CHANGE IN CONTROL
OPTION VESTING ACCELERATION AGREEMENT
This change in control option vesting acceleration agreement (this
"Agreement") is made this ____ day of ____________, 1997, by and between
Arterial Vascular Engineering, Inc. (the "Company") and ____________
("Employee").
WHEREAS, Employee has recently been employed as the ___________________
of the Company; and
WHEREAS, the Company wishes to arrange for the continued availability
of Employee's services to the Company; and
WHEREAS, Employee desires to serve the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the Company and Employee enter into this Agreement.
ARTICLE 1
DEFINITIONS
For purposes of the Agreement, the following terms shall have the
meanings set forth below:
1.1 "Annual Base Salary" means Employee's annual base salary at the
rate in effect during the last regularly scheduled payroll period immediately
preceding (i) the Change in Control or (ii) the Covered Termination, whichever
is greater.
1.2 "Change in Control" means the occurrence of any of the following
events:
(a) (i) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) fifty percent (50%) or more of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (ii) the
stockholders of the Company approve either a plan of liquidation or dissolution
of the Company or an agreement for the sale, lease, exchange or other transfer
or disposition by the Company of fifty percent (50%) or more of the Company's
assets;
(b) any person (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), is or becomes the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or
more of the Company's outstanding common stock; or
(c) a change in the composition of the Company's
Board of Directors (the "Board") within a three (3)-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who (i) are directors of the Company on the date
of this Agreement or (ii) are directors that were nominated by the Company.
Notwithstanding the foregoing, "Incumbent Directors" shall not include
an individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company.
1.3 "Constructive Termination" means that the Employee voluntarily
terminates his employment after any of the following are undertaken without
Employee's express written consent:
(a) the assignment to Employee of any duties or
responsibilities which result in any diminution or adverse change of Employee's
position, status or circumstances of employment as in effect immediately prior
to a Change in Control of the Company; a change in Employee's titles or offices
as in effect immediately prior to a Change in Control of the Company which
results in any diminution or adverse change of Employee's position, status or
circumstances of employment; or any removal of Employee from or any failure to
re-elect Employee to any of such positions, except in connection with the
termination of his employment for death, disability, retirement, fraud,
misappropriation, embezzlement or any other voluntary termination of employment
by Employee other than a Constructive Termination;
(b) a reduction by the Company in Employee's Annual
Base Salary by greater than ten (10) percent;
(c) any failure by the Company to continue in effect
any benefit plan or arrangement, including incentive plans or plans to receive
securities of the Company, in which Employee is participating at the time of a
Change in Control of the Company (hereinafter referred to as "Benefit Plans"),
or the taking of any action by the Company which would materially adversely
affect Employee's participation in or reduce Employee's benefits under the
Benefit Plans or deprive Employee of any fringe benefit enjoyed by Employee at
the time of a Change in Control of the Company; provided, however, that no
Constructive Termination shall be deemed to occur following a Change in Control
of the Company if the Company offers a range of benefit plans and programs
which, taken as a whole, are comparable to the Benefit Plans as determined in
good faith by the Company;
(d) a relocation of Employee, or the Company's
principal offices if Employee's principal office is at such offices, to a
location more than forty (40) miles from the location at which Employee was
performing his duties prior to a Change in Control of the Company, except for
required travel by Employee on the Company's business to an extent substantially
consistent with Employee's business travel obligations at the time of a Change
in Control of the Company;
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(e) any material breach by the Company of any
provision of this Agreement; or
(f) any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the Company.
1.4 "Covered Termination" means an Involuntary Termination or a
Constructive Termination occurring in either case within one (1) year following
a Change in Control. No other event shall be a Covered Termination for purposes
of this Agreement.
1.5 "Involuntary Termination" means Employee's dismissal or discharge
by the Company (or, if applicable, by the successor entity) for reasons other
than commission of a felony or any other crime involving moral turpitude,
repeated failure to perform services in accordance with the requests of
superiors within the context of Employee's duties, or the commission of a
material fraud, misappropriation, embezzlement or other act of gross dishonesty
on the part of Employee which resulted in material loss, damage or injury to the
Company.
