CHANGE IN CONTROL AGREEMENT
Exhibit 10.4
This agreement, made and entered into this 19th day of December, 2002, by and
between Pi Medical, Inc., a Minnesota corporation now renamed Restore Medical, Inc. (the
“Company”), with its principal offices at 0000 Xxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxx 00000, and Xxxxxx
X. Xxxxxxxxxxx (the “Employee”), residing at 00000 Xxxxx Xx. X.X., Xxxxxxx, XX 00000.
WHEREAS, this Agreement is intended to specify the financial arrangements that the Company
will provide to the Employee upon the Employee’s separation from employment with the Company under
any of the circumstances described herein; and
WHEREAS, the Agreement is entered into by the Company in the belief that it is in the best
interest of the Company to provide stable conditions of employment for the Employee notwithstanding
the possibility, threat, or occurrence of certain types of changes in control, thereby enhancing
the Company’s ability to attract and retain highly qualified people; and
NOW, THEREFORE, in lieu of the foregoing recitals and in consideration of the mutual
covenants, promises, payments and undertakings of the parties hereto, the parties agree as follows:
1. Term of Agreement. The Employee shall be employed on an at-will basis. This Agreement is
not, and shall not be construed as, an employment contract affecting in any way the duration of the
Employee’s employment or any terms and conditions thereof except those set forth herein. The
Employee and the Company may terminate their employment relationship at any time, for any reason,
or for no reason. Nothing in this Agreement shall alter any previous agreements between the
parties pertaining to confidentiality or ownership of inventions. This Agreement will expire on
December 19, 2005.
2. Termination of Employment.
(a) Prior to a Change in Control. Prior to a Change in Control (as defined in section 3(a)
hereof, the Company may terminate the Employee from employment with the Company at-will with or
without Cause (as defined in section 3(c) hereof), at any time.
(b) After a Change in Control.
(i) From and after the date of a Change in Control (as defined in section 3(a) hereof) during
the term of this Agreement, the Company shall not terminate the Employee from employment with the
Company except as provided in this section 2(b), or as a result of the Employee’s Disability (as
defined in section 3(d) hereof) or his death.
(ii) From and after the date of Change in Control (as defined in section 3(a) hereof) during
the term of the Agreement, the Company shall have the right to
terminate the Employee from employment with the Company at any time during the term of this
Agreement for Cause (as defined in section 3(c) hereof), by written notice to the Employee,
specifying the particulars of the conduct of the Employee forming the basis for such termination.
(iii) From and after the date of a Change in Control (as defined in section 3(a) hereof)
during the term of the Agreement: (a) the Company shall have the right to terminate the Employee’s
employment without Cause (as defined in section 3(c) hereof), at any time; and (b) the Employee
shall, upon the occurrence of such termination by the Company without Cause or upon the voluntary
termination of the Employee’s employment by the Employee for Good Reason (as defined in section
3(b) hereof), be entitled to receive the benefits provided in section 4 hereof. The Employee shall
evidence a voluntary termination for Good Reason by written notice to the Company given within ten
(10) days after the date of the occurrence of any event that the Employee knows or should need only
identify the Employee and set forth in reasonable detail the facts and circumstances claimed by the
Employee to constitute Good Reason. Any notice given by the Employee pursuant to this section 2
shall be effective ten (10) days after the date it is given by the Employee. For purposes of this
Section 2(b)(iii), an offer of employment from an acquiring company shall be deemed to be a
termination if such offer requires Employee to relocate more than 100 miles from Employee’s current
residence.
3. Definitions.
(a) A “Change in Control” shall mean:
(i) A change on control 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;
(ii) The public announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or any
“person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) that such person
has become the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act)
directly or indirectly, of securities of the Company representing twenty percent (20%) or more of
the combined voting power of the Company’s then outstanding securities;
(iii) The Continuing Directors cease to constitute a majority of the Company’s Board of
Directors;
(iv) The shareholders of the Company approve: (a) 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; (b) 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 (c) any
plan of liquidation or dissolution of the Company; or
(v) The majority of the Continuing Directors (as defined in section 3(e) hereof) determine in
their sole and absolute discretion that there has been a Change in Control of the Company.
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(b) “Good Reason” shall mean the occurrence of any of the following events, except for the
occurrence of such an event in connection with the termination or reassignment of the Employee’s
employment by the Company for Cause (as defined in section 3(c) hereof), for Disability (as defined
in section 3(d) hereof), or for death:
(i) The assignment to the Employee of employment responsibilities which are not of comparable
responsibility and status as the employment responsibilities held by the Employee immediately prior
to Change in Control (as defined in section 3(a) hereof);
(ii) Any unreasonable reduction by the Company in the Employee’s base salary as in effect
immediately prior to the change in control;
(iii) The failure by the Company to obtain, as specified in section 7(a) hereof, an assumption
of the obligations of the Company to perform this Agreement by any successor to the Company; or
(iv) Any other material breach of the Agreement by the Company which is not cured within
thirty (30) days after written notice thereof from the Employee.
