EXHIBIT 10.18
FORM OF SENIOR MANAGEMENT INCENTIVE AGREEMENT
SENIOR MANAGEMENT INCENTIVE AGREEMENT, dated as of the 12th day of
May, 2005, between EP MEDSYSTEMS, INC., a New Jersey corporation
(the "COMPANY"), and ________ ("EXECUTIVE").
RECITALS
A. Executive is currently employed by the Company.
B. The Board of Directors of the Company (the "BOARD") has determined that
it is appropriate to incentivize, and reinforce the continued attention
and dedication of, certain members of the Company's management,
including Executive, to their assigned duties without distraction in
potentially disrupting circumstances arising from the possibility of a
Change in Control of the Company, as defined on Schedule A attached
hereto.
AGREEMENTS
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the Company and Executive agree as follows:
1. DEFINITIONS.
Terms capitalized in this Agreement which are not otherwise defined
shall have the meanings assigned to such terms on Schedule A attached hereto.
2. TERM.
Unless earlier terminated as provided herein, the initial term of this Agreement
shall be from the date hereof until the second anniversary date of this
Agreement; provided, however, that, unless terminated as provided herein or
there shall have occurred a Change in Control, on each annual anniversary date
of this Agreement commencing on the second anniversary date of this Agreement,
this Agreement shall automatically be renewed for a successive one-year term.
3. PAYMENTS AND BENEFITS UPON CHANGE IN CONTROL.
Subject to Section 4 hereof, Executive shall be entitled to the
following payments and benefits (the "INCENTIVE BENEFITS AND PAYMENTS"), which
Incentive Benefits and Payments shall vest immediately prior to a Change in
Control:
(a) CHANGE IN CONTROL PAYMENT. In recognition of continued services to
the Company by Executive, the Company shall make a lump sum payment in cash to
Executive as incentive compensation within ten (10) business days following the
date of consummation and closing of a Change in Control (the "CHANGE IN CONTROL
CLOSING DATE") equal to two (2) times Executive's annual Base Salary in effect
immediately prior to the date that a Change in Control shall occur. Such payment
shall be paid within ten (10) business days following the Change in Control
Closing Date.
(b) OPTIONS. Pursuant to existing Company policy, which policy has been
unanimously approved by the Company's Board of Directors and the Compensation
Committee of the Company's Board of Directors, options to acquire common stock
of the Company granted to Executive prior to the Change in Control Closing Date
("EXECUTIVE'S OPTIONS"), which have not vested as of the Change in Control
Closing Date, shall vest immediately prior to the effective time of a Change in
Control on the Change in Control Closing Date. All other terms, conditions, and
limitations applicable to Executive's Options will remain in full force and
effect pursuant to the applicable stock options agreements between Executive and
the Company, the applicable stock option plan documents, and any other documents
applicable to Executive's Options. Executive is advised by the Company to seek
independent advice with respect to any financial, tax and/or securities law
issues regarding Executive's Options and any sale by Executive of Company stock.
(c) PARACHUTE EXCISE TAX. In the event that the payments or benefits
provided to Executive by this Agreement (the "PAYMENT), when combined with any
and all other payment(s) to which Executive is entitled, constitute "parachute
payments" within the meaning of Section 280G(b)(1) of the Internal Revenue Code
of 1986, as amended (the "CODE"), or any comparable successor provisions and are
subject to the excise tax imposed by Section 4999 of the Code, or any comparable
successor provisions (such excise tax, together with any interest and penalties
payable with respect to such excise tax, the "EXCISE TAX"), then Executive shall
be entitled to receive from the Company an additional payment (the "Gross-Up
Payment," and any iterative payments pursuant to this paragraph also shall be
"Gross-Up Payments") in an amount that shall fund the payment by Executive of
any Excise Tax on the Payment, as well as all income and employment taxes on the
Gross-Up Payment, any Excise Tax imposed on the Gross-Up Payment and any
interest or penalties imposed with respect to income and employment taxes
imposed on the Gross-Up Payment. For this purpose, all income taxes will be
assumed to apply to Executive at the highest marginal rate. Notwithstanding the
foregoing, the total amount paid as Gross-Up Payments will not exceed 20% of
aggregate value of the payments or benefits provided to Executive pursuant to
Sections 3(a) and (b) hereof determined in accordance with the applicable tax
regulations issued under Section 280G. Any Gross-Up Payment shall be paid to
Executive, or for his benefit, within 15 days following receipt by the Company
of the report of the Professional Services Firm.
