CHANGE OF CONTROL BONUS AND SEVERANCE AGREEMENT
EXHIBIT 10.2
THIS CHANGE OF CONTROL BONUS AND SEVERANCE AGREEMENT (this “Agreement”) is made and entered
into as of this 26th day of June, 2007 (the “Effective Date”) by and between Xxxx X. Xxxx (the
“Executive”), and Arrow International, Inc., a Pennsylvania corporation, having its principal
offices at 0000 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx 00000 (the “Company”).
WITNESSTH:
WHEREAS, the Executive has extensive experience in the business and affairs of the Company and
is a valuable member of the management team; and
WHEREAS, the Board of Directors of Arrow International, Inc. (the “Board”) has determined that
it is appropriate to reinforce the continued attention of certain key management employees,
including the Executive, to their assigned duties without distraction upon a change in control of
the Company;
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth,
the parties hereto agree as follows:
1. TERM OF AGREEMENT. This Agreement shall expire on the date which is three months
after the date on which a Change in Control (as defined herein) occurs (the “Term”).
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless there shall have
been a Change in Control (as defined below) of the Company. For purposes of this Agreement, a
“Change in Control” shall mean the occurrence of any of the following events after the date of this
Agreement:
(a) the acquisition after the Effective Date by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange
Act”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of more than 30% of the combined voting power of the voting securities of the Company entitled
to vote generally in the election of directors (the “Voting Securities”); provided, however, that
the following acquisitions shall not constitute a Change in Control: (a) any acquisition, directly
or indirectly by or from the Company or any subsidiary of the Company, or by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company,
(b) any acquisition by any underwriter in connection with any firm commitment underwriting of
securities to be issued by the Company, or (c) any acquisition by any corporation if, immediately
following such acquisition, 70% or more of the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting securities of such
corporation (entitled to vote generally in the election of directors), are beneficially owned,
directly or indirectly, by all or substantially all of the individuals and entities who,
immediately prior to such acquisition, were the beneficial owners of the then outstanding common
stock of the Company (“Common Stock”)
and the Voting Securities in substantially the same proportions, respectively, as their
ownership, immediately prior to such acquisition, of the Common Stock and Voting Securities; or
(b) The occurrence after the Effective Date of a reorganization, merger or consolidation,
other than a reorganization, merger or consolidation with respect to which all or substantially all
of the individuals and entities who were the beneficial owners, immediately prior to such
reorganization, merger or consolidation, of the Common Stock and Voting Securities, beneficially
own, directly or indirectly, immediately after such reorganization, merger or consolidation, 70% or
more of the then outstanding common stock and voting securities (entitled to vote generally in the
election of directors) of the corporation resulting from such reorganization, merger or
consolidation in substantially the same proportions as their respective ownership, immediately
prior to such reorganization, merger or consolidation, of the Common Stock and Voting Securities;
or
(c) The occurrence after the Effective Date of (a) a complete liquidation or substantial
dissolution of the Company, or (b) the sale or other disposition of all or substantially all of the
assets of the Company, in each case other than to a subsidiary, wholly-owned, directly or
indirectly, by the Company or to a holding company of which the Company is a direct or indirect
wholly owned subsidiary prior to such transaction; or
(d) During any period of twelve (12) consecutive months commencing upon the Effective Date,
the individuals at the beginning of any such period who constitute the Board and any new director
(other than a director designated by a person or entity who has entered into an agreement with the
Company or other person or entity to effect a transaction described in Sections 2(a), 2(b) or 2(c)
above) whose election by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least a majority of the directors then still in office who either were
directors at the beginning of any such period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the Board.
Notwithstanding the above, a “Change in Control” shall not include any event, circumstance or
transaction which results from the action of any entity or group which includes, is affiliated with
or is wholly or partially controlled by one or more executive officers of the Company and in which
the Executive actively and materially participates
3. CHANGE IN CONTROL BENEFITS. Provided that the Executive (a) is employed by the
Company on the date of a Change in Control, (b) terminated his employment for Good Reason (as
defined below) within 180 days prior to the date on which a Change in Control occurs, or (c) was
terminated by the Company for other than Cause (as defined below) within 180 days prior to the date
on which a Change in Control occurs, the Executive will, upon execution and effectiveness of the
general release attached hereto as Exhibit A, (a) become fully vested on the date of the Change in
Control in all outstanding, unvested stock options granted to the Executive by the Company (the
“Options”) and (b) shall receive a lump sum payment as soon as administratively feasible after the
date of the Change in Control equal to 200% of the annual base salary the Executive received from
the Company as of the Effective Date (“Base Salary”). In consideration of the payment described in
this Section 3, the Executive agrees to remain employed with the Company (or its successor) for up
to ninety (90) days after the date on which
a Change in Control occurs, if requested to do so (i) by the acquiror of the business of the
Company whether pursuant to a stock or asset acquisition, liquidation, dissolution, merger,
consolidation or other corporate transaction or (ii) by the Board, if the Change in Control is
pursuant to Section 2(d) of this Agreement and provided further that Good Reason to terminate his
employment does not occur during such ninety day period.
