CLASS II EMPLOYEE EMPLOYMENT AGREEMENT
Exhibit (e)(5)
This Employment Agreement (this “Agreement”) is made on February 19, 2008, to be effective on
the Acceptance Date (as defined in the Agreement and Plan of Merger, dated as of the date hereof,
by and among Phoenix Acquisition Corp., MEDRAD, Inc. and the Company (the “Agreement and Plan of
Merger”)) (the “Effective Date”), between Possis Medical, Inc., a Minnesota corporation, (the
“Company”), and Xxxxxx Xxxxxxx, an individual residing in the state of Minnesota (the “Employee”).
PREAMBLE
The Company currently employs the Employee as its Vice President & General Counsel.
Effective as of September 15, 1999, the Company created a change in control termination pay
plan for the benefit of certain of its employees in the event of change of control (as amended, the
“Change of Control Plan”), and the Employee is a participant in such plan.
Pursuant to the Agreement and Plan of Merger Medrad proposes to form a subsidiary that would
acquire substantially all of the Company’s capital stock through a tender offer, followed by a
merger of such subsidiary with and into the Company, after which the Company would become a
wholly-owned subsidiary of Medrad.
The Company hereby acknowledges that, by virtue of Medrad’s acquiring more than 50% of the
outstanding shares of the Company, a Change of Control (as defined in the Change of Control Plan)
will have occurred on the Effective Date, and that the duties hereunder are a material diminution
in Employee’s authority, duties and responsibilities that constitute “Good Reason” for Employee to
cause “Termination of Employment” by Employee under the Change of Control Plan, but the Company
desires to retain the future services of Employee and is willing to provide additional benefits in
consideration therefor, subject to the terms and conditions of this Agreement. Therefore, in
order for the Company to secure future services, help with integration of the two companies, and
restrictive covenants (the “Future Services”) from the Employee, the Company and the Employee
desire to set forth in this Agreement the terms and conditions by which the Company will secure
such Future Services from the Employee. .
NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the
Company and the Executive, intending to be legally bound, do hereby agree as follows:
AGREEMENT
1. Change of Control Payments. As a consequence of the acquisition as of the
Effective Date, the Company hereby acknowledges and agrees that (1) the Employee is entitled to,
and the Employee shall be paid within thirty (30) days after the Effective Date, the Cash Bonus set
forth in Section 4.3 of the Change of Control Plan, and (2) notwithstanding his agreement to resume
employment on the revised terms hereunder, but because of such diminution in authority, duties and
responsibility and in consideration of his agreement to
continue to provide services, the Company (x) shall pay to Employee, within thirty (30) days after
the Effective Date, the Termination Payment set forth in the first paragraph of Section 4.2.2 of
the Change in Control Plan as if a Termination of Employment had occurred on the Effective Date,
and (y) shall provide the benefits provided in the second paragraph of Section 4.2.2 from and after
the date Employee’s employment pursuant to this Agreement is terminated, as if such date was the
Date of Termination (as defined in the Change of Control Plan). Employee agrees that, except as
otherwise provided herein, such payments shall be in full satisfaction of the Company’s obligations
under Sections 4.2 and 4.3 of the Change of Control Plan and that Executive shall not be entitled
to any further payment upon any subsequent Change of Control, Good Reason or Termination of
Employment event.
2. Employment. Effective on the Effective Date, the Company hereby employs
the Employee as its General Counsel, and the Employee hereby accepts such employment and agrees to
perform all duties and responsibilities as are set forth in the job description attached hereto as
Exhibit A and as may be assigned to him from time to time by the Company’s Board of
Directors. The Employee shall devote his full time, best efforts, knowledge, and experience in
discharging his duties under this Agreement and shall act in conformity with and be bound by the
written and oral policies of the Company and within the limits, budgets, business plans, and
instructions established by the Company’s Board of Directors.
3. Compensation.
(a) Salary. Commencing on the Effective Date, the Company shall pay the Employee a
salary at an annual rate of One Hundred Ninety Thousand Dollars ($190,000.00) (the “Base Salary”),
subject to an annual merit increase in accordance with the Company’s current annual merit review
process, or consistent with MEDRAD’s annual merit review process for its executives, if such a
review actually occurs during the Term hereof, payable in accordance with the Company’s standard
payroll schedule and policies, as in effect from time to time. The Company shall withhold from all
payments that it makes pursuant to this Agreement as it determines to be required by applicable
law.