(c) “Cause” shall mean termination by the Company of the Employee’s employment based upon:
(i) Repeated violations by the Employee of any of his duties or his repeated failures or
omissions to carry out lawful and reasonable orders which, in the reasonable judgment of the
Company, are willful and deliberate and which are not cured within a reasonable period after the
Employee’s receipt of written notice thereof from the Company;
(ii) Any act or acts of personal dishonesty by the Employee and intended to result in the
personal enrichment of the Employee at the expense of the Company;
(iii) Any willful and deliberate misconduct that is materially and demonstrably injurious to
the Company; or
(iv) Any criminal indictment, presentment, or conviction for a felony, whether or not the
Company is the victim of such offense.
(d) “Disability” shall mean any physical or mental condition which causes the Employee to fail
or render services to the Company over a period of ninety (90) days during any one hundred eighty
(180) day period. The existence or nonexistence of the Employee’s disability will be determined in
good faith by the Board of Directors after notice in writing given to the Employee at least thirty
(30) days prior to such determination. During such thirty (30) day
period, the Employee shall be permitted to make a presentation to the Board of Directors for
its consideration.
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(e) “Continuing Director” shall mean any person who is a member of the Board of Directors of
the Company, while such person is a member of the Board of Directors, who is not an Acquiring
Person, or a representative of an Acquiring Person or any such Affiliate or Associate, and who:
(i) was a member of the Board of Directors on the date of this Agreement as first written
above; or
(ii) subsequently becomes a member of the Board of Directors, if such person’s initial
nomination for election or initial election to the Board of Directors is recommended or approved by
a majority of the Continuing Directors. For purposes of this section 3(e), “Acquiring Person”
shall mean any “person” (as such term is used in sections 13(d) and 14(d) of the Exchange Act) who
or which, together with all Affiliates and Associates of such person, is the “beneficial owner” (as
defined in Rule 13-d-3 promulgated under the Exchange Act), directly or indirectly, of securities
of the Company representing twenty percent (20%) or more of the combined voting power of the
Company’s then outstanding securities, but shall not include the Company, any subsidiary of the
Company, or any entity holding shares of common stock organized, appointed, or established for, or
pursuant to the terms of, any such plan; and “Affiliate” and “Associate” shall have the respective
meanings described to such terms in Rule 12-b-2 promulgated under the Exchange Act.
4. Benefits Upon Termination Under section 2(b)(iii).
(a) Upon the termination (voluntary or involuntary) of the employment of the Employee pursuant
to section 2(b)(iii) hereof, the Company shall pay to the Employee, in lieu of any further base
salary or bonus payments to the Employee for periods subsequent to the date that the termination of
the Employee’s employment becomes effective, as severance pay,
| 1. | During the first six months following termination, continued compensation payable on the Company’s normal employee pay periods with monthly amounts of such payments equal to the Employee’s average total monthly compensation (as in effect in the month preceding the month in which the termination becomes effective or as in effect in the month preceding the Change in Control, whichever is higher) without any reduction for other employment income earned by Employee during the first six months following termination; and | ||
| 2. | During the second six months following termination, continued compensation payable on the Company’s normal employee pay periods with monthly amounts of such payments equal to the Employee’s average total monthly compensation (as in effect in the month preceding the month in which the termination becomes effective or as in effect in the month preceding the Change in Control, whichever is higher) less other employment income earned by Employee during the pay periods. |
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(b) For purposes of this Agreement, total monthly compensation shall include the Employee’s
salary and any bonus to which the Employee is otherwise entitled, pro rated for such period, and
any such bonus will be calculated as if it were paid out at one hundred percent (100%) of any bonus
plan covering the Employee. All payments to the Employee subject to this section 4 shall be
subject to any applicable payroll or other taxes required by law to be withheld.
(c) During the period of time in which payments are being made under this Section 4, the
Company will continue to provide the Employee with medical and group life insurance benefits in
effect at the time of termination.
(d) Company may, at its sole option and discretion, pre-pay any or all payments of Section
2(a) as lump-sum payments.
5. Successors and Binding Agreement.
(a) 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 of the 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 it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Employee the compensation from the
Company in the same amount and on the same terms as the Employee would be entitled hereunder if the
Employee terminated his employment after a Change in Control for Good Reason, except that, for
purposes of implementing the foregoing, the date on which any such succession becomes effective
shall be deemed the date that the termination of the Employee’s employment becomes effective. As
used in this Agreement, “Company” shall mean the Company and any successor to its business and/or
assets which executes and delivers the Agreement provided for in this section 7(a) or which
otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.