(a) Cause. The Company shall have the right to terminate Executive’s employment for
“Cause” upon: (i) the Executive’s conviction of or plea of guilty or nolo contendere to a felony or
a crime involving fraud, theft against or embezzlement from the Company; (ii) the Executive’s
willful engagement in gross misconduct in the performing of his duties that materially xxxxx the
Company; or (iii) the Executive’s willful failure to comply with this Agreement or to carry out his
duties and responsibilities in a manner consistent with his past service and for a reason other
than physical or mental illness, which failure results in material harm to the Company or
diminution in the value of the Company.
(b) Good Reason. The Executive shall have the right to terminate his employment for
“Good Reason” if: (i) the Executive’s base salary is reduced or upon the elimination or material
adverse modification to any incentive or other material supplemental compensation or benefit plan,
except any such elimination or modification that is applied generally to all senior executives of
the Company or (ii) the Executive’s primary office location is relocated to a place that increases
the distance from Executive’s home (as of the Effective Date of this Agreement) to such new
location, by more than 40 miles; or (iii) the duties of the Executive immediately prior to the
Change in Control are substantially reduced after the Change in Control; provided however, that no
such reduction shall constitute Good Reason if after any such reduction, the Executive has or is
assigned duties commensurate with those of any individual having the title of “Vice President” or
above on and prior to the Change in Control.
(c) Continuation of Salary and Benefits. The payment described in Section 3 is in
addition to, not in lieu of, continued normal and regular payment of Executive’s salary, leadership
bonus and benefits (which shall be paid to Executive on the same basis as other executive
management) during his employment by the Company.
(d) Medical and other Benefits. The Executive (and his eligible dependents, as per
the terms and provisions of the relevant plan) will receive continuation of medical benefits in
effect as of the date of Executive’s termination of employment with the Company (or its
successor)(“Termination Date”)(or such benefits as the Company may subsequently provide from time
to time to the senior executives of the Company) at the Company’s (or its successor’s) sole expense
until the earlier of (i) the first anniversary of the Termination Date or (ii) the date on which
the Executive becomes eligible for medical benefits under a group health plan of any employer. Any
claims for reimbursement of a proper medical expense must be submitted and paid by the end of the
year following the year in which such expense is incurred.
(e) Code Section 280G Cutback. The payments to be provided to the Executive hereunder and
all other payments or benefits which are “parachute payments” (as defined in Section
280(G)(b)(2)(A) of the Code) payable to the Executive under other arrangements or agreements (the
“Total Payments”) shall be adjusted as set forth in the following sentence. If the Total Payments
as a result of any Change in Control would (in the aggregate) result in an excise tax
under Section 4999, the Company shall make an additional payment to the Executive in an amount such
that after the payment of all income and excise taxes, the Executive will be in the same after-tax
position as if no excise tax had been imposed.
4. INTENTIONALLY OMITTED.
5. CONFIDENTIAL INFORMATION AND NON-DISPARAGEMENT.
(a) Confidential Information. The Executive shall not, without the prior express
written consent of the Company, directly or indirectly divulge, disclose or make available or
accessible any Confidential Information (as defined below) to any person, firm, partnership,
corporation, trust or any other entity or third party (other than as is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as an executive of
the Company or when required to do so by a lawful order of a court of competent jurisdiction, any
governmental authority or agency, or any recognized subpoena power). In addition, the Executive
shall not create any derivative work or other product based on or resulting from any Confidential
Information (except in the good faith performance of his duties under this Agreement). The
Executive shall also proffer to the Board’s designee, no later than the date on which the
Executive’s employment with the Company terminates for any reason (the “Termination Date”), and
without retaining any copies, notes or excerpts thereof, all memoranda, computer disks or other
media, computer programs, diaries, notes, records, data, customer or client lists, marketing plans
and strategies, and any other documents consisting of or containing Confidential Information that
are in the Executive’s actual or constructive possession or which are subject to his control at
such time. For purposes of this Agreement, “Confidential Information” shall mean all information
respecting the business and activities of the Company, or any affiliate of the Company, including,
without limitation, the clients, customers, suppliers, employees, consultants, computer or other
files, projects, products, computer disks or other media, computer hardware or computer software
programs, marketing plans, financial information, methodologies, know-how, processes, practices,
approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of
the Company or any affiliate. Notwithstanding the immediately preceding sentence, Confidential
Information shall not include any information that is, or becomes, generally available to the
public (unless such availability occurs as a result of the Executive’s breach of any portion of
this Section 5(a) or any information or knowledge possessed by the Executive other than by reason
of his employment by the Company).