(d) DEATH OF EXECUTIVE FOLLOWING A CHANGE IN CONTROL. In the event of
Executive's death subsequent to a Change in Control, but prior to receiving all
Incentive Benefits and Payments to which Executive is entitled hereunder, such
2
Incentive Benefits and Payments shall be paid to the personal representative of
his or her estate, unless Executive has otherwise directed the Company in
writing prior to his or her death.
(e) NON-EXCLUSIVE PAYMENTS. Benefits provided hereunder are in addition
to any amount of severance pay to which Executive may be entitled under any
agreement, severance plan or policy between the Company and Executive or
generally available to employees of the Company.
(f) NON-SEGREGATION. No assets of the Company need to be segregated or
earmarked to represent the liability for benefits payable hereunder. The
rights of any person to receive benefits hereunder shall be only those of a
general unsecured creditor.
(g) WITHHOLDING. Except as described above, all payments under this
Section 3 are subject to applicable federal and state payroll withholding or
other applicable taxes, and Executive shall be responsible for the payment of
such taxes.
4. CONDITION. Executive will not be eligible to receive any Incentive Benefits
and Payments if Executive is not employed by the Company immediately prior to
closing of the Change in Control transaction on the Change in Control Closing
Date.
5. AT-WILL EMPLOYMENT. This Agreement shall not alter the status of Executive's
at-will employment relationship with the Company and shall not in any way
interfere with Executive's right or the Company's right to terminate Executive's
employment at any time, with or without cause or advance notice, except as may
be provided in an employment agreement between the Company and the Executive, if
any.
6. PROPRIETARY INFORMATION OBLIGATIONS. Executive acknowledges his or her
continuing obligations during Executive's employment with the Company and
thereafter, under his or her Proprietary Information and Inventions Agreement,
not to use or disclose any confidential or proprietary information of the
Company without prior written authorization from the Company. If Executive has
not previously executed the Company's Proprietary Information and Inventions
Agreement, he or she must do so in order to be eligible for any of the benefits
described in this Agreement.
7. INITIAL RELEASE. As consideration for continued employment, and as a
condition of Executive's eligibility for the Incentive Benefits and Payments,
Executive agrees to sign a general waiver and release and
non-competition/non-solicitation agreement in favor of the Company, a form of
which is attached hereto as ATTACHMENT 1, no later than May _____, 2005.
8. CHANGE IN CONTROL DATE RELEASE. If applicable, as a condition of receiving
the Incentive Benefits and Payments, Executive must sign and return to the
Company a general release, a form of which is attached hereto as ATTACHMENT 2,
immediately prior to a Change in Control. Executive will not be eligible for the
Incentive Benefits and Payments if Executive does not sign this release and
return it to the Company within the time stated.
3
9. MISCELLANEOUS.
(a) ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
in New York, New York, in accordance with the Rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any jurisdiction.
(b) CONFLICT IN BENEFITS. This Agreement is not intended to and shall
not adversely affect, limit or terminate any other agreement or arrangement
between Executive and the Company presently in effect, or hereafter entered
into, including any employee benefit plan under which Executive is entitled to
benefits.
(c) AMENDMENT. This Agreement may not be amended, except by written
agreement between Executive and the Company.
(d) NO MITIGATION. All payments and benefits to which Executive is
entitled under this Agreement shall be made and provided without offset,
deduction or mitigation on account of income Executive could or may receive from
other employment or otherwise.
(e) NOTICES. Any notices required under the terms of this Agreement
shall be effective when mailed, postage prepaid, by certified mail and
addressed to, in the case of the Company:
EP MedSystems, Inc.
Xxxxxx Run Executive Park
000 Xxxxx 00 Xxxxx - Xxxx. X
Xxxx Xxxxxx, XX 00000-0000
Attention: Chief Executive Officer
and to, in the case of Executive:
[ ]
[ ]
[ ]
Either party may designate a different address by giving written notice of
change of address in the manner provided above.
(f) WAIVER; CURE. No waiver or modification in whole or in part of this
Agreement, or any term or condition hereof, shall be effective against any party
unless in writing and duly signed by the party sought to be bound. Any waiver of
any breach of any provision hereof or any right or power by any party on one
4
occasion shall not be construed as a waiver of, or a bar to, the exercise of
such right or power on any other occasion or as a waiver of any subsequent
breach. Any breach of this Agreement may be cured by the breaching party within
ten (10) days of the date that such breaching party shall have received written
notice of such breach from the party asserting such breach.
