

ABIOMED, INC. AND SUBSIDIARIES

PART II. OTHER INFORMATION

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 thereunto duly authorized.

		ABIOMED, Inc.

Date: February 5, 2016		/s/ MICHAEL J. TOMSICEK
		Michael J. Tomsicek
		Vice President and Chief Financial Officer
		(Principal Accounting and Financial Officer)

Exhibit 10.1

EXECUTION VERSION

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

ABIOMED, INC. ,
AS PURCHASER,

and

THIBEAULT NOMINEE TRUST ,

AS SELLER

December 9, 2015

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT is made and entered into as of this 9 ^th day of December, 2015 (the “ Effective Date ”) by and between ABIOMED, INC. , a Delaware corporation, as purchaser (together with any successors or assigns permitted hereunder, the “ Purchaser ”), and THIBEAULT NOMINEE TRUST , a Massachusetts nominee trust, as seller (the “ Seller ”).

WITNESSETH :

WHEREAS, the Seller is the owner of the Property (as hereinafter defined); and

WHEREAS, the Purchaser desires to purchase the Property from the Seller, and the Seller desires to sell the Property to the Purchaser, in each case subject to and upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the Purchaser and the Seller, intending to be legally bound, hereby agree as follows:

ARTICLE I
DEFINITIONS

1.1 Capitalized Terms . Capitalized terms used and not otherwise defined in this Agreement shall have the meanings set forth below or in the section of this Agreement referred to below and such definitions shall apply equally to the singular and plural forms, and to the masculine and feminine forms, of such words:

“ Agreement ” shall mean this Purchase and Sale Agreement, together with all of the Schedules and Exhibits attached hereto, as it and they may be amended from time to time as herein provided.

“ Brokers ” shall mean Jones Lang LaSalle and Colliers International.

“ Business Day ” shall mean any day other than a Saturday, Sunday or any other day on which banking institutions in the Commonwealth of Massachusetts are authorized by law or executive action to close.

“ CC&R ” shall mean any covenants, restrictions or other easements affecting the Property that contain monetary or ongoing obligations, but shall specifically not include the Lease or an Agreement among Leo C. Thibeault, Jr. Thermadyne Holding Company and Danvers Industrial Packaging Corp. signed on November 20, 1996 and November 22, 1996 or any obligation of Thermadyne Holding Company to continue its environmental remediation program described in such agreement.

“ CC&R Estoppel ” means an estoppel certificate from the counterparty under each CC&R affecting the Property.

“ Closing ” shall mean the consummation of the transactions contemplated by this Agreement.

“ Closing Date ” shall mean the date that is five (5) Business Days after the expiration of the Inspection Period but in no event later than January 22, 2016.

“ Deposit ” shall mean, collectively, the aggregate amount of One Hundred Thousand Dollars ($100,000), together with all interest and other income earned thereon.

“ Effective Date ” shall have the meaning given to such term in the first paragraph of this Agreement.

“ Escrow Agent ” shall mean Commonwealth Land Title Insurance Company.

“ Existing Environmental Documents ” shall mean, collectively, (a) letters from Simmons Environmental Services, Inc. dated July 10, 1996 and August 30, 1996, (b) a letter from Lexicon Environmental Services, Inc. dated September 18, 1996, (c) a report entitled Risk Characterization and Phase III Remedial Action Plan dated May 24, 1996 prepared byLexicon Environmental Services, Inc., (d) an agreement dated November 22, 1996 by and between the Seller and Thermadyne Holding Company, and (e) a Phase II Comprehensive Site Assessment dated March 30, 2011 prepared by Action Environmental Boston, all of which the Seller has or contemporaneously with the signing of this Agreement, will deliver to the Purchaser.

“ Hazardous Materials ” shall mean, collectively, (a) any materials, wastes or substances defined as “hazardous” or “toxic” or any similar term under any Laws or the presence of which requires investigation or remediation under any Laws and (b) any petroleum or petroleum products, radioactive materials, infectious materials, asbestos, polychlorinated biphenyls or urea formaldehyde foam insulation .

“ Improvements ” shall mean, collectively, all of the buildings, structures and other improvements located on the Land, together with all of the fixtures and other property affixed thereto. The Improvements include, without limitation, that certain one story office/warehouse building containing approximately 163,560 square feet together with 326 parking spaces, situated on 12 acres, commonly known as 18-22 Cherry Hill Drive located in Danvers, Massachusetts.

“ Inspection Period ” shall mean the period commencing on the first Business Day after the Effective Date and expiring as soon as reasonably practicable but in no event later than at 6:00 p.m., local time at the Property, on January19, 2016.

“ Intangible Property ” shall mean all intangible property owned by the Seller and arising from or used in connection with the ownership, use, operation or maintenance of the Property, including, without limitation, all licenses, permits, authorizations, certificates of occupancy, warranties, guaranties, development rights, and the non-exclusive rights to use any trade name or trademark associated with the Property, but not including cash, LLC membership interests, securities or the like.

“ Land ” shall mean, collectively, that certain parcel or those certain parcels of land containing approximately 12 acres and having an address at 18-22 Cherry Hill Drive, Danvers, Massachusetts and more particularly described on Schedule 1 attached hereto and made a part hereof, together with all rights and other appurtenances related thereto, including, without limitation, all right, title and interest of the Seller in and to any streets, alleys or rights of way which are adjacent to such land, any mineral rights or subsurface rights below such land and any air rights above such land.

“ Laws ” shall mean, collectively, all federal, state, county, municipal and other governmental statutes, ordinances, by-laws, rules, regulations or any other legal requirements applicable to the Property, including, without limitation, those relating to the environment, zoning, construction, occupancy, occupational health and safety or fire safety, but specifically excluding the Americans With Disabilities Act, 42 U.S.C. §12101 (et seq.), the regulations and guidelines issued pursuant thereto.

“ Lease ” shall mean the Lease dated as of February 24, 2014 by and between Seller, as lessor and the Purchaser, as lessee, as amended by the First Amendment to Lease dated as of April 30, 2015.

“ OFAC ” shall have the meaning given to such term in Section 6.1(s) .

“ Permitted Exceptions ” shall mean, collectively, (a) liens for taxes, assessments and governmental charges not yet due and payable or due and payable but not yet delinquent; (b) the Lease; (c) the items listed on Schedule 3 attached hereto; and (d) such other non-monetary matters of record with respect to the Property which are not objected to by the Purchaser in accordance with Section 3.2 but excluding any matters which are to be remedied by the Seller pursuant to Section 3.2(b) .

“ Personal Property ” shall mean, collectively, all fixtures and equipment owned by the Seller and attached to the Property.

“ Property ” shall mean, collectively, the Land, the Improvements, the Personal Property, the Lease, the Service Contracts and the Intangible Property.

“ Purchase Price ” shall mean the amount of Sixteen Million Five Hundred Thousand Dollars ($16,500,000).

“ Purchaser ” shall have the meaning given to such term in the first paragraph to this Agreement.

“ Seller ” shall have the meaning given to such term in the first paragraph to this Agreement.

“ Service Contracts ” shall mean those certain service, maintenance, supply and management contracts related to the operation, maintenance or repair of the Property and which are listed on Schedule 2 attached hereto and made a part hereof.

“ Survey ” shall mean an ALTA survey (or an update to the Seller’s existing survey) with respect to the Property from a licensed surveyor in the jurisdiction in which the Property is located.

“ Survival Period ” shall mean the period beginning on the Closing Date and continuing through the first anniversary of the Closing Date.

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“ Surviving Obligations ” shall mean those obligations and liabilities of the Purchaser or the Seller which expressly survive the Closing or the earlier termination of this Agreement.

“ Tax Proceedings ” shall mean any tax abatement, tax certiorari or similar tax proceedings that have been commenced by Seller with respect to the Property for any tax year.

“ Title Commitment ” shall mean a commitment by the Title Company to issue an ALTA 2006 Owner’s Policy with respect to the fee simple interest in the Property in the full amount of the Purchase Price.

“ Title Company ” shall mean Commonwealth Land Title Insurance Company or any other nationally-recognized title insurance company as may be selected by the Purchaser.

“ Title Policy ” shall mean an ALTA 2006 Owner’s Title Insurance Policy, in the full amount of the Purchase Price, issued by the Title Company and insuring that fee simple title to the Property is vested in the Purchaser, with all standard and general printed exceptions deleted so as to afford full “extended form coverage”, together with such endorsements as Purchaser shall reasonably request, and otherwise in a form and substance consistent with the Title Commitment.

“ Voluntary Liens ” shall mean all (x) monetary liens and encumbrances, including mortgages, judgments and federal, state and municipal tax liens and (y) all non-monetary liens and encumbrances which Seller has allowed to be placed on the Property without Purchaser’s written consent from and after the Effective Date.

ARTICLE II
PURCHASE AND SALE; CLOSING

2.1 Purchase and Sale . The Seller shall sell the Property to the Purchaser, and the Purchaser shall purchase the Property from the Seller on the Closing Date, subject to and in accordance with the terms and conditions of this Agreement.

2.2 Closing . The purchase and sale of the Property shall be consummated at the Closing pursuant to a mutually satisfactory and customary escrow arrangement established with the Title Company.

2.3 Purchase Price .

(a) Purchase Price . The purchase price to be paid by the Purchaser to the Seller for the Property shall be the Purchase Price. The Purchase Price shall be paid as follows:

(i) Within three (3) Business Days following the Effective Date, the Purchaser shall deposit the entire Deposit into escrow with the Escrow Agent. The Escrow Agent shall invest and hold the entire Deposit in escrow and shall disburse the Deposit from escrow in accordance with the terms and conditions of this Agreement.

(ii) On the Closing Date, the Purchaser shall deposit the Purchase Price (less the Deposit) into escrow with the Escrow Agent, subject to any adjustments and apportionments as may be provided for in Article IX .

(b) Manner of Payment; Release of Funds . The Purchaser shall deposit the Deposit and the balance of the Purchase Price into escrow with the Escrow Agent by wire transfer of immediately available federal funds into an account or accounts to be designated by the Purchaser. Upon satisfaction of all of the conditions precedent to the Purchaser’s obligation to proceed to Closing hereunder, the Purchaser shall authorize the Escrow Agent to release the Purchase Price to the Seller. The Deposit will be held in escrow by the Escrow Agent and disbursed pursuant to the terms of this Agreement and the terms of any separate escrow agreement entered into among Purchaser, Seller and Escrow Agent.

2.4 Duties of Escrow Agent .

(a) Holding of Deposit . The Escrow Agent shall hold the Deposit in an FDIC-insured interest-bearing money market account at Bank of America. The Escrow Agent shall not commingle the Deposit with any other funds of the Escrow Agent. All interest earned on the Deposit will be the property of Purchaser and will be reported to the Internal Revenue Service as income of Purchaser. Purchaser will provide the Escrow Agent with a taxpayer identification number and will pay all income taxes due by reason of interest accruing on the Deposit. If the Closing does not occur, the Escrow Agent shall disburse the Deposit to the party entitled thereto in accordance with the terms and conditions of this Agreement. If the Closing does occur, the Deposit shall be credited against the Purchase Price and disbursed to the Seller as part of the Purchase Price.

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( b ) Obligations and Liabilities of Escrow Agent . The acceptance by the Escrow Agent of its duties as such under this Agreement is subject to the following terms and conditions, which all parties to this Agreement hereby agree shall govern and control with respect to the obligations, liabilities, rights, duties, and immunities of the Escrow Agent:

(i) The Escrow Agent acts hereunder as a depositary only, and except as expressly set forth in subsection (vi) below is not responsible or liable in any manner for the sufficiency of any amounts deposited with it.