The termination of an Employee's employment would not be deemed to be
an "Involuntary Termination" if such termination occurs as a result of the death
or disability of Employee.
ARTICLE 2
EMPLOYMENT BY THE COMPANY
2.1 Responsibilities. Employee shall devote his full time and attention
during normal business hours to the business affairs of the Company, except for
reasonable vacations and for illness or incapacity. Nothing in this Agreement,
however, shall preclude Employee from devoting reasonable time required for
serving as a director or member of any committee of any organization involving
no conflict of interest with the interests of the Company, from engaging in
charitable and community activities, and from managing his personal affairs,
provided that such activities do not materially interfere with the regular
performance of duties and responsibilities under this Agreement.
2.2 Term of Agreement. This Agreement shall remain in full force and
effect so long as Employee is employed by Company; provided, however, that the
rights and obligations of the parties hereto contained in Articles 3 and 4 shall
survive any termination for the longer of (i) one year from the date of the
Agreement or (ii) one year following a Covered Termination.
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ARTICLE 3
OPTION VESTING ACCELERATION; ALTERNATIVE SEVERANCE BENEFITS
3.1 Stock Option Vesting Acceleration; Alternative Severance Benefits.
(a) All stock options held by Employee shall become fully vested and exercisable
immediately upon the occurrence of a Covered Termination; provided, however,
that if the Board, upon receipt of a written opinion of the Company's
independent auditors, (i) determines that the enforcement of this subsection
3.1(a) would preclude accounting for any proposed business combination involving
a Change in Control as a "pooling of interests" and (ii) otherwise desires to
approve a proposed Change in Control business combination which requires as a
condition to the closing of such transaction that it be accounted for as a
"pooling of interests," then this subection 3.1(a) shall become null and void
and of no force or effect, and Employee shall instead, upon the occurrence of a
Covered Termination, be entitled to the severance benefits set forth in
subsection 3.1(b). For purposes of this subsection 3.1(a), the Board's
determination shall require the unanimous approval of the non-employee members
of the Board.
(b) In the event that subsection 3.1(a) becomes null and void pursuant
to its terms, then Employee shall receive from the Company, upon the occurrence
of a Covered Termination, a cash amount equal to 100% of his total taxable
compensation (including, without limitation, salary, bonus and other
compensation) received from or payable by the Company during the 12-month period
ending on the date of the Covered Termination.
3.2 Employee Agreement and Release Prior to Receipt of Benefits. Upon
the occurrence of a Covered Termination, and prior to the receipt of any
benefits under this Agreement in connection with the occurrence of a Covered
Termination, Employee shall, as of the date of a Covered Termination, execute an
employee agreement and release in substantially the form attached hereto as
Exhibit A ("Agreement and Release"). Such Agreement and Release shall
specifically relate to all of Employee's rights and claims in existence at the
time of such execution and shall confirm Employee's obligations under the
Company's standard form of proprietary information agreement. It is understood
that Employee has twenty-one (21) days to consider whether to execute such
Agreement and Release and Employee may revoke such Agreement and Release within
seven (7) business days after execution of such Agreement and Release. In the
event Employee does not execute such Agreement and Release within the twenty-one
(21) day period, or if Employee revokes such Agreement and Release within the
seven (7) business-day period, no benefits shall be payable or otherwise become
effective under this Agreement and this Agreement shall be null and void.
3.3 Further Action. To the extent that Employee's stock option
agreements evidencing outstanding stock options do not provide for the
following, such agreements shall hereby be deemed to be amended (unless
subsection 3.1(a) becomes null and void) to provide for full vesting of stock
options upon the occurrence of a Covered Termination; provided, however, that to
the extent that an amendment would result in a charge to earnings for the
Company, no such amendment shall be deemed made until the earlier of (i) such
time as the aforementioned
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adverse effects shall not result from such amendment and (ii) immediately prior
to the occurrence of a Covered Termination.