(g) BINDING EFFECT; SUCCESSORS. Subject to the provisions hereof,
nothing in this Agreement shall prevent the consolidation of the Company
with, or its merger into, any other corporation, or the sale by the Company of
all or substantially all of its properties and assets, or the assignment of this
Agreement by the Company in connection with any of the foregoing actions. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the Company and Executive and their respective heirs, legal representatives,
successors, and assigns. If the Company shall be merged into or consolidated
with another entity, the provisions of this Agreement shall be binding upon and
inure to the benefit of the entity surviving such merger or resulting from such
consolidation. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all, or
substantially all, of the business 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 it if no such succession had taken
place. The provisions of this Section 9(g) shall continue to apply to each
subsequent employer of Executive hereunder in the event of any subsequent
merger, consolidation, or transfer of assets of such subsequent employer.
(h) SEPARABILITY. Any provision of this Agreement which is held to be
unenforceable or invalid in any respect in any jurisdiction shall be ineffective
in such jurisdiction to the extent that it is unenforceable or invalid without
affecting the remaining provisions hereof, which shall continue in full force
and effect. The enforceability or invalidity of a provision of this Agreement in
one jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
(i) CONTROLLING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the state of New Jersey applicable to contracts
made and to be performed therein.
(j) ENTIRE AGREEMENT. This Agreement, including Attachments 1 and 2,
constitutes the complete, final and exclusive embodiment of the entire
agreement between Executive and the Company with regard to this subject matter.
It is entered into without reliance on any promise or representation, written or
oral, other than those expressly contained herein, and it supersedes any other
such promises, warranties or, representations.
5
(k) 409A PROVISION. It is the parties' intent that no payment
made or to be made hereunder shall be subject to the provisions of Section
409A(a)(1)(B) of the Internal Revenue Code, as amended (the "IRC"). Accordingly,
notwithstanding any other provision to the contrary contained herein, the
parties agree that this Agreement shall be amended to conform to their intent as
set forth in the preceding sentence and that they shall work together in good
faith to accomplish such amendment taking into account any regulations or other
guidance issued after the date hereof under IRC Section 409A.
[SIGNATURE PAGE FOLLOWS]
6
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the day and year first above written.
EP MEDSYSTEMS, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
EXECUTIVE
-----------------------------
(Printed or Typed) Name:
7
Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a different
meaning, the following terms have the meanings indicated:
"Base Salary" shall mean Executive's base pay (excluding incentive pay,
premium pay, commissions, overtime, bonuses and other forms of variable
compensation), at the rate in effect during the last regularly scheduled payroll
period immediately preceding the Change in Control Closing Date.
"Beneficial Owner" and "Beneficial Ownership" have the meanings set
forth in Rules 13d-3 and 13d-5 of the General Rules and Regulations promulgated
under the Exchange Act.
"Business Combination" means a reorganization, merger or consolidation,
or sale of substantially all of the assets of the Company.
"Change in Control" means, and shall be deemed to occur, upon the
happening of any one of the following:
1. The acquisition, directly or indirectly, in one or more transactions during
any 12-month period by any Person of Beneficial Ownership of 50% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors;
2. The consummation and closing of a Business Combination unless, following such
Business Combination, all or substantially all of the individuals and entitles
who were the Beneficial Owners of the outstanding Voting Securities immediately
prior to such Business Combination continue to be Beneficial Owners, directly or
indirectly, of more than 50% of the then outstanding voting securities entitled
to vote generally in the election of directors of the corporation or other
entity resulting from such Business Combination (including, without limitation,
a corporation or other entity which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the outstanding
Voting Securities.
"Code" means the Internal Revenue Cost of 1986, as amended.
"Disability" means that (a) a person has been incapacitated by bodily
injury or physical or mental disease so as to be prevented thereby from
performance of his or her duties with the Company for 120 days in any 12-month
period; and (b) such person is disabled for purposes of any and all of the plans
or programs of the Company or any Subsidiary that employs Executive under which
benefits, compensation, or awards are contingent upon a finding of disability.
The determination with respect to whether Executive is suffering from such a
Disability will be determined by a mutually acceptable physician.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Person" means any individual, entity, or group (as such term is used
in Section 13(d)(3) or 14(d)(2) of the Exchange Act).
"Subsidiary" with respect to the Company, has the meaning set forth in
Rule 12b-2 of the General Rules and Regulations promulgated under the Exchange
Act.
"Voting Securities" means the voting securities of the Company entitled
to vote generally in the election of directors.