(ii) The Escrow Agent shall not be liable for acting upon any notice, request, waiver, consent, receipt or other instrument or document which the Escrow Agent in good faith believes to be genuine and what it purports to be.

(iii) The Escrow Agent shall not be liable for any error in judgment, or for any act done or step taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, except its own bad faith, negligence or misconduct.

(iv) The Escrow Agent may consult with, and obtain advice from, legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof or its duties hereunder.

(v) In the performance of its duties hereunder, the Escrow Agent shall be entitled to rely upon any document, instrument or signature believed by it to be genuine and signed by either of the other parties hereto or their successors.

(vi) Escrow Agent hereby agrees to indemnify, protect and hold Purchaser and Seller harmless from and against any losses, costs, damages or expenses (including reasonable attorneys’ fees) resulting from Escrow Agent’s fraud, negligence or willful misconduct. Subject to the preceding sentence, the Seller and the Purchaser each hereby release the Escrow Agent from any act done or omitted to be done by the Escrow Agent in good faith in the performance of its duties hereunder.

(c) Disputes . If there is a dispute between the parties with respect to the disposition of the Deposit, the Escrow Agent shall either retain the Deposit or deliver the Deposit into a court of competent jurisdiction. Upon delivery of the Deposit into a court of competent jurisdiction, the Escrow Agent shall be released and discharged from all further obligations hereunder arising after the date of such delivery. Notwithstanding the foregoing, the Escrow Agent shall comply with the unilateral instructions of the Purchaser regarding the disposition of the Deposit prior to the expiration of the Inspection Period.

(d) IRS Real Estate Sales Reporting . The Escrow Agent agrees to act as “the person responsible for closing” the transactions contemplated hereby pursuant to Section 6045(e) of the Internal Revenue Code of 1986, as amended, and the Escrow Agent shall prepare and file all informational returns, including IRS Form 1099‑S, and shall otherwise comply with the provisions of said Section 6045(e).

(e) Removal of Escrow Agent . The Purchaser may remove the Escrow Agent at any time upon not less than five (5) Business Days’ prior notice to the Escrow Agent and the Seller; in such case, the Purchaser, by notice to the Seller, shall appoint a successor Escrow Agent reasonably satisfactory to the Seller who shall accept such appointment and agree in writing to be bound by the terms and conditions of this Agreement. If no such successor Escrow Agent is appointed and acting hereunder within five (5) Business Days after the removal of the Escrow Agent, the Escrow Agent shall deliver the Deposit into a court of competent jurisdiction as provided pursuant to Section 2.4(c) . Upon delivery of the Deposit to a successor Escrow Agent or a court of competent jurisdiction as aforesaid, the applicable Escrow Agent shall be released and discharged from all further obligations hereunder first arising after the date of such delivery.

(f) No Compensation; Reimbursement . The Escrow Agent agrees to serve without compensation for its services hereunder; provided , however , that the Purchaser hereby agrees to reimburse, or to advance to, the Escrow Agent all reasonable costs and expenses incurred by the Escrow Agent in the performance of its duties hereunder, unless the Escrow Agent incurs any costs and expenses in connection with any action, dispute or proceeding between the Seller and the Purchaser hereunder, in which event the party that does not prevail in such dispute shall be responsible for the payment of all such costs and expenses.Notwithstanding anything to the contrary herein, the Purchaser shall be solely responsible for the payment of any title insurance premium.

ARTICLE III
DILIGENCE, ETC.

3.1 Property Diligence .

(a) Inspections . From and after the Effective Date until the Closing or the earlier termination of this Agreement, the Seller shall permit the Purchaser and its representatives, agents and contractors to inspect the Property (including, without limitation, inspections of all roofs, electrical, mechanical and structural elements, HVAC systems and other building systems located on or within the Improvements), to perform appraisals and due diligence (including, without limitation, any soil, water and air sampling analysis or other environmental investigations of the Land and zoning investigations), to examine the books and records of the Seller, Service

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Contracts, governmental approvals, insurance policies, tax, utility and other bills, operating statements, and all other general records with respect to the Property (and to make copies thereof), and to perform such other inspections and investigations with respect to the Property as the Purchaser shall deem necessary or appropriate. During the Inspection Period, Purchaser may perform (x) surveys, architectural, engineering, geotechnical, property condition and environmental inspections and tests and (y) physically invasive inspection and sampling, but only if such physically invasive inspection and sampling is performed with the prior written consent of the Seller, which is not to be unreasonably withheld. In the event that Seller does not consent to or allow Purchaser to conduct intrusive or invasive testing that is reasonably recommended by a Phase I environmental site assessment and as a result Purchaser terminates this Agreement, Seller shall reimburse Purchaser for its actual out-of-pocket costs and expenses (including diligence costs and reasonable attorneys’ fees) incurred in connection with this transaction prior to such termination. To the extent that the Purchaser damages or disturbs the Property in connection with any such inspections or investigations, the Purchaser shall return the Property to substantially the same condition that it was in immediately prior to such damage or disturbance. The Purchaser shall indemnify, defend and hold harmless the Seller from and against any and all expense, loss or damage which the Seller incurs as a result of any entry onto the Property by the Purchaser or its representatives, agents or contractors, except to the extent that such expense, loss or damage arises out of any act or omission of the Seller or the mere discovery of any pre-existing condition at the Property.

(b) Diligence Deliverables . Within five (5) Business Days following the Effective Date, the Seller shall deliver to the Purchaser copies of the following items and materials to the extent such items and materials are in the Seller’s possession or control: the Service Contracts, the Seller’s most recent title insurance policy for the Property together with all of the exception documents referred to therein, the Seller’s most recent survey of the Property, all existing environmental reports with respect to the Property, all existing zoning reports or other zoning information with respect to the Property, all existing engineering reports with respect to the Property, all governmental approvals, copies of all tax bills with respect to the Property for the previous three (3) tax years, operating statements and other books, records and documents relating to the Property. In addition, the Seller shall deliver to the Purchaser copies of any other items reasonably requested by the Purchaser to the extent the same are in the Seller’s possession or control.

(c) Termination of Agreement . If the results of the inspections performed by or on behalf of the Purchaser pursuant to this Section 3.1 shall be unsatisfactory to the Purchaser in any respect, or if the Purchaser otherwise determines not to proceed to Closing, in each case as determined by the Purchaser in its sole and absolute discretion, the Purchaser shall have the right to terminate this Agreement at any time on or prior to the expiration of the Inspection Period by giving written notice thereof to the Seller, whereupon the Deposit shall be refunded to the Purchaser and neither party shall have any further obligations to the other hereunder, except for the Surviving Obligations.

3.2 Title and Survey Matters .

(a) Title Commitment and Survey . Promptly following the Effective Date, the Purchaser shall order (i) the Title Commitment from the Title Company, together with complete and legible copies of all instruments and documents referred to therein as exceptions to title, and (ii) the Survey. The Purchaser shall have the right from time to time to order such updates or supplements to the Title Commitment and the Survey as Purchaser deems necessary. The Purchaser shall instruct each of the Title Company and the surveyor to deliver copies of the Title Commitment and the Survey, and any supplements or updates thereto, to the Seller.

(b) Title and Survey Review . At least three (3) Business Days prior to the expiration of the Inspection Period, the Purchaser shall notify the Seller of any matters identified in the Title Commitment or shown on the Survey (or any supplements or updates thereto) which the Purchaser finds objectionable in its sole and absolute discretion. Seller shall have two (2) Business Days from its receipt of a title objection notice from Purchaser to notify Purchaser in writing whether Seller commits to cause such objections to be removed from the land records or insured against (and with any matters proposed to be insured against by Seller or Title Company, in a manner satisfactory to Purchaser in its sole discretion) at Closing, provided, however that Seller shall be obligated to remove or cause the removal from the land records of all Voluntary Liens at or prior to Closing. To enable the Seller to make conveyance as herein provided, the Seller may, at the time of delivery of the deed, cause the Escrow Agent to use the Purchase Price or any portion thereof to clear the title of any or all monetary liens and encumbrances, provided that all instruments so procured are recorded simultaneously with the delivery of said deed or arrangements have been made for the subsequent recordation in accordance with usual conveyancing practices and the Title Company is ready, willing and able to issue the Title Policy to the Purchaser without any exceptions for such monetary liens and encumbrances.Except as to any title objections that are based on any item or items listed on Schedule 3 attached hereto, regarding which the Seller shall have no obligation to attempt to cure, Seller shall use commercially reasonable good faith efforts to cure all title objections raised by Purchaser, provided, however , that Seller shall, subject to the preceding sentence relating to the obtaining discharge documents post-Closing in accordance with usual conveyancing practices, be obligated to remove or cause the removal from the land records of all Voluntary Liens at or prior to Closing. If, for any reason, the Seller is unable or unwilling to take such actions as may be required to remedy or remove from the land records any title objections (other than Voluntary Liens) raised by Purchaser, the Seller shall give the Purchaser notice thereof, it being understood and agreed that the failure of the Seller to give such notice within two (2) Business Days after receipt of the Purchaser’s notice of objection shall be deemed an election by the Seller not to remedy any such matters. If the Seller shall be unable or unwilling to remedy any matters (other than Voluntary Liens which Seller shall be obligated to cure or remove as provided herein) as to which the Purchaser has objected, the Purchaser may elect either (i) to terminate this Agreement by notice given to Seller within two (2) Business Days

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following the Purchaser’s receipt of the Seller’s notice or following the failure of the Seller to give such a notice , whereupon the Deposit shall be refunded to the Purchaser and neither party shall have any further obligations to the other hereunder, except for those obligations which expressly survive the termination of this Agreement or (ii) to proceed to Closing in accordance with the terms and conditions of this Agreement, notwithstanding such matter and without any abatement or reduction in the Purchase Price on account thereof.

(c) Title Affidavits, Etc. At the Closing, the Seller shall execute and deliver such affidavits and indemnities as the Title Company may reasonably require, including, without limitation, a so-called owner’s affidavit in such form as will permit the Title Company to issue the Title Policy without exceptions for parties-in-possession or mechanic’s liens and a so-called gap indemnity in such form as will permit the Title Company to release the Purchase Price to the Seller prior to recording the deed and the other applicable closing documents.

ARTICLE IV
CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE

4.1 Purchaser’s Conditions Precedent . The obligation of the Purchaser to acquire the Property from the Seller shall be subject to the satisfaction of the following conditions precedent on and as of the dates set forth below:

(a) CC&R Estoppels . At least five (5) Business Days prior to the expiration of the Inspection Period, the Seller shall have delivered to the Purchaser the CC&R Estoppels and all matters set forth therein shall be true and correct as of the Closing. Notwithstanding anything to the contrary in this Agreement, Purchaser shall not be obligated to accept any CC&R Estoppel that is dated earlier than thirty (30) days prior to the Closing Date or which contains any default or claimed default by Seller or any other party thereto.

(b) Closing Documents . On or prior to the Closing Date, the Seller shall have duly executed, acknowledged (where appropriate) and delivered each of the following documents into escrow with the Title Company:

(i) Deed . A good and sufficient quitclaim deed with covenants against encumbrances made by the grantor, in proper form for recording, conveying fee simple title to the Land and the Improvements to the Purchaser, and otherwise in the form attached hereto as Exhibit A .