(b) Non-disparagement. The Executive shall not, directly or indirectly, make or
publish any disparaging statements (whether written or oral) regarding the Company or any of its
affiliated companies or businesses, or the affiliates, directors, officers, agents, principal
stockholders or customers of any of them, which statements have a material adverse affect on the
Company.
6. STANDSTILL RESTRICTIONS. The Executive agrees that during his employment with the
Company and for one year after the Termination Date (the “Restricted Period”), neither the
Executive nor any of the Executive’s affiliates or representatives will, in any manner, directly or
indirectly, unless requested by the Board (i) acquire or make any proposal to acquire any
securities, or rights or options to acquire securities, or property of the
Company in an amount in excess of one percent of the equity of the Company, (ii) propose to
enter into any merger or business combination involving the Company or purchase a material portion
of the assets of the Company, (iii) make or participate in any solicitation of proxies to vote, or
seek to advise or influence any person with respect to the voting of any securities of the Company
other than a solicitation approved by the then-current Board, (iv) form, join or participate in a
“group” (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with
respect to any voting securities of the Company, (v) otherwise act or seek to control or influence
the management, Board or policies of the Company (other than as is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as an executive of
the Company), (vi) disclose any intention, plan or arrangement inconsistent with the foregoing,
(vii) take any action which might require the Company to make a public announcement regarding the
possibility of a business combination or merger or (viii) advise, assist or encourage or direct any
person to advise, assist or encourage any other persons in connection with the foregoing. The
Executive also agrees during the Restricted Period not to request the Company (or its directors,
officers, employees, agents or representatives) to amend or waive any provision of this Section 6
unless specifically invited to do so by the Board.
7. NON-COMPETE AND NON-SOLICITATION.
(a) Non-Competition. The Executive shall not, during the Restricted Period, directly
or indirectly, within or with respect to any country where the Company does business as of the
Termination Date, engage, without the prior express written consent of the Company, in any business
or activity, whether as an employee, consultant, partner, principal, agent, representative,
director, stockholder or in any other individual, corporate or representative capacity, or render
any services or provide any advice to any business, activity, service, person or entity, if such
business, activity, service, person or entity, competes with the Business. For purposes of this
section, the “Business” shall mean the development, manufacture or marketing of catheters and/or
other medical products used in critical and/or cardiac care as such activity is conducted by the
Company or any affiliate on the Termination Date. In addition, the Executive shall not, during the
Restricted Period, meaningfully assist, help or otherwise support, without the prior express
written consent of the Company, any person, business, corporation, partnership or other entity or
activity, whether as an employee, consultant, partner, principal, agent, representative, director,
stockholder or in any other individual, corporate or representative capacity, to create, commence
or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if
such business or activity competes (or is reasonably likely to compete) with the Business.
Notwithstanding the foregoing, the Executive shall not be prohibited during the Restricted Period
from being a passive investor where the Executive owns not more than five percent (5%) of the
outstanding capital stock of any publicly-held company.
(b) Non-Solicitation. The Executive shall not during the Restricted Period, (1) take
any action to solicit or divert any business (or potential business) or clients or customers away
from the Company or any subsidiary or affiliate of the Company, (2) induce customers, clients,
business partners, suppliers, agents or other persons under contract or otherwise associated or
doing business with the Company or any subsidiary or affiliate of the Company to terminate, reduce
or alter any such association or business with or from the Company or any subsidiary or affiliate,
and/or (3) induce any person in the employment of the Company or any subsidiary or affiliate of the
Company or any consultant to the Company or any subsidiary or
affiliate of the Company to (A) terminate such employment, or consulting arrangement, (B)
accept employment, or enter into any consulting arrangement, with anyone other than the Company or
any subsidiary or affiliate, and/or (C) interfere with the customers, suppliers, or clients of the
Company, any subsidiary or affiliate of the Company in a materially adverse manner or the Business
of the Company, any subsidiary, or any affiliate in a materially adverse manner. For purposes of
this Section 7(b), “potential business” shall mean any current or reasonably foreseeable commercial
activity or any current or reasonably foreseeable commercial opportunities associated with the
Company’s Business.