2
ATTACHMENT 1
FORM OF INITIAL GENERAL WAIVER AND RELEASE AND
NON-COMPETITION/NON SOLICITATION AGREEMENT
In consideration of my continued employment with EP MedSystems, Inc.,
and to be eligible for the possible receipt by me of the Incentive Benefits and
Payments (the "INCENTIVE BENEFITS") under the Senior Management Incentive
Agreement, dated as of May 12, 2005, between me and the Company (the
"AGREEMENT"), I hereby fully and forever release and discharge EP MedSystems,
Inc. and its current and former officers, directors, agents, employees,
attorneys, assigns, successors, predecessors, and subsidiaries (hereinafter,
collectively called the "COMPANY"), from all claims and causes of action,
whether presently known or unknown, arising out of or relating in any way to my
employment the Company, including the termination of my employment, based on any
acts or events occurring up until the date I sign below. Capitalized terms used
herein without definition shall have meanings given to those terms in the
Agreement.
1. I understand and agree that this Release and Agreement is a
full and complete waiver of all claims, including, but not limited to, any
claims with respect to my entitlement to any wages, bonuses, or other forms of
compensation; any claims with respect to my purchase of, or right to purchase,
capital stock of the Company (except stock options granted to me prior to the
date hereof); any claims of wrongful discharge, breach of contract, breach of
the covenant of good faith and fair dealing, violation of public policy,
defamation, personal injury, emotional distress; any claims under Title VII of
the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, the
Equal Pay Act of 1963, the Americans With Disabilities Act, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") as related to
severance benefits, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967 as amended ("ADEA"), the Workers Adjustment and
Retraining Notification Act, New Jersey's laws against discrimination and any
claims pursuant to any other federal, state and local laws and regulations
relating to employment or employment discrimination. I agree that the benefits
provided to me pursuant to the Agreement are in full satisfaction and settlement
of any such claims, liabilities, demands or causes of action, except as may be
provided in my employment agreement with the Company, if any, and I represent
and warrant that I will not file any lawsuit or institute any proceeding
asserting any such claim, provided that nothing in this Release and Agreement
prohibits me from bringing an action to determine the validity of the Release
with respect to claims under ADEA. I also hereby agree that nothing contained in
this Release and Agreement shall constitute or be treated as an admission of
liability or wrongdoing by the Company.
2. In addition, and in further consideration of the foregoing, I
hereby expressly waive, to the extent permissible, any and all rights and
benefits conferred upon me by any statute, common law principle, or other
provision negating the validity or enforceability of waivers of claims that
exist but are unknown to me at the time of my waiver.
3. I expressly acknowledge that I am waiving and releasing any
rights I may have under the ADEA. I understand that I have the right to consult
with an attorney before signing this Release and Agreement. I also understand
that, as provided under the Older Workers Benefit Protection Act of 1990, I have
until _____________ (which date is at least forty-five (45) days after my
receipt of this Release and Agreement) to review and consider it, discuss it
with an attorney of my own choosing, and decide to execute or not execute this
Release and Agreement. I also understand that for a period of seven (7) days
after I sign this Release, I may revoke this Release and Agreement and that the
Release and Agreement will not become effective until seven (7) days after I
sign it, and only then if I do not revoke it. In order to revoke this Release
and Agreement, I must deliver to the Chief Financial Officer or Chief Executive
Officer of the Company of the Company, by no later than seven (7) days after I
execute this Release and Agreement, a letter stating that I am revoking it. If I
do not deliver such a letter, then this Release and Agreement shall become
effective upon the expiration of the seventh day after I executed this Release
and Agreement (the "EFFECTIVE DATE"). I understand that if I choose to revoke
this Release and Agreement within seven (7) days after I sign it, I will not
receive any Incentive Benefits, and the Release and Agreement will have no
effect.
4. I further acknowledge that I was given an opportunity to
consider and review this Release and Agreement and to consult with an attorney
of my own choosing concerning the waivers contained in this Release and
Agreement, that I have done so or knowingly declined to do so and that the
waivers made herein are knowing, conscious and with full appreciation that I am
forever foreclosed from pursing any of the rights so waived.
5. I understand that this Release and Agreement and the Agreement
set forth the entire agreement between the Company and me concerning the subject
matter thereof and supercede any other written or oral promises or agreements
concerning the items described herein, except as may be provided in my
employment agreement with the Company, if any. I understand and agree that this
Release and Agreement shall be governed by the laws of the State of New Jersey,
without regard to its conflicts of law provisions.