(ii) Bill of Sale . A bill of sale conveying all of the Seller’s right, title and interest in and to the Personal Property to the Purchaser, and otherwise in the form attached hereto as Exhibit B .

(iii) Assignment and Assumption Agreement . An assignment and assumption agreement conveying all of the Seller’s right, title and interest in and to the Lease, the Service Contracts (to the extent the Seller is not obligated to terminate the same pursuant to Section 8.1(f) hereof) and the Intangible Property to the Purchaser, and otherwise in the form attached hereto as Exhibit C .

(iv) Non-Foreign Affidavit . A so-called “Non-Foreign” or “FIRPTA” affidavit as further described in Section 1445 of the Internal Revenue Code of 1986, as amended, and otherwise in the form attached hereto as Exhibit D .

(v) Settlement Statement . A so-called “Settlement Statement” in a form and substance reasonably satisfactory to the Purchaser, showing (among other things) the Purchase Price as adjusted by any adjustments or apportionments provided for in Article IX .

(vi) Title Affidavits and Other Documents . A parties-in-possession affidavit, a mechanic’s lien affidavit, a gap indemnity and such other affidavits, documents and instruments as the Title Company or the Purchaser may reasonably require in accordance with Section 3.2(c) .

(vii) Proof of Authority, Etc . Evidence, in form and substance reasonably satisfactory to the Purchaser and the Title Company as to each of the following: (A) the good standing of the Seller in the Commonwealth of Massachusetts;(B) if applicable, the foreign qualification of the Seller in the Commonwealth of Massachusetts; (C) the authority of the Seller to execute, deliver and perform this Agreement; and (D) the authority of the person signing this Agreement and the other Closing Documents on the Seller’s behalf.

(c) Other Closing Deliverables . On or prior to the Closing Date, the Seller shall have delivered to the Purchaser fully executed, true, accurate and complete copies of all other documents and agreements, plans, specifications, contracts, books and records, and licenses and permits pertaining to the Property, to the extent the same are in the Seller’s possession or control.

(d) Seller Representations and Warranties . All representations and warranties of the Seller made herein shall be true, correct and complete in all material respects on and as of the Closing Date, as if such representations and warranties were first made on the Closing Date.

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(e) Seller Covenants . The Seller shall have performed in all material respects all covenants and obligations required to be performed by the Seller on or before the Closing Date.

(f) Title Policy . The Title Company shall be irrevocably committed to issue the Title Policy to the Purchaser.

ARTICLE V
CONDITIONS TO SELLER’S OBLIGATION TO CLOSE

5.1 Seller’s Conditions Precedent . The obligation of the Seller to convey the Property to the Purchaser is subject to the satisfaction of the following conditions precedent on and as of the Closing Date:

(a) Purchase Price . The Purchaser shall have delivered the Purchase Price to the Escrow Agent.

(b) Closing Documents . The Purchaser shall have delivered to the Escrow Agent duly executed and acknowledged counterparts of the documents described in Section 4.1(b)(iii) and (v) .

(c) Purchaser Representations . All of the representations and warranties of the Purchaser set forth herein shall be true, correct and complete in all material respects on and as of the Closing Date as if first made on and as of the Closing Date.

(d) Purchaser Covenants . The Purchaser shall have performed in all material respects all covenants and obligations required to be performed by the Purchaser on or before the Closing Date .

(e) Lease Obligations . The Purchaser shall not be in default beyond all applicable notice and cure periods on any of its obligations under the Lease.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER

6.1 Seller’s Representations . To induce the Purchaser to enter into this Agreement, the Seller represents and warrants to the Purchaser as of the date hereof and as of the Closing Date, as follows:

(a) Status and Authority of the Seller, Etc. The Seller is a nominee trust duly formed, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, is duly qualified to conduct business in the Commonwealth of Massachusetts and has all requisite power and authority under the laws of such state and its trust and other charter documents to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

(b) Action of the Seller, Enforceability, Etc. The Seller has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each document to be delivered by the Seller hereunder, and upon the execution and delivery of this Agreement and any such document, this Agreement and each such document shall constitute the valid and binding obligations and agreements of the Seller, enforceable against the Seller in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors.

(c) No Violations of Agreements . None of the execution, delivery or performance of this Agreement or any other document to be executed, delivered or performed by the Seller hereunder, nor compliance with the terms and provisions hereof or thereof, will result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon the Property pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness or any other agreement or instrument by which the Seller or the Property is bound.

(d) No Litigation . There is no action, suit, arbitration, unsatisfied order or judgment, governmental investigation or proceeding pending or, to Seller’s knowledge, threatened against the Seller or the Property or the transaction contemplated by this Agreement.

(e) Leases . Other than the Lease, the Seller has not entered into, and the Property is not subject to, any contract or agreement with respect to the occupancy of the Property (or any portion thereof). To the Seller’s knowledge, there are no defaults currently existing under the Lease and there are no facts or circumstances which with the giving of notice, the passage of time or both would constitute a default by the Purchaser under the Lease.

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(f) Service Contracts . Other than the Service Contracts, the Seller has not entered into, and the Property is not subject to, any contract or agreement with respect to the management, operation or maintenance of the Property (or any portion thereof) or otherwise affecting the Property (or any portion thereof). The copies of the Service Contracts heretofore delivered (or to be delivered) by the Seller to the Purchaser are (or will be) true, correct and complete copies thereof; the Service Contracts have not been amended except as evidenced by amendments similarly delivered. Each of the Service Contracts is in full force and effect on the terms set forth therein, and there are no defaults under the Service Contracts, or circumstances which with the giving of notice, the passage of time or both, would constitute a default by any party thereunder.

(g) No Other Agreements . Other than the Lease, the Service Contracts and any Permitted Exceptions which are approved (or deemed to have been approved) by the Purchaser, the Seller has not entered into any contract or agreement with respect to the Property which will be binding on the Purchaser or the Property after the Closing.

(h) Compliance With Law . The Seller has not received any written notice alleging that the Property violates any Law, and, to the Seller’s knowledge, the Property does not violate any Law in any material respect. There are presently in effect all material licenses, permits and other authorizations necessary for the current use, occupancy and operation thereof.

(i) Condemnation; Change in Zoning . No investigation, action or proceeding is pending and, to the Seller’s knowledge, no action or proceeding is threatened and no investigation looking toward any action or proceeding has begun, which involves any condemnation or eminent domain proceeding against any part of the Property, or which involves any modification or realignment of any intersection, street or highway adjacent to the Property or which could affect the present use or zoning of the Property.

(j) Taxes . To the Seller’s knowledge, no taxes or special assessments of any kind (special, bond or otherwise) are or have been levied with respect to the Property, or any portion thereof, which are outstanding or unpaid, other than amounts not yet due and payable, and no such assessments or levies are pending or threatened. True and complete copies of the real estate tax bills for the Property for the past three (3) years have been delivered to Purchaser. Seller has not received any written notice of, and has no knowledge of, any proposed or pending increase in the assessed valuation or rate of taxation of any or all of the Property from that reflected on such real estate tax bills. No Tax Proceedings are currently pending or subject to appeal or will be currently pending or subject to appeal as of the Closing Date.

(k) Hazardous Materials . Other than as set forth or revealed in the Existing Environmental Documents, neither the Seller nor, to the Seller’s knowledge, any other occupant or user of the Property, or any portion thereof, has stored, disposed of, or otherwise managed (or engaged in the business of storing, disposing of, or otherwise managing), or has released or caused the release of, any Hazardous Materials at, on, in or from the Property. Except as set forth or revealed in the Existing Environmental Documents, to the Seller’s knowledge, the Property is free from any such Hazardous Materials, except for any such Hazardous Materials as are maintained in the ordinary course of business at the Property and in accordance with Law. Except as set forth or revealed in the above Existing Environmental Documents, Seller has not received written notification, and has no knowledge, that any governmental or quasi-governmental authority or third party has determined that there are any violations of environmental statutes, ordinances or regulations, or Hazardous Material releases, affecting the Property.

(l) No Bankruptcy . No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, or other proceedings are pending or, to Seller’s knowledge, threatened against Seller, nor are any such proceedings contemplated by Seller, nor to Seller’s knowledge do any grounds exist for any such proceedings to be instituted against Seller. Seller has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy, or admitted in writing its inability to pay its debts as they come due or made an offer of settlement, extension or composition to its creditors generally, and Seller has received no written notice of and has no knowledge of (i) the filing of any involuntary petition by Seller’s creditors, (ii) the appointment of a receiver to take possession of all, or substantially all, of Seller’s assets, or (iii) the attachment or other judicial seizure of all, or substantially all, of Seller’s assets.

(m) Due Diligence Information . To Seller’s knowledge, all due diligence information and other items and documents delivered by or on behalf of Seller to Purchaser pursuant to this Agreement, are true, accurate and complete in all material respects, and fairly and accurately present the information therein set forth in a manner that is not misleading.

(n) No Contract of Sale . Seller has not entered into any other outstanding contracts for the sale of all or any portion of the Property, nor do there exist any rights of first offer, first refusal or options to purchase all or any portion of the Property other than in favor of the Purchaser pursuant to the Lease.

(o) CC&R . There have been no written notices of, and Seller has no knowledge of, any defaults by Seller or any other party under the CC&Rs that remain uncured. All amounts billed to and payable by Seller under the CC&Rs have been paid in full.

(p) Employee Matters . Seller has no employees, and there are no employment agreements, union agreements, benefit agreements, pension plans, or collective bargaining agreements, at or otherwise affecting the Property to which Seller is bound which will survive the Closing or for which Purchaser will be responsible for or have any liability for after the Closing.

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(q) Capital Improvements . There are no capital improvement projects at the Property presently being performed by or at the direction of Seller, or any of its agents or sub-contractors, other than budgeted maintenance required in the ordinary course of business, and no material structural portion of the Property has been damaged or destroyed by fire, storm or other casualty that remains unrepaired.

(r) Not a Foreign Person . The Seller is not a “foreign person” within the meaning of Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

(s) OFAC . Neither the Seller nor, to the Seller’s knowledge, any of its respective partners, members, shareholders or other equity owners, is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Assets Control (“ OFAC ”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism).

6.2 Survival of Seller’s Representations . The representations and warranties made in this Agreement by the Seller shall be continuing and shall be deemed remade by the Seller as of the Closing Date, with the same force and effect as if made on and as of such date. All representations and warranties made in this Agreement by the Seller shall survive the Closing, provided that no action based on a breach of any such representations or warranties shall be commenced after the expiration of the Survival Period.

6.3 “As Is” . Except as otherwise expressly provided in this Agreement or in any document to be delivered to the Purchaser at the Closing, the Seller has not made, and the Purchaser has not relied on, any information, promise, representation or warranty, express or implied, regarding the Property. The Purchaser acknowledges that the Purchaser is a sophisticated investor in real property, is experienced in purchasing properties similar to the Property and, except as otherwise expressly provided in this Agreement or in any document to be delivered to the Purchaser at the Closing, is acquiring the Property in its current “ AS IS ”, “ WHERE IS ” condition without any other representations or warranties. It is understood that from and after the expiration of the Inspection Period but subject to the representations and warranties of Seller in this Article VI, the Property will be purchased by the Purchaser on an “as is” basis, including, without limitation, with respect to the condition of the building, roof, HVAC systems and its environs.

ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER

7.1 Representations of Purchaser . To induce the Seller to enter in this Agreement, the Purchaser represents and warrants to the Seller as follows:

(a) Status and Authority of the Purchaser . The Purchaser is a corporation duly organized and validly existing under the laws of the State of Delaware, and has all requisite power and authority under its formation documents to enter into and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

(b) Action of the Purchaser; Enforceability . The Purchaser has taken all necessary action to authorize the execution, delivery and performance of this Agreement and any documents to be delivered by it hereunder, and, upon the execution and delivery of this Agreement and such other documents, this Agreement and such other documents shall constitute the valid and binding obligations and agreements of the Purchaser, enforceable against the Purchaser in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors.

(c) No Violations of Agreements . Neither the execution, delivery or performance of this Agreement nor any of the documents to be delivered by the Purchaser hereunder, nor compliance with the terms and provisions hereof or thereof, will result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of the Purchaser pursuant to the terms of any indenture, mortgage, deed of trust, note, evidence of indebtedness or any other agreement or instrument by which the Purchaser is bound.

(d) Litigation . No investigation, action or proceeding is pending and, to the Purchaser’s knowledge, no action or proceeding is threatened and no investigation looking toward such an action or proceeding has begun, which questions the validity of this Agreement or any action taken or to be taken pursuant hereto.

7.2 Survival, Etc. The representations and warranties made in this Agreement by the Purchaser shall be continuing and shall be deemed remade by the Purchaser as of the Closing Date, with the same force and effect as if made on and as of such date. All representations and warranties made in this Agreement by the Purchaser shall survive the Closing, provided that no action based on a breach of any such representations or warranties shall be commenced after the expiration of the Survival Period.

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ARTICLE VIII
COVENA NTS OF THE SELLER

8.1 Seller’s Covenants . From and after the Effective Date until the Closing or the earlier termination of this Agreement, the Seller hereby covenants with the Purchaser as follows:

(a) Estoppel Certificates . To request, and use commercially reasonable efforts to obtain the CC&R Estoppels, and to deliver to the Purchaser all responses received by the Seller in connection with the Seller’s request for the same promptly following such receipt.

(b) Operation of Property . To operate the Property in a good and businesslike fashion consistent with the Seller’s current practices and to continue to maintain the Property in good working order and condition and in a manner consistent with the Seller’s current practices and, in connection with the same, Seller shall not (i) cancel or permit cancellation of any casualty or liability insurance carried with respect to the Property or (ii) remove from the Property any Personal Property unless such item is replaced by an item of similar utility and value.

(c) Compliance with Law . To comply in all material respects with all Laws; provided , however , in no event shall the Seller be obligated to perform any capital improvements in connection with this provision.

(d) Compliance with Applicable Agreements . To comply with all of the terms, covenants and conditions contained in the Lease, the Service Contracts and any other agreement affecting the Property and to monitor compliance thereunder in a manner consistent with the Seller’s current practices.

(e) Approval of Agreements . Not to enter into, modify, amend or terminate any lease or occupancy agreement, Service Contract, Permitted Exception or any other agreement with respect to the Property, which would encumber or be binding upon the Property from and after the Closing Date, without in each instance obtaining the prior written consent of the Purchaser, which consent shall not be unreasonably withheld, conditioned or delayed prior to the expiration of the Inspection Period but may be withheld in the Purchaser’s sole and absolute discretion thereafter.

(f) Service Contracts . To terminate effective no later than the Closing Date (at no cost or expense to the Purchaser) any and all Service Contracts which the Purchaser requests the Seller to terminate by notice given to the Seller at or prior to the Closing Date.

(g) Notice of Material Changes or Untrue Representations . To promptly notify the Purchaser of any material change in the condition of the Property or of any event or circumstance which makes any representation or warranty of the Seller to the Purchaser under this Agreement untrue or misleading in any respect.

(h) No-Shop . To not market the Property or otherwise solicit or accept any offers or inquiries regarding the Property, or entertain offers or take or enter into back-up offers or back-up sale contracts.

(i) Tax Proceedings . To not commence any Tax Proceedings for the reduction of the assessed valuation of the Property for any tax year or challenging the tax rates or other components used in determining real estate taxes.

(j) Cooperation . To reasonably cooperate with the Purchaser, at no out-of-pocket cost or expense to the Seller, with respect to all matters related to this Agreement.

ARTICLE IX
ADJUSTMENTS AND APPORTIONMENTS

9.1 Apportionments and Credits .

(a) Apportioned Items . The following items shall be apportioned at the Closing as of 12:01 a.m. on the Closing Date to the extent that such items are applicable to the month in which the Closing Date occurs, such that all items of income and expense with respect to the Property shall be for the account of the Purchaser on the Closing Date:

(i) rents and all other charges payable under the Lease;

(ii) amounts payable under any Service Contracts (other than Service Contracts that are terminated pursuant to Section 8.1(f));

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(iii) estimated or unfixed charges payable under the Lease (including, without limitation, estimated amounts payable by the Purchaser with respect to operating expenses and/or real estate taxes) unless such charges are paid by the Purchaser directly to any governmental authority or third party ;

(iv) real estate taxes and assessments (other than special assessments) and personal property taxes and assessments based on the rates and assessed valuation applicable in the tax year for which assessed;

(v) fuel, electricity, water and other utility costs (including, without limitation, water rates and charges and sewer and vault taxes and rents); and

(vi) such other items of income and expense as are customarily prorated in sales transactions involving other properties which are similar to the Property.

(b) Utility Readings . If there are any water, gas or electric meters located at the Property, the Seller shall obtain readings thereof to a date not more than thirty (30) days prior to the Closing Date and the unfixed water rates and charges, sewer taxes and rents and gas and electricity charges, if any, based thereon for the intervening time shall be apportioned on the per diem basis on the basis of such readings. If such readings are not obtainable by the Closing Date, then, at the Closing, any water rates and charges, sewer taxes and rents and gas and electricity charges which are based on such readings shall be prorated based upon the per diem charges obtained by using the most recent period for which such readings shall then be available. Upon the taking of subsequent actual readings, the apportionment of such charges shall be recalculated and the Seller or the Purchaser, as the case may be, shall make prompt payment to the other based upon such recalculations. This provision shall not apply to any utilities paid by the Purchaser pursuant to the Lease, which utilities shall remain the sole obligation of the Purchaser.

(c) Tax Refunds . If any refunds of real property taxes or assessments, water rates and charges or sewer taxes and rents shall be made after the Closing, the same shall be held in trust by the Seller or the Purchaser, as the case may be, and shall first be applied to the unreimbursed costs incurred in obtaining the same, then to any required refunds to the Purchaser, and the balance, if any, shall be paid to the Seller (to the extent such refunds relate to periods prior to the Closing Date) and to the Purchaser (to the extent such refunds relate to periods commencing with the Closing Date).

(d) Special Assessments . If, on the Effective Date, the Property shall be or shall have been affected by any special or general assessment or assessments or real property taxes payable on a lump sum or which are or may become payable in installments of which the first installment is then a charge or lien and has become payable, the Seller shall pay or cause to be paid at the Closing the unpaid installments of such assessments, including those which are payable after the Closing Date.Any such assessments made after the date of this Agreement and prior to the Closing shall, after the Closing, be the responsibility of the Purchaser to pay.

(e) Insurance Premiums . No insurance policies of the Seller are to be assigned or otherwise transferred to the Purchaser, and no apportionment of the premiums therefor shall be made except to the extent such premiums are passed through to the Purchaser as Additional Rent (as defined in the Lease) under the Lease and apportioned pursuant to Section 9.1(a)(i) above.

(f) Estimates . If any of the foregoing items of income or expense cannot be apportioned at the Closing because of the unavailability of the amounts which are to be apportioned, such items shall be apportioned on the basis of a good faith estimate by the parties and adjusted and reconciled as soon as practicable after the Closing Date; provided , however , all such adjustments and reconciliations shall occur no later than one (1) year after the Closing Date.

(g) Service Contracts . Fees and charges under the Service Contracts (other than the Service Contracts that are to be terminated or which are not assumed by Purchaser at Closing in accordance with Section 8.1(f)) shall be prorated on a per diem basis based upon the per diem charges obtained by using the most recent billing statement rendered to Seller by the applicable service provider and, after an actual statement is received, a copy shall be delivered to Purchaser or Seller, as applicable, and the apportionment of such charges hereunder shall be recomputed if necessary.

(h) Errors . If either party discovers any errors on the Settlement Statement within one (1) year after the Closing Date, the parties shall make such adjustments and reconciliations as are necessary to correct such errors; provided , however , all such adjustments and reconciliations shall occur no later than one (1) year after the Closing Date.

(i) Adjustment to Purchase Price . If a net amount is owed by the Seller to the Purchaser pursuant to Section 9.1 , such amount shall be credited against the Purchase Price. If a net amount is owed by the Purchaser to the Seller pursuant to Section 9.1 , such amount shall be paid together with the Purchase Price.

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9.2 Closing Costs .

(a) Purchaser’s Closing Costs . The Purchaser shall pay the following costs in connection with the consummation of the Closing: (i) - any escrow fees; (ii) all charges for the Title Policy (including all endorsements thereto) and the Survey; and (iii) all other charges incurred by the Purchaser in connection with this Agreement (including, without limitation, the fees and expenses of the Purchaser’s attorneys and other consultants).

(b) Seller’s Closing Costs . The Seller shall pay the following costs in connection with the consummation of the Closing: (i) all charges for recording the deed and any other applicable instruments; (ii) all transfer taxes imposed in connection with this transaction; and (iii) all other charges incurred by the Seller in connection with this Agreement (including, without limitation, the fees and expenses of the Seller’s attorneys and other consultants).

9.3 Survival . provisions of this Article IX shall survive the Closing or any earlier termination of this Agreement.

ARTICLE X
CASUALTY AND CONDEMNATION

10.1 Casualty . If, prior to the Closing, all or any part of the Property shall be destroyed or damaged by fire or other casualty, the Seller shall promptly notify the Purchaser of such fact. If such notice is given subsequent to the expiration of the Inspection Period, the Purchaser shall have the right to terminate this Agreement by giving notice thereof to the Seller not later than ten (10) Business Days after the date on which the Purchaser received the Seller’s notice of such casualty (and, if necessary, the Closing Date shall be extended until the day that is two (2) Business Days after the expiration of such period in order to permit the Purchaser the full period to consider whether or not to exercise its termination right). Failure of Purchaser to deliver any such notice of termination to Seller within such ten (10) Business Day period shall be a deemed election by Purchaser to terminate this Agreement. If the Purchaser shall elect (or be deemed to have elected) to terminate this Agreement as aforesaid, the Deposit shall be paid to the Purchaser, whereupon this Agreement shall terminate and be of no further force and effect and neither party shall have any liabilities or obligations to the other hereunder, except for the Surviving Obligations. If the Purchaser shall not elect (or is not deemed to have elected) to terminate this Agreement as aforesaid, then the Seller shall, unless the Seller has previously restored the premises to their former condition, either

(a) pay over or assign to the Purchaser, on delivery of the deed, all amounts recovered or recoverable on account of insurance, less any amounts reasonably expended by the Seller for any partial restoration, or

(b) if a holder of a mortgage on said premises shall not permit insurance proceeds or a part thereof to be used to restore the said premises to their former condition or to be paid over or assigned, give to the Purchaser a credit against the purchase price, on delivery of the deed, equal to said amounts so recovered or recoverable by the holder of the said mortgage, less any amounts reasonably expended by the Seller for any partial restoration.