(b) The Agreement is personal to the Employee, and the Employee may not assign or transfer any
part of his rights or duties hereunder, or any compensation due to him hereunder, to any other
person. Notwithstanding the foregoing, this Agreement shall enure to the benefit of, and be
enforceable by, the Employee’s personal or legal representatives, executors, administrators, heirs,
distributees, devicees, and legatees.
6. Limitation of Damages. If for any reason the Employee believes the severance provisions of
this Agreement have not been properly adhered to by the Company, and if, pursuant to section 9
hereof, it is determined that the Company has not, in fact, properly adhered to the severance
provisions of
this Agreement, the sole and exclusive remedy to which the Employee is entitled is the
severance payment to which he is entitled under the provisions of this Agreement.
7. Dispute Resolution. Except as provided in Subsection 9(d) hereof, any controversy, claim,
or dispute arising out of or relating to the making, performance, breach, termination, expiration,
application, or meaning of this Agreement shall be resolved exclusively
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by arbitration before the
American Arbitration Association in Minneapolis, Minnesota, pursuant to the American Arbitration
Association’s rules then in effect.
(a) The decision of the arbitrator(s) shall be final and binding on both parties. Judgment on
the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
In the event of submission of any dispute to arbitration, each party shall, not later than thirty
(30) days prior to the date set for hearing, provide to the other party and to the arbitrator(s) a
copy of all exhibits upon which the party intends to rely at the hearing and a list of all persons
whom the party intends to call as witnesses at the hearing.
(b) The arbitrator(s) shall strictly adhere to the sole and exclusive remedy set forth in
section 8 hereof and may not award or assess punitive damages against either party.
(c) Each party shall bear its own costs and expenses of the arbitration and one-half (1/2) of
the fees and costs of the arbitrator(s).
(d) This section 9 shall have no application to claims by the Company asserting violation of
or seeking to enforce, by injunction or otherwise, the terms of sections 5 or 6 hereof. Such
claims may be maintained by the Company in a lawsuit in a court of competent jurisdiction.
8. Modification; Waiver. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in a writing signed by the
Employee and such officer as may be specifically designated by the Board of Directors of the
Company. No waiver by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time.
9. Notice. All notices, requests, demands, and all other communications required or permitted
by either party to the other party by this Agreement (including, without limitation, any notice of
termination of employment) shall be in writing and shall be deemed to have been duly given when
delivered personally or received by certified or registered mail, return receipt requested, postage
prepaid, at the address of the other party as first written above (directed to the attention of the
Board of Directors in the case of the Company). Either party hereto may change its
address for purposes of this section 11 by giving fifteen (15) days’ prior written notice to
the other party hereto.
10. Severability. If any term or provision of this Agreement or the application hereof to any
person or circumstances shall 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 held invalid or unenforceable shall not be effected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
11. Governing Law. This Agreement has been executed and delivered in the State of Minnesota
and shall in all respects be governed by, and construed and enforced in accordance
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with, the laws
of the State of Minnesota, including all matters of construction, validity, and performance.
12. Effect of Agreement; Entire Agreement. The Company and the Employee understand and agree
that this Agreement is intended to reflect their agreement only with respect to the subject matter
hereof and is not intended to create any obligation on the part of either party to continue
employment. This Agreement supersedes any and all other oral or written agreements or policies
made relating to the subject matter hereof and constitutes the entire agreement of the parties
relating to the subject matter hereof; provided that this Agreement shall not supersede or limit in
any way the Employee’s rights under any benefit plan, program, or arrangements in accordance with
their terms.
IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date
first written above.
Restore Medical, Inc. (a/k/a Pi Medical, Inc.)
By
|
/s/ Xxxxx X. Xxxxxxx | /s/ Xxxxxx X. Xxxxxxxxxxx | ||||||
| Xxxxx Xxxxxxx, its President | Xxxxxx X. Xxxxxxxxxxx |
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AMENDMENT AGREEMENT
For good and valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, Restore Medical, Inc., 0000 Xxxxxx Xxxx, Xx. Xxxx, XX 00000 and Xxxxxx X. Xxxxxxxxxxx
hereby agree to amend the December 19, 2002 Change In Control Agreement between the parties as
follows:
In paragraph 1, “Term of Agreement”, the last sentence of the paragraph is amended to read,
“This Agreement will expire on December 31, 2006.”
The December 19, 2002 Change In Control Agreement is unchanged in all other respects.
Agreed to by:
| RESTORE MEDICAL, INC | XXXXXX X. XXXXXXXXXXX | |||||||||
By:
|
/s/ Xxxxx Xxxxxxx | By: | /s/ Xxxxxx X. Xxxxxxxxxxx | |||||||
| Xxxxx Xxxxxxx, its CEO | Xxxxxx X. Xxxxxxxxxxx, personally | |||||||||
| Date: April 27, 2004 | Date: April 29, 2004 | |||||||||
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