6. I hereby acknowledge that I have read and understand this
Release and Agreement and that I sign it voluntarily and without coercion.
7. As a condition to receiving the Incentive Benefits, during my
employment with the Company and for a period of twelve (12) months following
termination or cessation of during my employment with the Company ("NON-COMPETE
PERIOD"), I agree not to undertake any planning for any outside business
activity that is engaged in the Business (as defined below) and further agrees
not to own, either directly or indirectly, any interest in, manage, control,
2
participate in (whether as an officer, director, employee, partner, agent,
representative or otherwise), consult with or render services for, or in any
manner engage in the Business anywhere within any state, possession, territory
or jurisdiction of the United States of America, provided that nothing in this
paragraph 7 shall prohibit me from acquiring up to 5% of any class of
outstanding equity securities of any corporation whose equity securities are
publicly traded. For purposes of this Paragraph 7, the "Business" shall mean any
business engaged in the development, manufacture, marketing and/or sale of
products of any kind in cardiac rhythm management or electrophysiology (EP)
market relating to products which are used to diagnose, monitor, visualize
and/or treat irregular heartbeats known as arrhythmias.
8. As a condition to receiving the Incentive Benefits, during and
continuing until the end of the Non-Compete Period, I will not directly or
indirectly, personally or through others, solicit or attempt to solicit (on your
own behalf or on behalf of any other person or entity) the employment of any
employee of the Company, any successor company to all or any material part of
the Company's business (a "SUCCESSOR") or any of their respective affiliates. In
addition, during the Non-Compete Period, I will not directly or indirectly,
personally or through others, solicit or attempt to solicit (on my own behalf or
on behalf of any other person or entity) the business of any customer or
supplier of the Company, any Successor or any their respective affiliates.
9. If the duration or geographical extent of, or business
activities covered by, this Release and Agreement are in excess of what is valid
and enforceable under applicable law, then its provisions shall be construed to
cover only that duration, geographical extent or activities that are valid and
enforceable. You acknowledge the uncertainty of the law in this respect and
expressly stipulates that this Release and Agreement be given the construction
that renders its provisions valid and enforceable to the maximum extent (not
exceeding its express terms) possible under applicable law.
10. I understand and agree that in order to be eligible to receive
Incentive Benefits, I will return all of the Company's property in my possession
including, but not limited to, all copies of any confidential or proprietary
information, personal computer(s), keys, pager, cellular phone, phone card,
credit card, electronic organizer, fax modem, printer, etc. I represent, warrant
and agree that at all times during my employment with the Company, I have been
in compliance with, and at all times in the future I will continue to be bound
by, the terms and conditions set forth in the Company's form of Proprietary
Information and Inventions Agreement as executed between the Company and me. I
further agree to refrain from making any disparaging comments about the Company.
3
Executed this _____ day of _____________, 2005
By:--------------------------------
Executive Signature
--------------------------------
Print Full Name
4
ATTACHMENT 2
FINAL GENERAL RELEASE AND AGREEMENT
I understand and agree completely to the terms in the Senior Management
Incentive Agreement between me and EP MedSystems, Inc. (together with its
subsidiaries, the "COMPANY", dated May 12, 2005 (as amended in accordance with
its terms, the "AGREEMENT"). Capitalized terms used herein without definition
shall have the meanings give to such terms in the Agreement.
Except as provided in the Agreement, I hereby release, acquit and forever the
Company, their subsidiaries, and their respective officers, directors, agents,
attorneys, servants, employees, stockholders, successors, predecessors, assigns
and affiliates, of and from any and all claims, liabilities, demands, causes of
action, costs, expenses, attorneys' fees, damages, indemnities and obligations
of every kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising at any time prior
to and including the date I sign this release, including but not limited to: any
and all such claims and demands directly or indirectly arising out of or in any
way related to my employment and the termination of my employment; claims of
demands related to salary, bonuses, commissions, stock, stock options (except
stock options granted to me before the date hereof), or any other equity
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
sabbatical benefits, relocation benefits, severance benefits, or any other form
of compensation; claims pursuant to any federal, state or local law, statute or
cause of action including, but not limited to, the federal Civil Rights Act of
1964, as amended; the federal Americans with Disabilities Act of 1990; wrongful
discharge; harassment; breach of the covenant of good faith and fair dealing;
contract law; tort law; discrimination; fraud; defamation; and emotional
distress.
Date: By:
------------- -------------------------------
EXECUTIVE
PRINTED NAME:
