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EXHIBIT 10.14
Heartport, Inc.
January 24, 2001
Re: Letter Agreement for Change in Control Compensation
Dear [ ]:
In connection with any upcoming Change in Control (as defined below) of
Heartport, Inc. (the "Company"), the Compensation Committee of the Board of
Directors of the Company (the "Committee") desires to set forth a compensation
arrangement for the senior management team, in order to provide a continuing
incentive to pursue the most advantageous transaction for the Company.
Change in Control
A Change in Control means (i) the consummation of a merger or consolidation of
the Company with or into another entity or any other corporate reorganization,
or a tender offer for the Company's securities, if more than 50% of the combined
voting power of the continuing or surviving entity's securities outstanding
immediately after such merger, consolidation or other reorganization is owned by
persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization; or (ii) the sale, transfer or
other disposition of all or substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
Amount of Bonus Pool
Bonuses under this program will be paid in cash and will be subject to all
applicable withholding taxes. Bonuses will be paid in consideration of the key
employee's agreement to relinquish an option for the number of shares set forth
on Exhibit A; an employee may choose to relinquish an option in whole or in
part. The amount of bonuses to be paid under this Program (the "Bonus Pool")
will equal $1 per share for each $1 in excess of the key employee's exercise
price of the Merger Consideration (as defined below) multiplied by the number of
shares set forth beside the key employee's name on Exhibit A. The Committee may
choose to enhance the amount of the bonus as a reward for performance and such
enhancement may be measured by the Committee as a per share calculation or as a
percentage of the entire bonus or such other method that the Committee deems
appropriate. Examples of this calculation are shown on Exhibit A.
The Merger Consideration will be the aggregate gross consideration received in
connection with a Change in Control by (i) stockholders of the Company and/or
(ii) the Company plus the value of the assumption or retirement of any Company
indebtedness and the payment of any of the Company's transaction costs divided
by the number of shares outstanding at the closing of the Change in Control.
Merger Consideration shall include amounts paid into escrow. Merger
Consideration shall not include any variable amounts including, but not limited
to, "earn out" payments.
The fair market value of the Merger Consideration will be determined as follows:
i. Any portion of the Merger Consideration consisting of
cash or the assumption or retirement of debt will be
valued at face value of such cash or debt (regardless of
whether the debt was retired or assumed for less than
its face value);
ii. Any portion of the Merger Consideration consisting of
securities will be valued (a) if such securities are
publicly traded, at the closing sales price for such
securities (or closing bid, if no sales are reported) as
quoted on any established stock exchange or national
market system for the last market trading day prior to
the date of determination, as reported in the Wall
Street Journal or such other source as the Board deems
reliable, or (b) if such securities are not publicly
traded, at the fair market value as determined in good
faith by the Board.
iii. The Compensation Committee of the Board shall, based on
the above criteria, reasonably determine the amount of
Merger Consideration and such determination shall be
final and binding.
Determination of Participants
The individuals named on Exhibit A are the eligible participants. An individual
shall be eligible for a bonus only if he or she is a current employee of the
Company on the date of the closing of the Change in Control or his or her
employment is involuntarily terminated by the Company without cause within the
90-day period prior to the closing. Bonuses will be paid by the Company under
this Program
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immediately prior to the closing of the Change in Control. No bonuses will be
paid under this Program if a Change in Control does not occur.
General Provisions
This Program became effective when adopted by the Committee. The Board may at
any time amend or terminate this Program, provided it must do so in a written
resolution and such action shall not adversely affect rights and interests of
participants to individual bonuses allocated prior to such amendment or
termination, and provided further that no amendment may be effected without the
consent of each of the eligible participants (A) while discussions relating to a
merger agreement are ongoing with Xxxxxxx & Xxxxxxx or relating to any
transaction related to or in response to the J&J transaction or (B) following
the date that the Company enters into a definitive agreement to effect a Change
in Control until such an agreement has been withdrawn and is no longer being
pursued. This is the full and complete embodiment of the terms of this Program
as described herein.
No amounts under this Program shall actually be funded, set aside or otherwise
segregated prior to payment. The obligation to pay the bonuses awarded hereunder
shall at all times be an unfunded and unsecured obligation of the Company.
Participants shall have the status of general unsecured creditors.
No participant shall have the right to alienate, pledge or encumber his/her
interest in this Program, and such interest shall not (to the extent permitted
by law) be subject in any way to the claims of the employee's creditors or to
attachment, execution or other process of law.
No action of the Company in establishing this Program, no action taken under
this Program by the Committee and no provision of this Program itself shall be
construed to grant any person the right to remain in the employ of the Company
for any period of specific duration. Rather, each employee will be employed "at
will," which means that either such employee or the Company may terminate the
employment relationship at any time for any reason, with or without cause.
The Committee appreciates your efforts to effect a Change in Control of the
Company, and intends this arrangement to be a reflection of your extraordinary
dedication in this uncertain time for the Company.
Sincerely,
The Compensation Committee
By: Xxxx Xxxxxxx, Chairman
By: Xxxxxx Xxxxx
Exhibit A
ELIGIBLE PARTICIPANTS
Xxxxx Xxxxxx
Xxxxxx Xxxxxxx
Xxxxxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxxx
Example
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SHARES $2.80 $3.00 $3.25 $4.00 $4.50
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Xxxxxx 875,000 $1,082,375 $1,257,375 $1,476,125 $2,132,375 $2,569,875
Xxxxxxx 175,000 $ 216,475 $ 251,475 $ 295,225 $ 426,475 $ 513,975
Xxxxxx 175,000 $ 216,475 $ 251,475 $ 295,225 $ 426,475 $ 513,975
Xxxxxxx 175,000 $ 216,475 $ 251,475 $ 295,225 $ 426,475 $ 513,975
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Total 1,400,000 $1,731,800 $2,011,800 $2,361,800 $3,411,800 $4,111,800
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These cash payment calculations are based upon the option strike price of $1.563
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