10.2 Condemnation . If, prior to the Closing, all or any part of the Property is taken by eminent domain (or becomes the subject of a pending taking which has not yet been consummated), the Seller shall notify the Purchaser of such fact. If such notice is given subsequent to the expiration of the Inspection Period, the Purchaser shall have the right to terminate this Agreement by giving notice thereof to the Seller not later than ten (10) Business Days after the date on which the Purchaser received the Seller’s notice of such condemnation (and, if necessary, the Closing Date shall be extended until two (2) Business Days after the expiration of such period in order to permit the Purchaser the full period to consider whether or not to exercise its termination right). Failure of Purchaser to deliver any such notice of termination to Seller within such ten (10) Business Day period shall be a deemed election by Purchaser to terminate this Agreement. If the Purchaser shall elect (or be deemed to have elected) to terminate this Agreement as aforesaid, the Deposit shall be paid to the Purchaser, whereupon this Agreement shall terminate and be of no further force and effect and neither party shall have any liabilities or obligations to the other hereunder, except for the Surviving Obligations. If the Purchaser shall not elect to terminate this Agreement as aforesaid, then the sale of the Property shall be consummated as herein provided without any adjustment to the Purchase Price (except that Purchaser shall be entitled to a credit for any condemnation award received by the Seller prior to the Closing) and the Seller shall assign to the Purchaser at the Closing all of the Seller’s right, title and interest in and to all awards, if any, for the taking, and the Purchaser shall be entitled to receive and keep all awards for the taking of the Property or any portion thereof.

10.3 Survival . The provisions of this Article X shall survive the Closing.

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ARTICLE XI
DEFAULT

11.1 Breach or Default by the Seller; Failure of Condition Precedent . If the Purchaser discovers prior to Closing that the Seller shall have made any representation or warranty herein that is untrue, incorrect or misleading in any material respect, or if the Seller shall fail to perform any of the material covenants and agreements contained herein to be performed by the Seller at or prior to the Closing, the Purchaser may, as its sole and exclusive remedy, either (a) terminate this Agreement and receive a refund of the Deposit and, if an applicable representation or warranty was intentionally untrue, incorrect or misleading, or if the Seller failed to use commercially reasonable efforts to perform an applicable covenant or agreement, receive reimbursement from the Seller for the Purchaser’s out-of-pocket costs and expenses (including diligence costs and reasonable attorneys’ fees) incurred in connection with this transaction or (b) pursue a suit for specific performance; provided , however , if Purchaser is unsuccessful in its suit for specific performance it shall nevertheless be entitled to the remedies provided in clause (a) above. If the Closing shall not occur hereunder due to a failure of any condition precedent set forth in Section 4.1 which is not addressed in the preceding sentence, then the Purchaser may terminate this Agreement and receive a refund of the Deposit. If the Purchaser discovers following the Closing that the Seller made any representation or warranty herein which is untrue or misleading in any material respect, or if the Seller shall fail to perform any of its Surviving Obligations, then the Purchaser shall have all remedies available to it at law or in equity.

11.2 Default by the Purchaser . If the Seller discovers prior to the Closing that the Purchaser shall have made any representation or warranty herein that is untrue or misleading in any material respect, or if the Purchaser shall fail to perform any of the material covenants and agreements contained herein to be performed by the Purchaser at or prior to the Closing, the Seller, as its sole and exclusive remedy, may terminate this Agreement, whereupon the Seller shall be entitled to retain the Deposit as liquidated damages and not as a penalty.

11.3 Survival . The provisions of this Article XI shall survive the Closing.

ARTICLE XII
MISCELLANEOUS

12.1 Allocation of Liability . It is expressly understood and agreed that the Seller shall be liable to third parties for any and all obligations, claims, losses, damages, liabilities, and expenses arising out of events, contractual obligations, acts, or omissions of the Seller that occurred in connection with the ownership or operation of the Property prior to the Closing, and, subject to the terms of this Agreement and the documents delivered at Closing, the Purchaser shall be liable to third parties for any and all obligations, claims, losses, damages, liabilities and expenses arising out of events, contractual obligations, acts, or omissions of Purchaser that occur in connection with the ownership or operation of the Property after the Closing.

12.2 Brokers . Each of the parties hereto represents to the other that it has dealt with no broker, finder or like agent in connection with this Agreement or the transactions contemplated hereby other than the Brokers. Seller shall be solely responsible for any commissions, compensation or other fees due, owed or payable to the Brokers. Each party shall indemnify, defend and hold harmless the other and its respective legal representatives, heirs, successors and assigns from and against any loss, liability or expense, including, reasonable attorneys’ fees, arising out of any claim or claims for commissions or other compensation for bringing about this Agreement or the transactions contemplated hereby made by any other broker, finder or like agent, if such claim or claims are based in whole or in part on their dealings with the indemnifying party. Furthermore, the Seller shall indemnify, defend and hold harmless the Purchaser and the Purchaser’s respective legal representatives, heirs, successors and assigns from and against any loss, liability or expense, including, reasonable attorneys’ fees, arising out of any claim or claims for commissions or other compensation for bringing about this Agreement or the transactions contemplated hereby made by the Brokers.

12.3 Confidentiality . Subject to the following paragraph, neither party shall contact or conduct negotiations with public officials or otherwise furnish any information regarding this Agreement or the transactions contemplated hereby to any third party without the consent of the other party, which consent may be withheld by the other party in the other party’s sole discretion. In no event shall any such announcements or press releases of either party identify the other party without the prior written consent of the other party, which may be withheld in the other party's sole discretion.

This Agreement and all negotiations and related due diligence materials and documentation will be held strictly confidential and shall not be intentionally disclosed by Purchaser and Seller, subject to Purchaser’s and Seller’s ability to disclose this Agreement and such applicable information and documentation (i) to their respective officers, directors, attorneys, investors, shareholders, accountants, agents, advisors, lenders and others who are involved in this transaction and such disclosure shall be limited to the extent such parties have reason or need to know of the transaction, (ii) to the extent disclosure is required by law or order of a court or government entity of competent jurisdiction, and (iii) to the extent necessary in connection with the enforcement of Purchaser’s or Seller’s (as applicable)

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rights under this Agreement. Notwithstanding the foregoing, nothing contained in this Agreement or in any other agreement between Seller and Purchaser shall prohibit or limit Purchaser or its affiliates from being able to disclose this Agreement or any documents or information relating thereto or in respect of the Property or this transaction to the extent required under the rules and regulations of any stock exchange, governmental agency or other regulatory body, or to the extent required by any examiners, regulators or similar authorities, or in marketing materials and reports prepared for investors in Purchaser and/or its affiliates.

12.4 Trading in Purchaser’s Securities . The Seller hereby acknowledges, and the Seller agrees to advise its representatives who are informed of the matters that are the subject of this Agreement, that the United States securities laws prohibit any person who has received from the issuer of such securities material, nonpublic information concerning the matters that are the subject of this Agreement from purchasing or selling securities of such issuer or from communicating such information to any other person when it is reasonably foreseeable that such other person is likely to purchase or sell such securities in reliance upon such information, and the Seller hereby agrees for the benefit of the Purchaser and its affiliates to be bound by such prohibitions. Neither party expresses a view as to whether or not any portion or all of the information regarding this Agreement and the transaction contemplated hereby constitutes, or in the future may constitute, material, nonpublic information with respect to the Purchaser and its affiliates.

12.5 Notices . Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted to be given under this Agreement shall be given in writing and shall be delivered either in hand, by facsimile with a confirmation of transmission generated by the sender’s machine, by electronic mail or by mail or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier). All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes under this Agreement upon the date and time of the confirmation of transmission generated by the sender’s machine, in the case of a notice by facsimile or electronic mail, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Day or is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day. Notices on behalf of either party may be given by the attorneys representing such party. All such notices shall be addressed as follows:

if to the Seller, to:

Leo C. Thibeault, Jr.

513 Turtle Hatch Lane,

Naples, FL 34103

Email: chuckthibeault@comcast.net

Fax No.: ___________________

with a copy to:

Marc Frey

Tinti, Quinn, Grover & Frey, P.C.

27 Congress Street, # 414

Salem, MA 01970

Email: mpfrey@tintilaw.com

Fax No.: 978-745-3369

If to the Purchaser, to:

22 Cherry Hill Drive

Danvers, MA 01923

Attention: Steve McEvoy

Email: smcevoy@abiomed.com

Fax No.: 978-777-8411

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with a copy to:

Ropes & Gray LLP

Prudential Tower
800 Boylston Street

Boston, MA 02199

Attention: John M. Creedon

Email: john.creedon@ropesgray.com

Fax No.: (617) 235-9362

If to the Escrow Agent, to:

Commonwealth Land Title Insurance Company

265 Franklin Street, 8 ^th Floor

Boston, MA 02110

Attention: David M. Walker

Email: david.m.walker@fnf.com

Fax No.: 617-619-4848

The parties hereto and their respective successors and assigns shall have the right to change their respective addresses to any other address within the United States of America effective upon receipt by the other parties of such notice.

12.6 Waivers, Etc. Any waiver of any term or condition of this Agreement, or of the breach of any covenant, representation or warranty contained herein, in any one instance, shall not operate as or be deemed to be or construed as a further or continuing waiver of any other breach of such term, condition, covenant, representation or warranty or any other term, condition, covenant, representation or warranty, nor shall any failure at any time or times to enforce or require performance of any provision hereof operate as a waiver of or affect in any manner such party’s right at a later time to enforce or require performance of such provision or any other provision hereof. This Agreement may not be amended, nor shall any waiver, change, modification, consent or discharge be effected, except by a written instrument executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification, consent or discharge is sought.

12.7 Assignment; Successors and Assigns . This Agreement and all rights and obligations hereunder shall not be assignable by either party without the written consent of the other party, except that the Purchaser may assign this Agreement with notice to, but without the consent of, Seller to any affiliate of the Purchaser or to any entity wholly owned, directly or indirectly, by the Purchaser; provided , however , if this Agreement shall be assigned by the Purchaser as aforesaid, the Purchaser named herein shall remain liable for the obligations of the “Purchaser” hereunder. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. This Agreement is not intended and shall not be construed to create any rights in or to be enforceable in any part by any other persons.

12.8 Severability . If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case.

12.9 Counterparts, Etc. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each such counterpart may be delivered by facsimile or e-mail (in .pdf format) and any signatures which are so delivered by facsimile or e-mail shall be deemed original signatures for all purposes.

12.10 Integration . This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

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12.1 1 Performance on Business Days . If the date on which payment or performance of any obligation of a party hereunder is other than a Business Day, or the last day for the giving of any notice required or permitted hereunder is other than a Business Day, the time for such payment, performance or delivery shall automatically be extended to the first Business Day following such date.

12.12 Attorneys Fees . Notwithstanding anything contained herein to the contrary, if any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party’s costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein.

12.13 Section and Other Headings . The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

12.14 Construction . This Agreement shall not be construed more strictly against one party than against the other merely by virtue of the fact that this Agreement may have been prepared by counsel for one of the parties, it being mutually acknowledged and agreed that the Seller and the Purchaser and their respective counsel have contributed substantially and materially to the preparation and negotiation of this Agreement. Accordingly, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any exhibits or amendments hereto.

12.15 Time of Essence . Time shall be of the essence with respect to the performance of each and every covenant and obligation, and the giving of all notices, under this Agreement.

12.16 Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.

12.17 Waiver of Trial by Jury . TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY ABSOLUTELY AND IRREVOCABLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THEM RELATED TO THIS AGREEMENT OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

12.18 Survival . The provisions of this Article XII shall survive the Closing or any earlier termination of this Agreement.