(b) Additional Benefits.
(i) Welfare Benefits. The Employee shall be entitled to participate in all insurance
and benefit plans available on a general basis to all other employees of the Company; provided,
however, that the Company reserves the right, from time to time, to amend in any respect and to
discontinue any such benefit plan.
(ii) Vacation/Sick Days. The Employee shall be entitled to the number of paid
holidays and paid vacation days in accordance with the Company’s existing holiday and vacation
policy.
(iii) Reimbursement of Expenses. During the term of the Employee’s employment
hereunder, the Company shall reimburse the Employee for all reasonable out-of-pocket expenses
incurred by the Employee in the lawful and ordinary course of the Company’s business and reported
to the Company in accordance with its accounting procedures.
(iv) Auto. During the Term hereof, the Company will continue to provide Employee
automobile benefits consistent with the Company’s existing policy, or a comparable benefit through
participation in Medrad’s automobile lease or allowance programs available to its executives.
(v) Tax Preparation. During the Term hereof, the Company will continue to provide
Employee tax preparation benefits consistent with the Company’s existing policy.
(vi) Health Club Membership. During the term of Employee’s employment hereunder, the
Company will continue to provide Employee health club membership benefits consistent with the
Company’s existing policy.
(vii) Deferred Compensation. During the term of Employee’s employment hereunder, the
Company will continue to either: (a) maintain the Company’s existing deferred compensation plan and
Employee’s participation and annual contribution level therein; or (b) if the Company is unable to
maintain that plan, then Employee will be added to Medrad’s deferred compensation plan at a level
consistent with how similarly situated Medrad executives participate, and provided participation in
Medrad’s gainshare and 401(k) match programs consistent with Medrad’s policy for similarly situated
executives.
(c) Incentive Compensation. At the end of the Term, the Employee shall be entitled
to receive as incentive compensation a bonus in the amount of Sixty Thousand Dollars ($60,000.00)
(the “Incentive Bonus”) payable upon the achievement of such post-merger reasonable objective
performance targets as may be established by the Company consistent with similar performance
targets established by MEDRAD for its executives and payable within 30 business days after the
relevant financial information becomes available for the period up to and including the end of the
Term, but no later than 75 days following the end of the Term.
4. Term and Disability.
(a) Term. The Employee’s employment hereunder shall commence on the Effective Date
and shall terminate on the six month anniversary of the Effective Date (the “Term”), unless sooner
terminated pursuant to this Section 4. The Company shall have the right to automatically terminate
this Agreement for Cause upon providing written notice to the Employee. For purposes of this
Agreement, “Cause” means the occurrence of any one or more of the following events: (i) the
commission by the Employee of an act of fraud, embezzlement or willful breach of a fiduciary duty
to the Company or an Affiliate (including the willful unauthorized disclosure of confidential or
proprietary material information of the Company or an Affiliate), (ii) a conviction of the Employee
(or a plea of nolo contendere in lieu thereof) for a felony or a crime involving fraud, dishonesty
or moral turpitude, (iii) willful failure of the Employee to follow the reasonable and lawful
written directions of the President of the Company, Company management, or the Board of Directors,
in the case of executive officers of the Company, other than directions requiring the Employee to
permanently relocate his job
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location more than Fifty (50) miles from the Company facility at which the Employee presently
performs his job, when such directions are consistent with the Employee’s customary duties and
responsibilities and where such refusal has continued for more than 10 days following written
notice; (iv) willful misconduct as an employee of the Company or an Affiliate which includes the
Employee’s failure to adhere to Company’s ethical code of conduct; (v) gross negligence or willful
failure of the Employee to render services to the Company or an Affiliate in accordance with his or
her employment arrangement, which negligence or failure amounts to a material neglect of his or her
duties to the Company or an Affiliate (except for such failure that results from physical or mental
illness); (vi) recurring and regular use of drugs or alcohol or other substance such that Employee
becomes significantly impaired in the performance of his or her duties; or (vii) material breach of
this Agreement or any other written agreement Employee may have with the Company.