8. SCOPE OF AGREEMENT ENFORCEABILITY. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive with regard to all matters herein
and supersedes all prior oral and written agreements and understandings of the parties with respect
to such matters, whether express or implied. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s heirs, beneficiaries and/or legal representatives. This Agreement
shall inure to the benefit of and be enforceable by the Company and its respective successors and
assigns. If any term or provision of this Agreement, or the application thereof to any person or
circumstances, will to any extent be invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other than those as to which
it is invalid or unenforceable, will not be affected thereby, and each term and provision of this
Agreement will be valid and enforceable to the fullest extent permitted by law.
9. MATERIAL INDUCEMENTS. The provisions of Sections 5, 6 and 7 of this Agreement are
material inducements to the Company entering into and performing this Agreement. In the event of
any breach of the provisions of Sections 5, 6 and/or 7 of this Agreement by the Executive, in
addition to all other remedies at law or in equity possessed by the Company, the Company shall have
the right to (i) terminate and not pay any amounts payable to the Executive hereunder and/or (ii)
cease the provision of any benefits otherwise due to the Executive hereunder. The Executive
acknowledges and agrees that the Company will have no adequate remedy at law, and would be
irreparably harmed, if the Executive breaches any of the provisions of Sections 5, 6 and/or 7 of
this Agreement. The Executive further agrees that the Company shall be entitled to equitable
and/or injunctive relief to prevent any breach or threatened breach of Sections 5, 6 and/or 7 of
this Agreement, and to specific performance of each of the terms of such Sections in addition to
any other legal or equitable remedies that the Company may have, without any requirement to post
bond or other security. The Executive also agrees that he shall not, in any equity proceeding
relating to the enforcement of the terms of this Agreement, raise the defense that the Company has
an adequate remedy at law.
10. ASSISTANCE. The Executive agrees to personally provide reasonable assistance and
cooperation to the Company in activities related to the prosecution or defense of any pending or
future lawsuits or claims involving the Company, provided that the Executive shall be reimbursed
for any reasonable costs or expenses incurred and that such assistance and cooperation shall be
provided by the Executive at reasonable times, upon reasonable notice and telephonically whenever
possible and shall not unreasonably interfere with any employment obligations of the Executive.
11. AMENDMENTS/WAIVER. This Agreement may not be amended, waived, or modified
otherwise than by a written agreement executed by the parties to this Agreement or their respective
successors and legal representatives. No waiver by any party to this Agreement of any breach of
any term, provision or condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or subsequent time.
12. NOTICES. All notices and other communications hereunder shall be in writing and
shall be deemed given when received by hand-delivery to the other party, by facsimile transmission,
by overnight courier, or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive, at his residence address most recently filed with the Company;
and
If to the Company:
|
Arrow International, Inc. | |
| 0000 Xxxxxxxxx Xxxx | ||
| Xxxxxxx, Xxxxxxxxxxxx 00000 | ||
| Att: Corporate Secretary | ||
with a copy to:
|
Xxxxxxx X. Xxxxxxxxxx, Esq. | |
| Dechert LLP | ||
| 00 Xxxxxxxxxxx Xxxxx | ||
| Xxx Xxxx, Xxx Xxxx 00000 |
or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notices and communications shall be effective when actually received by the addressee.
13. SUCCESSORS; BINDING AGREEMENT. The Company shall require any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of
the business, equity and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be required to perform
if no such succession had taken place. Failure of the Company to obtain such agreement prior to
the effective date of any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same terms as that which
the Executive would be entitled to hereunder as if the Executive’s employment by the Company were
terminated without Cause or for Good Reason after a Change in Control. If the Executive should die
while any amount would still be payable hereunder, all such amounts shall be paid in accordance
with the terms of this Agreement to the Executive’s estate.
14. SURVIVAL. The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement for any reason to the extent necessary to the intended
provision of such rights and the intended performance of such obligations.
15. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with
the laws of the Commonwealth of Pennsylvania without reference to its choice of law provisions and
shall be binding upon the parties and their respective heirs, executors, successors and assigns.
Each party agrees that the state and federal courts of Pennsylvania shall have sole and exclusive
jurisdiction over the parties hereto and the subject matter herein. Neither party to this
Agreement shall contest such jurisdiction or assert that Pennsylvania is a forum non convenience in
respect of any dispute. No dispute shall be submitted for arbitration without the express written
consent of each party hereto.
16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, but all of which together shall constitute one and the
same instrument.
17. WITHHOLDING. All payments hereunder shall be subject to any required withholding
of federal, state and local taxes pursuant to any applicable law or regulation.