[Remainder of page intentionally left blank; signature page follows.]

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IN WITNESS WHEREOF , the parties have caused this Agreement to be executed as a sealed instrument as of the Effective Date.

PURCHASER:

ABIOMED, INC.,
a Delaware corporation

By:	/s/ Michael R. Minogue
	Name:	Michael R. Minogue
	Its:	Chief Executive Officer and President

SELLER

Thibeault Nominee Trust

By:	/s/ Leo C. Thibeault, Jr.
	Name:	Leo C. Thibeault, Jr.
	Its:	Trustee

Signature Page to the Purchase and Sale Agreement

THE UNDERSIGNED HEREBY JOINS IN THIS AGREEMENT AS THE ESCROW AGENT AND ACKNOWLEDGES AND AGREES TO BE BOUND BY THE PROVISIONS OF SECTION 2.4 OF THIS AGREEMENT.

COMMONWEALTH LAND TITLE INSURANCE COMPANY

By:	/s/ David M. Walker
	Name:	David M. Walker
	Its:	Assistant Vice President

Signature Page to the Purchase and Sale Agreement

SCHEDULE 1

THE LAND

Schedule 1

SCHEDULE 2

SERVICE CONTRACTS

None

Schedule 2

SCHEDULE 3

PERMITTED EXCEPTIONS FROM THE TITLE COMMITMENT

Rights and obligations regarding Right of Way (roadway now known as Cherry Hill Drive) as shown on plan recorded in Plan Book 147, Plan 71 and as set forth in document recorded with Essex South District Registry of Deeds, Book 6460, Page 391.

Rights and obligations regarding 80 foot right of way (roadway now known as Cherry Hill Drive) as shown on plan recorded in Plan Book 149, Plan 86 and as set forth in document recorded, Book 6530, Page 261.

Sewer and Water Main easement as set forth in document recorded at Book 6460, Page 391 and as shown on plan recorded in Plan Book 149, Plan 86 and Plan Book 160, Plan 1.

Declaration of Protective Covenants and Restrictions recorded in Book 6721, Page 562 as affected by Certificate recorded at Book 6721, Page 569 and Certificate of Approval recorded at Book 15420, Page 360.

Order of Conditions at Book 6721, Page 570 as affected by Action Letter recorded at Book 6749, Page 795 and as affected by Certificate of Compliance recorded at Book 12818, Page 134 setting forth continuing conditions.

Notice and Decision of Special Permit under Section X1A-D (2) of the Danvers Zoning By-Law as set forth in document recorded at Book 6721, Page 575 and Page 576.

Covenant relating to construction of drainage system and retention basin by T. Flatley as set forth in document recorded at Book 6721, Page 579.

Certificate of Action recorded at Book 6721, Page 580 and Book 6721, Page 586 and Covenants recorded at Book 6721, Page 584 issued by Danvers Planning Board, as affected by Certificates of Action recorded at Book 6798, Page 487 and Book 6798, Page 488.

Buffer Zone Easement, fifty (50) feet in width, as shown on plan recorded at Plan Book 160, Plan 1 and as set forth in Notes to said Plan and also in deed recorded at Book 6721, Page 589.

10.

Easement for drainage purposes as set forth in Notes to Plan recorded at Plan Book 160, Plan 1 and as excepted by Certificates of Action as to Lot 2, recorded at Book 6738, Page 467.

11.

Easement to Danvers Municipal Light Department and New England Telephone & Telegraph Company and Massachusetts Electric Company as set forth in document recorded at Book 6744, Page 754.

12.

Order of Conditions at Book 14883, Page 410, as affected by Certificate of Compliance, Book 16464, Page 485.

Schedule 3

EXHIBIT A

FORM OF DEED

(Form to be provided by the Seller based upon the vesting deed and subject to approval by the Purchaser and Title Company.)

Exhibit A

EXHIBIT B

FORM OF BILL OF SALE

BILL OF SALE

THIS BILL OF SALE (this “ Bill of Sale ”) is made and given as of [●], 20 [●] by THIBEAULT NOMINEE TRUST , a Massachusetts nominee trust (the “ Seller ”), to and for the benefit of ABIOMED, INC. , a Delaware corporation (the “ Purchaser ”).

WITNESSETH :

WHEREAS, the Seller and the Purchaser are parties to that certain Purchase and Sale Agreement, dated as of December 9, 2015, as amended from time to time (as so amended, the “ Purchase Agreement ”), pursuant to which the Seller agreed to sell, and the Purchaser agreed to purchase, certain real property interests and other property, including, without limitation, that certain commercial office building having an address at 18-22 Cherry Hill Drive, Danvers, Massachusetts;

WHEREAS, the Seller is entering into this Bill of Sale in connection with the closing of the transactions contemplated by the Purchase Agreement;

NOW, THEREFORE, in accordance with the terms and provisions of the Purchase Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the Seller hereby agrees as follows:

1. Capitalized Terms . Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.

2. Sale of Personal Property . The Seller hereby sells, bargains, conveys assigns, delivers, grants and transfers unto the Purchaser all of the Seller’s right, title and interest in and to the Personal Property, to have and to hold the Personal Property forever.

3. WARRANTY OF TITLE . THE SELLER HEREBY WARRANTS TO THE PURCHASER THAT THE SELLER IS THE LAWFUL OWNER OF THE PERSONAL PROPERTY AND THE PERSONAL PROPERTY IS FREE FROM THE RIGHTS AND CLAIMS OF OTHERS, BUT THE SELLER MAKES NO OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PERSONAL PROPERTY, EXCEPT TO THE EXTENT SET FORTH IN THE PURCHASE AGREEMENT. WITHOUT LIMITING THE FOREGOING, THE SELLER MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE WITH RESPECT TO THE PERSONAL PROPERTY, AND THE SAME IS SOLD IN AN “AS IS, WHERE IS” CONDITION, WITH ALL FAULTS AND THAT THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED, EXCEPT TO THE EXTENT SET FORTH IN THIS AGREEMENT OR IN THE PURCHASE AGREEMENT.

4. Successors and Assigns . This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors in interest and assigns.

5. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.

[Signature page follows.]

Exhibit B

IN WITNESS WHEREOF, the Seller has executed this Bill of Sale as a sealed instrument as of the day and year first hereinabove written.

SELLER :

THIBEAULT NOMINEE TRUST ,
a Massachusetts nominee trust

By:
		Name:
		Its:

Exhibit B

EXHIBIT C

FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Assignment ”) is made and entered into as of [●], 20 [●] by and between THIBEAULT NOMINEE TRUST , a Massachusetts nominee trust (the “ Assignor ”), and ABIOMED, INC. , a Delaware corporation (the “ Assignee ”).

WITNESSETH :

WHEREAS, the Assignor and the Assignee are parties to that certain Purchase and Sale Agreement, dated as of December 9, 2015, as amended from time to time (as so amended, the “ Purchase Agreement ”), pursuant to which the Assignor agreed to sell, and the Assignee agreed to purchase, certain real property interests and other property, including, without limitation, that certain commercial building having an address at 18-22 Cherry Hill Drive, Danvers, Massachusetts; and

WHEREAS, the Assignor and the Assignee are entering into this Assignment in connection with the closing of the transactions contemplated by the Purchase Agreement;

1. Capitalized Terms . Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Purchase Agreement.

2. Assignment and Assumption of the Lease, Service Contracts and Intangible Property . The Assignor hereby assigns to the Assignee all of the Assignor’s right, title and interest in and to the Lease described on Exhibit A attached hereto, the Service Contracts described on Exhibit B attached hereto and the Intangible Property. The Assignee hereby assumes all of the Assignor’s obligations under such Lease, Service Contracts and Intangible Property to the extent arising from and after the date hereof. The Assignee hereby agrees to perform all of the Assignor’s obligations arising under such Lease, Service Contracts and Intangible Property to the extent arising from and after the date hereof.

3. Indemnifications .

(a) The Assignor shall indemnify, defend and hold harmless the Assignee from and against any and all claims, demands, liabilities, losses, damages, costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements, arising under and the Lease, Service Contracts and Intangible Property to the extent related to periods prior to the date hereof.

(b) The Assignee shall indemnify, defend and hold harmless the Assignor from and against any and all claims, demands, liabilities, losses, damages, costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements, arising under the Lease, Service Contracts and Intangible Property to the extent related to periods from and after the date hereof.

4. Successors and Assigns . This Assignment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors in interest and assigns.

5. Counterparts . This Assignment may be executed in two or more counterparts, all of which shall be construed together as a single instrument.

6. Governing Law . This Assignment shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts.

[Signature page follows.]

Exhibit C

IN WITNESS WHEREOF, the Assignor and the Assignee have executed this Assignment as a sealed instrument as of the day and year first hereinabove written.

ASSIGNOR:

THIBEAULT NOMINEE TRUST ,
a Massachusetts nominee trust

By:
		Name:
		Its:

ASSIGNEE:

ABIOMED, INC. ,
a Delaware corporation

By:
		Name:
		Title:

Exhibit C

Exhibit A

Lease dated as of February 24, 2014 by and between Leo C. Thibeault, Jr., Trustee of the Thibeault Nominee Trust u/d/t dated November 20, 1996, recorded with the Essex South Registry of Deeds, Book 13856, Page 290, as lessor and ABIOMED, Inc., as lessee, as amended by the First Amendment to Lease dated as of April 30, 2015 (collectively, the “ Lease ”).

Exhibit C

Exhibit B

Exhibit C

EXHIBIT D

FORM OF FIRPTA AFFIDAVIT

CERTIFICATION OF NON-FOREIGN STATUS

Section 1445 of the Internal Revenue Code provides that a transferee of a United States real property interest must withhold tax if the transferor is a foreign person. To inform ABIOMED, INC., the transferee of a U.S. real property interest (the “ Transferee ”), that withholding of tax is not required upon the disposition of such U.S. real property interest by THIBEAULT NOMINEE TRUST , a Massachusetts nominee trust, the transferor of a U.S. real property interest (the “ Transferor ”), the undersigned hereby certifies the following on behalf of Transferor:

The Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate (as those terms are defined in the Internal Revenue Code and Income Tax Regulations);

Transferor is not a disregarded entity as defined in §1.1445-2(b)(2)(iii) of the Income Tax Regulations;

The Transferor’s U.S. taxpayer identification number is [●]; and

The Transferor’s address is:

The Transferor understands that this certification may be disclosed to the Internal Revenue Service by Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Exhibit D

Under penalties of perjury, the undersigned declares that he/she has examined this certification and, to the best of his/her knowledge and belief, it is true, correct and complete, and he/she further declares that he/she has the authority to sign this document on behalf of Transferor.