(b) Total and Permanent Disability or Death. In the event of the death of the
Employee, or the Employee’s Total and Permanent Disability (as determined by the Company’s Board of
Directors in its sole discretion), this Agreement shall terminate without any further obligation of
one party to the other except payment to the legal representative of the Employee of his
compensation hereunder to the date of the Employee’s death or the date on which the President has
determined that the Employee has suffered a Total and Permanent Disability. For purposes of this
Agreement, the term “Total and Permanent Disability” shall mean a mental or physical disability,
illness or incapacity of the Employee which renders the Employee unable to perform a substantial
portion of his duties as an employee of the Company for a period of three (3) consecutive months or
an aggregate period of four (4) months in any twelve (12) month period or that renders the Employee
unable to earn a livelihood as an employee of a business comparable to the Company’s business,
unless further time is required as a reasonable accommodation under federal or state law or
regulation.
5. Restrictive Covenants.
5.1 Non-Competition. During the Employee’s employment with the Company and for a period of two
(2) years following Employee’s termination of employment for any reason other than at the Company’s
behest without Cause, the Employee shall not, directly or indirectly, engage in any business or
activity, or render any services or provide any advice to, any Person which provides products or
services substantially similar to those products and services manufactured, sold, distributed or
provided by the Company and contemplated being provided by the Company during the term of the
Employee’s employment with the Company, whether as an employee, consultant, partner, principal,
agent, representative, stockholder, director or in any other capacity; provided, however, that
Employee’s ownership of not more than 2% of the stock of any publicly traded corporation shall not
be violation of this Section 5.1.
5.2 Non-Solicitation. During the Employee’s employment with the Company and for a period of
two (2) years following Employee’s termination of employment for any reason other than at the
Company’s behest without Cause, the Employee shall not (except on the Company’s behalf), directly
or indirectly, on his own behalf or on behalf of any other person, firm, partnership, corporation
or other entity, (A) solicit or service the business of any of the Company’s clients, any of the
Company’s former clients which were clients within twelve
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months prior to the termination of his employment or any of the prospective clients which were
being actively solicited by the Company at the time of the termination of his employment, or (B)
attempt to cause or induce any employee of the Company to leave the Company.
5.3 Non-Disparagement. Employee agrees to refrain from making any statements or comments of a
defamatory nature to any third party regarding the Company, the Business Unit or any of its
officers, directors, employees, agents, representatives, affiliates, products or services.
5.4 Acknowledgements. The Employee acknowledges and agrees that the restrictions set forth in
this Section 5: (a) are critical and necessary to protect the Company’s legitimate business
interests (including, without limitation, the protection of its confidential or proprietary
information, its good will, and its relationship with its customers, clients, employees, and
consultants); (b) are reasonably drawn to this end with respect to duration, scope and otherwise;
(c) are not unduly burdensome or injurious to the public interest; (d) are supported by adequate
consideration and (e) the terms and provisions of this Section 5 shall inure to the benefit of the
Successor in Interest.
5.5 Injunctive Relief. The Employee acknowledges and agrees that the Company will have no
adequate remedy at law, and would be irreparably harmed, if the Employee breaches or threatens to
breach any of the provisions of Section 5.1, 5.2 or 5.3. The Employee agrees that the Company
shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach
of such Sections, 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. The Employee further agrees that
the Employee shall not, in any equity proceeding relating to the enforcement of the terms of such
Sections, raise the defense that the Company has an adequate remedy at law. The Employee
acknowledges and agrees that the restricted periods set forth above in Section 5.1 shall be tolled
during any period in which the Employee is in violation of such Section(s) so that the Company is
provided with the full benefit of the restricted period. During the period that the Employee is in
violation of any covenant under this Section 5, the Company shall not be required to continue
making any payment that the Employee is entitled to hereunder until such violation has been
remedied.
5.6 Special Severability. The terms and provisions of this Section 5 are intended to be
separate and divisible provisions and if, for any reason, any one or more of them is held to be
invalid or unenforceable, neither the validity nor the enforceability of any other provision of
this Agreement shall thereby be affected. It is the intention of the parties to this Agreement
that the potential restrictions on the Employee’s future employment imposed by this Section 5 be
reasonable in both duration and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 5 unreasonable in
duration, geographic scope or otherwise, the Employee and the Company agree that the restrictions
and prohibitions contained herein shall be effective to the fullest extent allowed under applicable
law in such jurisdiction.
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6. Confidential Information; Employee Work.