18. SECTION HEADINGS. The section headings in this Agreement are for convenience of
reference only, and they form no part of this Agreement and shall not affect its interpretation.
IN WITNESS WHEREOF, the Company and the Executive have caused this Agreement to be executed as
of the date first above written.
| ARROW INTERNATIONAL, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxx | |||
| Name: | Xxxxxx X. Xxxxx | |||
| Title: | President and CEO | |||
| XXXX X. XXXX |
||||
| /s/ Xxxx X. Xxxx | ||||
| Xxxx X. Xxxx | ||||
EXHIBIT A
Form of General Release
IN CONSIDERATION OF good and valuable consideration, the receipt of which is hereby
acknowledged, and in consideration of the terms and conditions contained in the Change Of Control
Bonus and Severance Agreement, dated as of June ___, 2007, (the “Retention Agreement”) by and
between Xxxx X. Xxxx (the “Executive”) and Arrow International, Inc. (the “Company”), the Executive
on behalf of himself and his heirs, executors, administrators, and assigns, releases and discharges
the Company and its past present and future subsidiaries, divisions, affiliates and parents, and
their respective current and former officers, directors, employees, agents, and/or owners, and
their respective successors, and assigns and any other person or entity claimed to be jointly or
severally liable with the Company or any of the aforementioned persons or entities (the “Released
Parties”) from any and all manner of actions and causes of action, suits, debts, dues, accounts,
bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever
(“Losses”) which the Executive and his heirs, executors, administrators, and assigns have or had
against the Released Parties or any of them arising out of or by reason of any cause, matter, or
thing whatsoever from the beginning of the world to the date hereof, including without limitation,
any and all matters relating to the Executive’s employment by the Company and the cessation
thereof, and any and all matters arising under any federal, state, or local statute, rule, or
regulation, or principle of contract law or common law, including but not limited to, the Family
and Medical Leave Act of 1993, as amended, 29 U.S.C. §§ 2601 et
seq., Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§
2000 et seq., the Age Discrimination in Employment Act of 1967, as
amended, 29 U.S.C. §§ 621 et seq. (the “ADEA”), the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12101 et seq.,
the Worker Adjustment and Retraining Notification Act of 1988, as amended, 29
U.S.C. §§2101 et seq., the Employee Retirement Income Security Act of 1974,
as amended, 29 U.S.C. §§ 1001 et seq., the Pennsylvania Human
Relations Act, as amended, 43 P.S. §§ 955 et. seq., and any other
equivalent or similar federal, state, or local statute; provided, however, that the Executive does
not release or discharge the Released Parties from any of the Company’s obligations to him under
the Retention Agreement, any vested benefit the Executive may be due under a tax qualified plan
sponsored or maintained by the Company or Losses arising under the ADEA which arise after the date
on which the Executive executes this general release. It is understood that nothing in this
general release is to be construed as an admission on behalf of the Released Parties of any
wrongdoing with respect to the Executive, any such wrongdoing being expressly denied.
The Executive represents and warrants that he fully understands the terms of this general
release, that he has been encouraged to seek, and has sought, the benefit of advice of legal
counsel, and that he knowingly and voluntarily, of his own free will, without any duress, being
fully informed, and after due deliberation, accepts its terms and signs below as his own free act.
Except as otherwise provided herein, the Executive understands that as a result of executing this
general release, he will not have the right to assert that the Company or any other of the Released
Parties unlawfully terminated his employment or violated any of his rights in connection with his
employment or otherwise.
The Executive further represents and warrants that he has not filed, and will not initiate, or
cause to be initiated on his behalf any complaint, charge, claim, or proceeding against any of the
Released Parties before any federal, state, or local agency, court, or other body relating to any
claims barred or released in this General Release, and will not voluntarily participate in such a
proceeding. However, nothing in this general release shall preclude or prevent the Executive from
filing a claim, which challenges the validity of this general release solely with respect to the
Executive’s waiver of any Losses arising under the ADEA. The Executive shall not accept any relief
obtained on his behalf by any government agency, private party, class, or otherwise with respect to
any claims covered by this General Release.
The Executive may take twenty-one (21) days to consider whether to execute this General
Release. Upon the Executive’s execution of this general release, the Executive will have seven (7)
days after such execution in which he may revoke such execution. In the event of revocation, the
Executive must present written notice of such revocation to the office of the Company’s Corporate
Secretary. If seven (7) days pass without receipt of such notice of revocation, this General
Release shall become binding and effective on the eighth (8th) day after the execution hereof (the
“Effective Date’).
INTENDING TO BE LEGALLY BOUND, I hereby set my hand below:
| Dated: | ||||||
