Exhibit 10.2
Form of Change In Control Agreement
______, 200_
[Name of Officer]
[Home Address]
Dear ________:
ATS Medical, Inc. (the "Company") recognizes that your contribution to the
growth and success of the Company will be substantial and therefore desires to
assure the Company of your continued employment. In this connection, the Board
of Directors of the Company (the "Board") recognizes that, as is the case with
many publicly held companies, the possibility of a change in control may exist
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.
The Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Company.
In order to induce you to remain in the employ of the Company, the Company
agrees that you shall receive the severance benefits set forth in this letter
agreement ("Agreement") in the event your employment with the Company is
terminated subsequent to a "Change in Control" (as defined in Section 2 hereof)
under the circumstances described below:
1. Term of Agreement. This Agreement shall commence on the date hereof and
shall continue in effect through December 31, 200_; provided, however, that
commencing on January 1, 200_ and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one additional year
unless, not later than January 1 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement; and
provided further, that notwithstanding any such notice by the Company not
to extend, this Agreement shall continue in effect for a period of 24
months beyond the term provided herein if a change in control of the
Company (as defined in Section 2 hereof) shall have occurred during such
term.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control of the Company, as set forth below, and
your employment by the Company shall have been terminated in accordance
with Section 3 below. For purposes
of this Agreement, a "Change in Control of the Company" shall be deemed to
have occurred if (A) a change in control occurs of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Company is then subject to
such reporting requirement; (B) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding
securities; (C) individuals who at the date hereof constitute the Board of
Directors of the Company cease for any reason to constitute at least a
majority thereof (unless the election or the nomination for election of
each new director was approved by a vote of at least two-thirds of
directors then still in office who were directors at the beginning of the
period and/or their successor directors who were recommended or elected to
succeed a beginning director by at least two-thirds of the directors who
were directors at the beginning of the period); or (D) the shareholders of
the Company approve (i) any consolidation or merger of the Company in which
the Company is not the continuing or surviving corporation or pursuant to
which shares of Company stock would be converted into cash, securities or
other property, other than a merger of the Company in which shareholders
immediately prior to the merger have the same proportionate ownership of
stock of the surviving corporation immediately after the merger; (ii) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the
Company; or (iii) any plan of liquidation or dissolution of the Company.
Notwithstanding the foregoing, none of the transactions contemplated by the
Agreement and Plan of Merger dated as of January 23, 2006 by and among the
Company, Seabiscuit Acquisition Corp., 3F Therapeutics, Inc. and Xx. Xxxx
Xxx shall be deemed to constitute a Change in Control of the Company under
this Agreement
3. Termination Following a Change in Control. If a Change in Control shall
have occurred, you shall be entitled to the benefits provided in Section 4
hereof upon any termination of your employment within 24 months following
the Change in Control unless such termination is (A) because of your death,
(B) by the Company for Cause (as defined below) or (C) by you other than
for Good Reason (as defined below).
(i) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon (A) the willful and continued failure by
you to substantially perform your duties with the Company (other than
any such failure resulting from your disability or from termination by
you for Good Reason), after
a demand for substantial performance is delivered to you that
specifically identifies the manner in which the Company believes that
you have not substantially performed your duties, and you have failed
to resume substantial performance of your duties on a continuous basis
within 30 days of receiving such demand, (B) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise or (C) your conviction of a felony
which impairs your ability substantially to perform your duties with
the Company. For purposes of this Subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to
be done, by you not in good faith and without reasonable belief that
your action or omission was in the best interest of the Company.
Failure to perform your duties with the Company during any period of
disability shall not constitute Cause.
(ii) Good Reason. Termination by you of your employment for "Good
Reason" shall mean termination within 24 months following a Change in
Control upon the occurrence of any one or more of the following:
(A) the assignment to you of any duties inconsistent in any
respect with your position (including status, offices, titles,
and reporting requirements), authorities, duties, or other
responsibilities as in effect immediately prior to the Change in
Control or any other action of the Company which results in a
diminishment in such position, authority, duties, or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Company promptly after receipt of
notice thereof given by you;
(B) a reduction by the Company in your base salary as in effect
on the date hereof and as the same shall be increased from time
to time hereafter;
(C) the Company's requiring you to be based at a location in
excess of thirty-five (35) miles from the location of your
principal office immediately prior to the Change in Control;
(D) the failure by the Company to (a) continue in effect any
material compensation or benefit plan, program, policy or
practice in which you were participating at the time of the
Change in Control or (b) provide you with compensation and
benefits at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each employee benefit
plan, program, policy and practice as in effect immediately prior
to
the Change in Control (or as in effect following the Change in
Control, if greater); and
(E) the failure of the Company to obtain a satisfactory agreement
from any successor to the Company to assume and agree to perform
this Agreement, as contemplated in Section 7 hereof.