(a) Certain Definitions. As used in this Agreement the following terms have the
following meanings:
“Affiliate” means any corporation, partnership, limited liability company or partnership,
association, trust or other organization which, directly or indirectly, controls, is controlled by,
or is under common control with, the Company. For purposes of the preceding sentence, “control”
(including, with correlative meanings, the terms “controlled by” and “under common control with”),
as used with respect to any entity or organization, shall mean the possession, directly or
indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power
for the election of directors of the controlled entity or organization, or (ii) to direct or cause
the direction of management and policies of the controlled entity or organization, whether through
the ownership of voting securities or by contract or otherwise.
“Confidential Information” means all information concerning or related to the business,
operations, financial condition or prospects of the Company or any of its Affiliates, regardless of
the form in which such information appears and whether or not such information has been reduced to
a tangible form, and specifically includes (i) all information regarding the officers, directors,
employees, equity holders, customers, suppliers, distributors, sales representatives and licensees
of the Company and its Affiliates, in each case whether past, present or prospective, including
sales and pricing information and procedures, customer lists, and business and marketing plans;
(ii) all inventions, discoveries, trade secrets, processes, techniques, methods, formulae, ideas,
system designs, program materials (including source and object code and system and user
documentation), operating processes, equipment design, product specifications, and know-how of the
Company and its Affiliates and (iii) all financial statements, audit reports, budgets and business
plans or forecasts of the Company and its Affiliates; provided, that Confidential Information does
not include (A) information which is or becomes generally known to the public through no act or
omission of the Employee and (B) information which has been or hereafter is lawfully obtained by
the Employee from a source other than the Company or any of its Affiliates (or their respective
officers, directors, employees, equity holders or agents) so long as, in the case of information
obtained from a third party, such third party was or is not, directly or indirectly, subject to an
obligation of confidentiality owed to the Company or any of its Affiliates at the time such
Confidential Information was or is disclosed to the Employee.
“Employee Work” means all written and graphic materials, computer software, inventions,
discoveries and improvements authored, prepared, conceived or made by the Employee during the term
of his employment with the Company and which are related to the business of the Company.
(b) Confidential Information.
(i) Except as provided in clause (ii) below, the Employee will not disclose or use for the
Employee’s benefit any Confidential Information.
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(ii) Notwithstanding clause (i) above, the Employee shall be permitted to disclose
Confidential Information to the extent, but only to the extent, (1) reasonably necessary to perform
the duties hereunder or (2) required by law; provided, that prior to making any disclosure of
Confidential Information required by law, the Employee will notify the Company of the Employee’s
intent to make the disclosure, and the Company will have the right to participate with the Employee
in determining the amount and type of Confidential Information, if any, which must be disclosed in
order to comply with applicable law.
(iii) Promptly after termination of the Employee’s employment with the Company for any
reason, the Employee or his/her personal representative will return to the Company any Confidential
Information which is in tangible form and which is then in the Employee’s possession.
(c) Employee Work. All Employee Work is the sole property of the Company and, to the
extent applicable, is “work made for hire” under and as defined in the Copyright Act of 1976, 17
U.S.C. §1 et seq. The Employee will promptly disclose to the Company all Employee
Work and will execute all such documents and instruments as the Company may reasonably determine
are necessary or desirable in order to give effect to the preceding sentence or to preserve,
protect or enforce the Company’s rights with respect to any Employee Work.
(d) Cessation of Payments. Without limiting the Company’s rights and remedies
hereunder, at law or in equity, the Employee acknowledges and agrees that the right of the Employee
to receive and retain any payments otherwise due will be suspended and cancelled if and for so long
as the Employee is in breach of any provision of this Section 6. If and when the Employee has
cured any such breach and has tendered to the Company any and all economic benefits directly or
indirectly received or receivable by the Employee arising therefrom, such right will automatically
be reinstated, but only for the remainder of the period, if any, during which such payments are
due.
(e) Employee Affirmation. The Employee acknowledges and agrees that the restrictions
set forth in this Section (i) are critical and necessary to protect the Company’s legitimate
business interests (including, without limitation, the protection of its confidential or
proprietary information, its good will, and its relationship with its customers, clients,
employees, and consultants), (ii) are reasonably drawn to this end with respect to duration, scope
and otherwise, (iii) are not unduly burdensome or injurious to the public interest, (iv) are
supported by adequate consideration and (v) shall inure to the benefit of the Company and its
successors and assigns.