THIBEAULT NOMINEE TRUST,
a Massachusetts nominee trust

By:

Name:
Its:

Date:			, 20 [●]

Exhibit D

Table of Contents

		Page
ARTICLE I DEFINITIONS		1

1.1 Capitalized Terms.		1

ARTICLE II PURCHASE AND SALE; CLOSING		3

2.1 Purchase and Sale.		3
2.2 Closing.		3
2.3 Purchase Price.		3
2.4 Duties of Escrow Agent.		3

ARTICLE III DILIGENCE, ETC.		4

3.1 Property Diligence.		4
3.2 Title and Survey Matters.		5

ARTICLE IV CONDITIONS TO THE PURCHASER’S OBLIGATION TO CLOSE		6

4.1 Purchaser’s Conditions Precedent.		6

ARTICLE V CONDITIONS TO SELLER’S OBLIGATION TO CLOSE		7

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER		7

6.1 Seller’s Representations.		7
6.2 Survival of Seller’s Representations.		9
6.3 “As Is”.		9

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PURCHASER		9

7.1 Representations of Purchaser.		9
7.2 Survival, Etc.		9

ARTICLE VIII COVENANTS OF THE SELLER		10

8.1 Seller’s Covenants.		10

ARTICLE IX ADJUSTMENTS AND APPORTIONMENTS		10

9.1 Apportionments and Credits.		10
9.2 Closing Costs.		12

ARTICLE X CASUALTY AND CONDEMNATION		12

10.1 Casualty.		12
10.2 Condemnation.		12
10.3 Survival.		12

ARTICLE XI DEFAULT		13

11.1 Breach or Default by the Seller; Failure of Condition Precedent.		13
11.2 Default by the Purchaser.		13
11.3 Survival		13

ARTICLE XII MISCELLANEOUS		13

12.1 Allocation of Liability.		13
12.2 Brokers.		13
12.3 Confidentiality.		13
12.4 Trading in Purchaser’s Securities.		14
12.5 Notices.		14

12.6 Waivers, Etc.		15
12.7 Assignment; Successors and Assigns.		15
12.8 Severability.		15
12.9 Counterparts, Etc.		15
12.10 Integration.		15
12.11 Performance on Business Days.		16
12.12 Attorneys Fees.		16
12.13 Section and Other Headings.		16
12.14 Construction.		16
12.15 Time of Essence.		16
12.16 Governing Law.		16
12.17 Waiver of Trial by Jury.		16
12.18 Survival.		16

Exhibit 10.2

EXECUTION VERSION

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (this “ Amendment ”) is effective as of January 19, 2016 and amends that certain Purchase and Sale Agreement dated as of December 9, 2015, by and between Abiomed, Inc., a Delaware corporation, as purchaser (“ Purchaser ”) and Thibeault Nominee Trust, a Massachusetts nominee trust, as seller (“ Seller ”) (as so amended, the “ Existing Agreement ”). All defined terms used herein and not otherwise defined herein shall have the meanings set forth in the Existing Agreement.

WHEREAS, Purchaser and Seller desire to amend the Existing Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants and consideration set forth herein, all of which is duly acknowledged, notwithstanding anything to the contrary contained in the Existing Agreement, Sell er and Purchaser hereby agree as follows:

Inspection Period . Each of the following definitions in Section 1.1 of the Existing Agreement is deleted in its entirety and respectively replaced by the following:

“ Inspection Period ” shall mean the period commencing on the first Business Day after the Effective Date and expiring on Tuesday, April 19, 2016, or such earlier date as designated by Purchaser at any time upon not less than five (5) Business Days’ prior written notice to Seller.

“ Closing Date ” shall mean the date that is five (5) Business Days after the expiration of the Inspection Period.

Miscellaneous .

This Amendment is an amendment and supplement to the Existing Agreement. Except as specifically amended by this Amendment, the Existing Agreement is, and continues to be, in full force and effect as in effect prior to the date hereof.

In the event of any inconsistency between this Amendment and the terms and provisions contained in the Existing Agreement, the terms and provisions of this Amendment shall control.

The Existing Agreement (as amended hereby) may not be further modified, amended or supplemented except in a writing signed by Purchaser and Seller.

The headings and captions of the various subdivisions of this Amendment are for convenience of reference only and shall in no way modify, or affect, or be considered in construing or interpreting the meaning or construction of any of the terms or provisions hereof.

This Amendment may be executed by different parties hereto on separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts executed and exchanged by electronic mail transmission shall be fully enforceable.

[Remainder of This Page Intentionally Left Blank]

IN WITNESS WHEREOF, Seller and Purchaser have caused this A mendment to be executed as of the date first written above.

PURCHASER:

ABIOMED, INC.,
a Delaware corporation

By:	/s/ Stephen C. McEvoy
	Name: Stephen C. McEvoy
	Its: Vice President, General Counsel and Secretary

SELLER

Thibeault Nominee Trust

By:	/s/ Leo C. Thibeault, Jr.
	Name: Leo C. Thibeault, Jr.
	Its: Trustee

Exhibit 10.3


Name:	[●]
Number of Restricted Stock Units:	[●]
Date of Grant:	[●]

ABIOMED, Inc.

2015 Omnibus Incentive Plan

Restricted Stock Unit Agreement (Employee)

This agreement (this “ Agreement ”) evidences the grant of restricted stock units (the “ Restricted Stock Units ”) by ABIOMED, Inc. (the “ Company ”) to the individual named above (the “ Grantee ”) pursuant to and subject to the terms of the ABIOMED, Inc. 2015 Omnibus Incentive Plan (as amended from time to time, the “ Plan ”), which is incorporated herein by reference.

1. Grant of Restricted Stock Units . On the date of grant set forth above (the “ Date of Grant ”) the Company granted to the Grantee an award (the “ Award ”) consisting of the right to receive, on the terms provided herein and in the Plan, one share of Stock with respect to each Restricted Stock Unit forming part of the Award, in each case, subject to adjustment pursuant to Section 7 of the Plan in respect of transactions occurring after the date hereof.

2. Meaning of Certain Terms . Each initially capitalized term used but not separately defined herein has the meaning assigned to such term in the Plan.

(a)

[Vesting Terms].

(b)

Notwithstanding the foregoing, the Restricted Stock Units, to the extent then outstanding and unvested, shall be immediately and fully vested upon the closing of a Change of Control if (i) such Change of Control shall occur before the third anniversary of the Date of Grant and (ii) the Grantee has remained in continuous Employment from the Date of Grant through the closing of such Change of Control.

4. Delivery of Stock . The Company shall deliver to the Grantee as soon as practicable upon the vesting of the Restricted Stock Units (or any portion thereof), but in all events no later than thirty (30) days following the date on which such Restricted Stock Units vest, one share of Stock with respect to each such vested Restricted Stock Unit, subject to the terms of the Plan and this Agreement.

5. Dividends, etc . The Grantee shall have the rights of a shareholder with respect to a share of Stock subject to the Award only at such time, if any, as such share is actually delivered under the Award. Without limiting the generality of the foregoing and for the avoidance of doubt, the Grantee shall not be entitled to vote any share of Stock subject to the Award or to receive or be credited with any dividend or other distribution declared and payable on any such share unless and until such share has been actually delivered hereunder and is held by the Grantee on the record date for such vote or dividend (or other distribution), as the case may be.

6. Certain Tax Matters .

(a)

The Grantee expressly acknowledges and agrees that the Grantee’s rights hereunder, including the right to be issued shares of Stock upon the vesting of the Restricted Stock Units (or any portion thereof), are subject to the Grantee’s promptly paying, or in respect of any later requirement of withholding being liable promptly to pay at such time as such withholdings are due, to the Company in cash (or by such other means as may be acceptable to the Administrator in its discretion) all taxes required to be withheld, if any (the “ Withholding Obligation ”).

(b)

By accepting the Award, the Grantee hereby acknowledges and agrees that, unless he or she provides notice to the Company at least two (2) days prior to a Vesting Date that he or she intends to satisfy the applicable Withholding Obligation by paying such amount in cash or with a check in a form acceptable to the Company and delivers such cash or check no later than such Vesting Date, he or she will have been deemed to have elected to have the Company hold back whole shares of Stock otherwise deliverable pursuant to Section 3 having a Fair Market Value sufficient to satisfy the Withholding Obligation (but not in excess of the applicable minimum statutory withholding obligations or such greater amount that would not result in adverse accounting consequences to the Company), with the Company accepting a

payment in cash or by check by the Grantee to the extent of any remaining balance of the Withholding Obligation not satisfied by such withholding of shares.

(c)

The Grantee expressly acknowledges that because the Award consists of an unfunded and unsecured promise by the Company to deliver Stock in the future, subject to the terms hereof, it is not possible to make a so-called “83(b) election” with respect to the Award.

7. Forfeiture/Recovery of Compensation . By accepting the Award the Grantee expressly acknowledges and agrees that his or her rights, and those of any permitted transferee, under the Award or to any Stock acquired under the Award or proceeds from the disposition thereof, are subject to Section 6(a)(5) of the Plan (including any successor provision). Nothing in the preceding sentence shall be construed as limiting the general application of Section 10 of this Agreement.

8. Transfer of Award . Neither the Award nor the Restricted Stock Units may be transferred except at death in accordance with Section 6(a)(3) of the Plan.

9. Form S-8 Prospectus . The Grantee acknowledges that he or she has received and reviewed a copy of the prospectus required by Part I of Form S-8 relating to shares of Stock that may be issued pursuant to the Award under the Plan.

10. Acknowledgments . By accepting the Award, the Grantee agrees to be bound by, and agrees that the Award is, and the Restricted Stock Units are, subject in all respects to, the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. The Grantee further acknowledges and agrees that (a) the signature to this Agreement on behalf of the Company is an electronic signature that will be treated as an original signature for all purposes hereunder and (b) such electronic signature will be binding against the Company and will create a legally binding agreement when this Agreement is countersigned by the Grantee.

[The remainder of this page is intentionally left blank]

- 2 -

Executed as of the ___ da y of [●] , [●].

Company:		ABIOMED, INC.

		By:
		Name:
		Title:

Grantee:
		Name:

		Address:

[Signature Page to Restricted Stock Unit Agreement]

Exhibit 10.4


Name:	[●]
Number of Restricted Stock Units:	[●]
Date of Grant:	[●]

ABIOMED, Inc.
2015 Omnibus Incentive Plan

Restricted Stock Unit Agreement (Non-Employee Director)

2. Meaning of Certain Terms . Each initially capitalized term used but not separately defined herein has the meaning assigned to such term in the Plan.

(a)

[Vesting Terms].

(b)

Notwithstanding the foregoing, the Restricted Stock Units, to the extent then outstanding and unvested, shall be immediately and fully vested upon the closing of a Change of Control if (i) such Change of Control shall occur before the first anniversary of the Date of Grant and (ii) the Grantee has remained in continuous Employment from the Date of Grant through the closing of such Change of Control.

5. Dividends, etc . The Grantee shall have the rights of a shareholder with respect to a share of Stock subject to the Award only at such time, if any, as such share is

actually delivered under the Award. Without limiting the generality of the foregoing and for the avoidance of doubt, the Grantee shall not be entitled to vote any share of Stock subject to the Award or to receive or be credited with any dividend or other distribution declared and payable on any such share unless and until such share has been actually delivered hereunder and is held by the Grantee on the record date for such vote or dividend (or other distribution), as the case may be.

6. Certain Tax Matters .

(a)

The Grantee expressly acknowledges and agrees that he or shall be responsible for satisfying and paying all taxes arising from or due in connection with the Award, the vesting of the Restricted Stock Units, and/or the delivery of any Stock hereunder. The Company shall have no liability or obligation relating to the foregoing.

(b)

8. Transfer of Award . Neither the Award nor the Restricted Stock Units may be transferred except at death in accordance with Section 6(a)(3) of the Plan.

[The remainder of this page is intentionally left blank]

- 2 -

28845197_1

Executed as of the ___ da y of [●] , [●].

Company:

ABIOMED, INC.