Your right to terminate your employment pursuant to this Subsection
shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or
a waiver of rights with respect to, any circumstance constituting Good
Reason hereunder. Termination by you of your employment for Good
Reason as defined in this Subsection 3(ii) shall constitute
termination for Good Reason for all purposes of this Agreement.
(iii) Notice of Termination. Any purported termination of your
employment by the Company or by you (other than by reason of your
death) within 24 months following the month in which a Change in
Control occurs, shall be communicated by Notice of Termination to the
other party hereto in accordance with Section 8 hereof. Failure by you
to provide Notice of Termination shall not limit any of your rights
under this Agreement except to the extent the Company can demonstrate
that it suffered actual damages by reason of such failure. For
purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which shall indicate the specific termination provision
in this Agreement relied upon and the Date of Termination (as defined
below) and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(iv) Date of Termination. "Date of Termination" shall mean the date
specified in the Notice of Termination (except in the case of your
death, in which case Date of Termination shall be the date of death);
provided, however, that if your employment is terminated by the
Company other than for Cause, the date specified in the Notice of
Termination shall be at least 30 days from the date the Notice of
Termination is given to you and if your employment is terminated by
you for Good Reason, the date specified in the Notice of Termination
shall not be more than 60 days from the date the Notice of Termination
is given to the Company.
(v) Termination Prior to a Change in Control. Any termination of your
employment by the Company without Cause prior to a Change in Control
which occurs at the request or insistence of any person (other than
the Company) related to the Change in Control shall be deemed to have
occurred after the Change in Control for purposes of this Agreement.
4. Compensation Upon Termination. Subject to paragraph 5 of this Agreement,
following a Change in Control, upon termination of your employment during
the term of this Agreement you shall be entitled to the following benefits:
(i) If your employment by the Company shall be terminated (y) by the
Company for any reason other than Cause, or (z) by you for Good
Reason, you shall be entitled to the benefits provided below:
(A) the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given;
(B) the Company will pay as severance benefits to you, not later
than 30 days following the Date of Termination, a lump sum
severance payment equal to two times your annual base salary in
effect at the time Notice of Termination is given or immediately
prior to the date of the Change in Control, whichever is greater;
and
(C) for a period of 24 months after the Date of Termination, the
Company will arrange to provide you with health and dental
benefits substantially similar in design and cost (to you) as
such benefits available to you immediately prior to the Notice of
Termination; provided that such benefits shall be discontinued to
the extent that you obtain employment providing comparable health
and/or dental benefits during such 24-month period.
(ii) The payments provided for in Section 4(i)(A) and (B) above shall
be made not later than 30 days following the Date of Termination;
provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to you
on such day an estimate as determined in good faith by the Company of
the minimum amount of such payments and shall pay the remainder of
such payments (together with interest from the date of such estimated
payment at the rate provided in Section 1274(b)(2)(B) of the Internal
Revenue Code of 1986, as amended (the "Code")) as soon as the amount
thereof can be determined but in no event later than 45 days after the
Date of Termination.
In the event that the amount of the estimated payment exceeds the
amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to you payable no later than 30 days
after demand by the Company
(together with interest from the date of such estimated payment at the
rate provided in Section 1274(b)(2)(B) of the Code).
(iii) The Company shall also pay to you any legal fees and expenses
incurred by you (A) as a result of successful litigation against the
Company for nonpayment of any benefit hereunder or (B) in connection
with any dispute with any Federal, state or local governmental agency
with respect to benefits claimed under this Agreement. If you utilize
arbitration to resolve any such dispute, the Company will pay any
legal fees and expenses incurred by you in connection therewith.
(iv) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Section 4 be reduced by any compensation earned by you as the result
of employment by another employer after the Date of Termination, or
otherwise, except as set forth in Section 4(i)(C) hereof.
(v) Notwithstanding the foregoing, if and to the extent that you are
entitled under any other agreement with the Company to receive any
payment of severance upon termination, the amount payable to you
pursuant to Section 4(i)(B) above shall be reduced by the amount of
such other severance payment.