(f) Survival. The provisions of this Section 6 will survive any termination of this
Agreement. If the Employee violates any of the restrictions set forth in this Section 6, the
duration of the restrictions shall be extended for a period of time equal to the period of time in
which the Employee has been in violation.
(g) Damages. The Employee hereby acknowledges and agrees that the claim for the
payment of any damages for breach of the provisions herein contained shall not preclude the Company
from seeking injunctive or such other forms of relief as may be obtained in a court
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of law or equity, and that the Company, in lieu of or in addition to the remedy of damages, may
seek injunctive relief prohibiting the Employee from breaching the provisions of this Agreement.
7. Dispute Resolution. Any disagreement or claim (other than a claim for injunctive
relief for violation of Sections 5 or 6 hereof) arising out of or relating to this Agreement (a
“Dispute”), or the breach thereof, or its termination shall be finally settled by arbitration in
Minneapolis, Minnesota pursuant to the rules of the American Arbitration Association regarding
employment disputes. In such instances, it is agreed that the Dispute shall be submitted to final
and binding arbitration by one arbitrator; provided, however, that either party may request that
there be three (3) arbitrators, in which case each party shall select one (1) arbitrator, and the
two (2) arbitrators so selected shall select a third. The Employee hereby irrevocably consents to
the jurisdiction of the state and federal courts located in the State of Minnesota for the purposes
of deciding any claim seeking injunctive relief for any alleged violation of Sections 5 or 6
hereof, and agrees that any judgment rendered by such courts against the Employee may be entered or
executed in any court of competent jurisdiction for enforcement purposes.
8. Return of Company Property. Promptly after termination of the Employee’s
employment hereunder for any reason, the Employee or his personal representative shall return to
the Company all property of the Company then in his possession, including without limitation
papers, documents, computer disks, s, credit cards and Confidential Information, and shall neither
make nor retain copies of the same.
9. Notice. All notices and other communications hereunder shall be in writing and
shall be given by hand-delivery to the other parties or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
To the Employee:
|
To the Company: | |
| Possis Medical, Inc. | ||
| Attn: Director of Corporate Services | ||
| 0000 Xxxxxxxxx Xxxxxxxxx XX | ||
| Xxxxxxxxxxx, XX 00000 | ||
| With a cc to: | ||
| MEDRAD, INC. | ||
| 000 Xxxxxx Xxxx Xxxxx | ||
| Xxxxxxxxxx, XX 00000 | ||
| Attn: General Counsel |
or to such other address as any party shall have furnished to the others in writing in accordance
herewith. Notices and communications shall be effective when actually received by the addressee.
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10. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.
11. Miscellaneous. The validity or enforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provision. This Agreement embodies the
entire Agreement between the parties hereto and supersedes any and all prior or contemporaneous,
oral or written understandings, negotiations, or communications on behalf of such parties. This
Agreement may be executed in several counterparts, each of which shall be deemed original, but all
of which together shall constitute one and the same instrument. This Agreement may be delivered by
telefax, and such telefax copy shall be as effective as delivery of a manually executed
counterpart. The waiver by either party of any breach or violation of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach or violation
hereof. This Agreement is executed in and shall be governed by and construed in accordance with
the laws of Minnesota without giving effect to any conflict of laws provision. This Agreement
shall be amended only by written agreement of both parties hereto. This Agreement shall inure to
the benefit of the Company and its successors and assigns. The parties waive the application of
any law, regulation, holding or rule of construction providing that ambiguities in the Agreement
will be construed against the party drafting such agreement. The language used in this Agreement
shall be deemed to be the language chosen by the parties to express their mutual agreement, and
this Agreement shall not be deemed to have been prepared by any single party.
12. Effectiveness. This Agreement shall become effective on the Effective Date. To
the extent that the Agreement and Plan of Merger is terminated and the Acceptance Date (as defined
in the Agreement and Plan of Merger) does not occur, the Employee shall have no rights under this
Agreement and this Agreement shall be void and of no effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date
first written above.
| Employee | POSSIS MEDICAL, INC. | |||
/s/ XXXXXX X. XXXXXXX
|
By: | /s/ XXXXXX X. XXXXXXX | ||
Employee’s Name
|
Name: | Xxxxxx X. Xxxxxxx | ||
| Title: | Chairman, President and Chief Executive Officer |
|||
WITNESS: |
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/s/ XXXXX XxXXXX
|
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