By: ______________________________

Name:

Title:

Grantee:

__________________________________

Name:

Address:

28845197_1

Exhibit 10.5

(Name:	[●]
Number of Restricted Stock Units:	[●]
Date of Grant:	[●]

ABIOMED, Inc.
2015 Omnibus Incentive Plan

Restricted Stock Unit Agreement (Employee)

2. Meaning of Certain Terms . Each initially capitalized term used but not separately defined herein has the meaning assigned to such term in the Plan. [The following terms have the following meanings:

(a)

[●]]

3. Vesting . The term “vest” as used herein with respect to any Restricted Stock Unit means the lapsing of the restrictions described herein with respect to such Restricted Stock Unit. Restricted Stock Units shall only vest, and shares of Stock shall only be issued to the Grantee in respect of such Restricted Stock Units, to the extent that both the performance-based vesting conditions and time-based vesting conditions set forth below are satisfied.

( a )

[●]

4. Forfeiture Risk . Automatically and immediately upon the cessation of the Grantee’s Employment for any reason the unvested portion of this Award shall terminate and be forfeited for no consideration.

5. Delivery of Stock . The Company shall deliver to the Grantee as soon as practicable upon the vesting of the Restricted Stock Units (or any portion thereof), but in all events no later than thirty (30) days following the date on which such Restricted Stock Units vest, one share of Stock with respect to each such vested Restricted Stock Unit, subject to the terms of the Plan and this Agreement.

6. Dividends, etc . The Grantee shall have the rights of a shareholder with respect to a share of Stock subject to the Award only at such time, if any, as such share is actually delivered under the Award. Without limiting the generality of the foregoing and for the avoidance of doubt, the Grantee shall not be entitled to vote any share of Stock subject to the Award or to receive or be credited with any dividend or other distribution declared and payable on any such share unless and until such share has been actually delivered hereunder and is held by the Grantee on the record date for such vote or dividend (or other distribution), as the case may be.

7. Certain Tax Matters .

(a)

(b)

By accepting the Award, the Grantee hereby acknowledges and agrees that, unless he or she provides notice to the Company at least two (2) days prior to a [ Vesting Date ] that he or she intends to satisfy the applicable Withholding Obligation by paying such amount in cash or with a check in a form acceptable to the Company and delivers such cash or check no later than such [ Vesting Date ] , he or she will have been deemed to have elected to have the Company hold back whole shares of Stock otherwise deliverable pursuant to Section 3 having a Fair Market Value sufficient to satisfy the Withholding Obligation (but not in excess of the applicable minimum statutory withholding obligations or such greater amount that would not result in adverse accounting consequences to the Company), with the Company accepting a payment in cash or by check by the Grantee to the extent of any remaining balance of the Withholding Obligation not satisfied by such withholding of shares.

(c)

8. Forfeiture/Recovery of Compensation . By accepting the Award the Grantee expressly acknowledges and agrees that his or her rights, and those of any permitted transferee, under the Award or to any Stock acquired under the Award or proceeds from the disposition thereof, are subject to Section 6(a)(5) of the Plan (including any successor provision). Nothing in the preceding sentence shall be construed as limiting the general application of Section 11 of this Agreement.

9. Transfer of Award . Neither the Award nor the Restricted Stock Units may be transferred except at death in accordance with Section 6(a)(3) of the Plan.

10. Form S-8 Prospectus . The Grantee acknowledges that he or she has received and reviewed a copy of the prospectus required by Part I of Form S-8 relating to shares of Stock that may be issued pursuant to the Award under the Plan.

11. Acknowledgments . By accepting the Award, the Grantee agrees to be bound by, and agrees that the Award is, and the Restricted Stock Units are, subject in all respects to, the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. The Grantee further acknowledges and agrees that (a) the signature to this Agreement on behalf of the Company is an electronic signature that will be treated as an original signature for all purposes hereunder and (b) such electronic signature will be binding against the Company and will create a legally binding agreement when this Agreement is countersigned by the Grantee.

[The remainder of this page is intentionally left blank]

-2-

Executed as of the ___ da y of [●] , [●].

Company:		ABIOMED, INC.

		By:
		Name:
		Title:

Grantee:
		Name:

		Address:

[Signature Page to Restricted Stock Unit Agreement]

Exhibit 10.6

Name:	[●]
Number of Shares of Stock Subject to Stock Option:	[●]
Exercise Price Per Share:	$[●]
Date of Grant:	[●]

ABIOMED, Inc.
2015 Omnibus Incentive Plan

Non-statutory Stock Option Agreement (Employee)

This agreement (this “ Agreement ”) evidences the grant of a stock option by ABIOMED, Inc. (the “ Company ”) to the individual named above (the “ Optionee ”) pursuant to and subject to the terms of the ABIOMED, Inc. 2015 Omnibus Incentive Plan (as amended from time to time, the “ Plan ”), which is incorporated herein by reference.

1. Grant of Stock Option . On the date of grant set forth above (the “ Date of Grant ”) the Company granted to the Optionee an option (the “ Stock Option ”) to purchase, on the terms provided herein and in the Plan, up to the number of shares of Stock set forth above (each, a “ Share ,” and collectively, the “ Shares ”) at the exercise price per Share set forth above, in each case, subject to adjustment pursuant to Section 7 of the Plan in respect of transactions occurring after the date hereof.

The Stock Option evidenced by this Agreement is a non-statutory option (that is, an option that is not to be treated as a stock option described in subsection (b) of Section 422 of the Code). The Optionee is an employee of the Company and/or of one or more subsidiaries of the Company with respect to which the Company has a “controlling interest” as described in Treas. Regs. §1.409A-1(b)(5)(iii)(E)(1).

2. Meaning of Certain Terms . Each initially capitalized term used but not separately defined herein has the meaning assigned to such term in the Plan.

3. Vesting; Method of Exercise .

(a)

[Vesting Terms].

(b)

No portion of the Stock Option may be exercised until it vests. Each election to exercise any vested portion of the Stock Option will be subject to the terms and conditions of the Plan and shall be in a form acceptable to the Administrator signed by the Optionee (or legally appointed representative, in the event of the Optionee’s disability) or the person or persons to whom the Stock Option is transferred by will or the applicable laws of descent and distribution. Each such election must be received by the Company at its principal office or by such other party as the Administrator may prescribe and be accompanied by payment in full as provided in the Plan. The exercise price may be paid by cash or check acceptable to the Administrator or by such other means provided for in the Plan, to the extent permitted by the Administrator. In the event that the Stock Option is exercised by a person other than the Optionee, the Company will be under no obligation to deliver Shares hereunder unless and until it is satisfied as to the authority of such individual to exercise the Stock Option and compliance with applicable securities laws. The latest date on which the Stock Option or any portion thereof may be exercised will be the 10th anniversary of the Date of Grant (the “ Final Exercise Date ”). Any portion of the Stock Option that remains outstanding and has not been exercised by the Final Exercise Date will thereupon immediately terminate. Upon any earlier termination of Employment, the provisions of Section 6(a)(4) of the Plan shall apply.

4. Forfeiture; Recovery of Compensation . By accepting the Stock Option the Optionee expressly acknowledges and agrees that his or her rights, and those of any permitted transferee, under the Stock Option or to any Stock acquired under the Stock Option or proceeds from the disposition thereof, are subject to Section 6(a)(5) of the Plan (including any successor provision). Nothing in the preceding sentence shall be construed as limiting the general application of Section 8 of this Agreement.

5 . Transfer of Stock Option . The Stock Option may not be transferred except at death in accordance with Section 6(a)(3) of the Plan.

6. Taxes . The exercise of the Stock Option will give rise to “wages” subject to withholding. The Optionee expressly acknowledges and agrees that the Optionee’s rights hereunder, including the right to be issued Shares upon exercise, are subject to the Optionee promptly paying to the Company in cash (or by such other means as may be acceptable to the Administrator in its discretion) all taxes required to be withheld. No Shares will be transferred pursuant to the exercise of the Stock Option unless and until the person exercising the Stock Option has remitted to the Company an amount in cash sufficient to satisfy any federal, state, or local withholding tax requirements, or has made other arrangements satisfactory to the Company with respect to such taxes. The Optionee authorizes the Company and its subsidiaries to withhold such amount from any amounts otherwise owed to the Optionee, but nothing in this sentence shall be construed as relieving the Optionee of any liability for satisfying his or her obligation under the preceding provisions of this Section.

7. Form S-8 Prospectus . The Optionee acknowledges that he or she has received and reviewed a copy of the prospectus required by Part I of Form S-8 relating to shares of Stock that may be issued pursuant to the exercise of the Stock Option under the Plan.

8. Acknowledgments . By accepting the Stock Option, the Optionee agrees to be bound by, and agrees that the Stock Option is subject in all respects to, the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. The Optionee further acknowledges and agrees that (a) the signature to this Agreement on behalf of the Company is an electronic signature that will be treated as an original signature for all purposes hereunder and (b) such electronic signature will be binding against the Company and will create a legally binding agreement when this Agreement is countersigned by the Optionee.

[The remainder of this page is intentionally left blank]

-2-

Executed as of the ___ da y of [●] , [●].

Company:	ABIOMED, INC.

	By:
	Name:
	Title:

Optionee:
	Name:

	Address:

[Signature Page to Non-Statutory Option Agreement]

Exhibit 10.7

Name:	[●]
Number of Shares of Stock Subject to Stock Option:	[●]
Exercise Price Per Share:	$[●]
Date of Grant:	[●]

ABIOMED, Inc.

2015 Omnibus Incentive Plan

Non-statutory Stock Option Agreement (Non-Employee Director)

2. Meaning of Certain Terms . Each initially capitalized term used but not separately defined herein has the meaning assigned to such term in the Plan.

3. Vesting; Method of Exercise .

(a)

[Vesting Terms].

(b)

5. Transfer of Stock Option . The Stock Option may not be transferred except at death in accordance with Section 6(a)(3) of the Plan.

6. Certain Tax Matters . The Optionee expressly acknowledges and agrees that he or shall be responsible for satisfying and paying all taxes arising from or due in connection with the Stock Option, the exercise of the Stock Option, and/or the acquisition of any Stock hereunder. The Company shall have no liability or obligation relating to the foregoing.

8. Acknowledgments . By accepting the Stock Option, the Optionee agrees to be bound by, and agrees that the Stock Option is subject in all respects to, the terms of the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall control. The Optionee further acknowledges and agrees that ( a ) the signature to this Agreement on behalf of the Company is an electronic signature that will be treated as an original signature for all purposes hereunder and ( b ) such electronic signature will be binding against the Company and will create a legally binding agreement when this Agreement is countersigned by the Optionee.

[The remainder of this page is intentionally left blank]

-2-

Executed as of the ___ da y of [●] , [●].

Company:	ABIOMED, INC.

	By:
	Name:
	Title:

Optionee:
	Name:

	Address:

[Signature Page to Non-Statutory Option Agreement]

Exhibit 31.1

CERTIFICATIONS

I, Michael R. Minogue certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ABIOMED, Inc.

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2016

/s/ Michael R. Minogue

Michael R. Minogue

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

I, Michael J. Tomsicek certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ABIOMED, Inc.

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2016

/s/ MICHAEL J. TOMSICEK

Michael J. Tomsicek

Vice President and Chief Financial Officer

(Principal Accounting and Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. § 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of ABIOMED, Inc., (the “Company”) for the quarter ended December 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned President and Chief Executive Officer, and Chief Financial Officer, of the Company, certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MICHAEL R. MINOGUE

/s/ MICHAEL J. TOMSICEK

Michael R. Minogue

Chairman, President and Chief Executive Officer

Michael J. Tomsicek

Vice President and Chief Financial Officer

Date: February 5, 2016