(vi) Notwithstanding the foregoing, the Company shall, to the extent
necessary and only to the extent necessary, modify the timing of
delivery of severance benefits if the Company determines that the
timing would subject the severance benefits to any additional tax or
interest assessed under Section 409A of the Code. In such event, the
payments will occur as soon as practicable without causing the
severance benefits to trigger such additional tax or interest under
Section 409A of the Code. In addition, if your base salary
continuation under Section 4(i)(A) above is delayed to comply with
Section 409A of the Code, the Company shall pay any missed payments in
a single lump sum at the time your base salary continuation commences.
5. Limitation on Payments. In the event that any payment or benefit received
or to be received by you in connection with a change in control of the
Company or a termination of your employment (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement
with the Company or with any person constituting a member of an "affiliated
group" (as defined in Section 280G(d)(5) of the Code) which includes the
Company or with any person whose actions result in a change in control of
the Company (which shall be deemed to include any member of an affiliated
group as
defined above)) (collectively with the amounts payable under this
Agreement, "Total Payments") would not be deductible (in whole or in part)
by the Company, an Affiliate or other person making such payment or
providing such benefit solely as a result of Section 280G of the Code, the
payments under this Agreement shall be reduced until no portion of the
Total Payments is not deductible as a result of Section 280G of the Code,
or the payments under this Agreement are reduced to zero. For purposes of
this limitation: (i) no portion of the Total Payments the receipt or
enjoyment of which you shall have effectively waived pursuant to Section
280G of the Code in writing prior to the date of payment of the payments
under this Agreement shall be taken into account, (ii) no portion of the
Total Payments shall be taken into account which in the opinion of tax
counsel selected by the Company's independent auditors and acceptable to
you does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the payments under this Agreement shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in clause (ii)) in their entirety constitute reasonable
compensation within the meaning of Section 280G(b)(4)(B) of the Code, in
the opinion of the tax counsel referred to in clause (ii); and (iv) the
value of any non-cash benefit or any deferred cash payment included in the
Total Payments shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
6. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit
your continuing or future participation in any benefit, bonus, incentive,
retirement or other plan or program provided by the Company and for which
you may qualify, nor shall anything herein limit or reduce such rights as
you may have under any other agreement with, or plan, program, policy or
practice of, the Company. Amounts which are vested benefits or which you
are otherwise entitled to receive under any agreement with, or plan,
program, policy or practice of, the Company (including, without limitation,
the cash-out of unused vacation days upon termination of employment) shall
be payable in accordance with such agreement, plan, program, policy or
practice, except as explicitly modified by this Agreement.
7. Successors.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company or of
any division or subsidiary thereof employing you 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 assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you
to compensation from the Company in the same amount and on the same
terms as you would be entitled hereunder if you terminated your
employment for Good Reason following a Change in Control, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination
and Notice of Termination shall be deemed to have been given on such
date.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If you should
die while any amount would still be payable to you hereunder if you
had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to your devisee, legatee or other designee or, if there is no such
designee, to your estate or, if no estate, in accordance with
applicable law.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, postage prepaid, addressed to the other party as follows:
If to the Company, to:
ATS Medical, Inc.
Attention: Corporate Secretary
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
If to you, to:
[Name of Officer]
[Home Address]
Either party to this Agreement may change its address for purposes of this
Section 8 by giving 15 days' prior notice to the other party hereto.
9. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by you and such officer as may be specifically
designated by the Board. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Minnesota.
10. Validity; Integration. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect. This Agreement represents the entire agreement between the parties
as to the subject matter hereof and supersedes and replaces any prior
agreements, written or oral, between the parties hereto specifically with
respect to severance payments triggered by termination of employment after
a change in control.
11. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
12. Arbitration. If you so elect, any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by
arbitration in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that you shall
be entitled to seek specific performance of your right to be paid until the
Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement. If you do not elect
arbitration, you may pursue any and all legal remedies available to you.
13. Effective Date. This Agreement shall become effective as of the date set
forth above.
14. Employment. This Agreement does not constitute a contract of employment or
impose on the Company any obligation to retain you as an employee, to
continue your current employment status or to change any employment
policies of the Company.
If this letter sets forth our agreement on the subject matter hereof, kindly
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
Sincerely,
ATS MEDICAL, INC.
By
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Name:
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Title:
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Agreed to this day
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of , 200
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By
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Name:
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