3.4 Certain Reductions in Payments or Benefits. (a) In the event that
any payments or other benefits received or to be received by Employee pursuant
to this Agreement ("Payments") would (1) constitute a "parachute payment" within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), and (2) but for this Section 3.4, be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), then, in accordance with
this Section 3.4, such Payments shall be reduced to the maximum amount that
would result in no portion of the payments being subject to the Excise Tax, but
only if and to the extent that such a reduction would result in Employee's
receipt of Payments that are greater than the net amount that Employee would
receive hereunder (after application of the Excise Tax) if no reduction is made.
The amount of required reduction, if any, shall be the smallest amount so that
Employee's net proceeds with respect to the Payments (after taking into account
payment of any Excise Tax) shall be maximized, as determined by Employee.
Employee's determination of any required reduction pursuant to this subsection
3.4(a) shall be conclusive and binding upon the Company. The Company shall
reduce Payments in accordance with this subsection 3.4(a) only upon written
notice from Employee indicating the amount of such reduction, if any. If the
Internal Revenue Service (the "IRS") determines that a Payment is subject to the
Excise Tax, then subsection 3.4(b) shall apply.
(b) If, notwithstanding any reduction described in subsection 3.4(a)
(or in the absence of any such reduction), the IRS determines that Employee is
liable for the Excise Tax as a result of the receipt of Payments, then Employee
shall be obligated to pay back to the Company, within thirty (30) days after
final IRS determination, an amount of the Payments equal to the "Repayment
Amount." The Repayment Amount shall be the smallest such amount, if any, as
shall be required to be paid to the Company so that Employee's net proceeds with
respect to the Payments (after taking into account the payment of the Excise Tax
imposed on such Payments) shall be maximized. Notwithstanding the foregoing, the
Repayment Amount shall be zero if a Repayment Amount of more than zero would not
eliminate the Excise Tax imposed on the Payments. If the Excise Tax is not
eliminated pursuant to this subsection 3.4(b), Employee shall pay the Excise
Tax.
3.5 Certain Deferral of Payments. Notwithstanding the other provisions
of this Agreement, to the extent that any amounts payable pursuant to this
Agreement would not be deductible by the Company for federal income tax purposes
on account of the limitations of Section 162(m) of the Code, the Company may
defer payment of such amounts to the earliest one or more subsequent calendar
years in which the payment of such amounts would be deductible by the Company.
3.6 Non-Alienation of Benefits. No benefit hereunder shall be subject
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to so subject a benefit hereunder shall be void.
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ARTICLE 4
GENERAL PROVISIONS
4.1 Notices. Any notices provided hereunder must be in writing and such
notices or any other written communication shall be deemed effective upon the
earlier of personal delivery (including personal delivery by telex or facsimile)
or five (5) days after mailing by first class mail, to the Company at its
primary office location and to Employee at his address as listed in the
Company's payroll records. Any payments made by the Company to Employee under
the terms of this Agreement shall be delivered to Employee either in person or
at his address as listed in the Company's payroll records.
4.2 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.
4.3 Waiver. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
4.4 Complete Agreement. This Agreement, including Exhibit A and other
written agreements referred to in this Agreement, constitutes the entire
agreement between Employee and the Company and it is the complete, final, and
exclusive embodiment of their agreement with regard to this subject matter. This
Agreement is entered into without reliance on any promise or representation
other than those expressly contained herein.
4.5 Amendment or Termination of Agreement. This Agreement may be
amended or terminated only upon the mutual written consent of the Company and
Employee. The written consent of the Company to an amendment or termination of
this Agreement must be approved by the Compensation Committee of the Board after
such amendment or termination has been approved by such committee.
4.6 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
4.7 Headings. The headings of the Articles and Sections hereof are
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof.
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4.8 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Employee and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Employee may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which consent shall not be withheld unreasonably.
4.9 Arbitration. Any controversies or claims among the parties arising
out of or relating to this Agreement or any breach thereof that are not resolved
by their mutual agreement, shall, upon demand of either party, be submitted to
final and binding arbitration before J.A.M.S./ENDISPUTE, or its successor,
pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et seq. Either
party may commence the arbitration process called for in this agreement by
filing a written demand for arbitration with J.A.M.S./ENDISPUTE, with a copy to
the other party. The arbitration will be conducted in accordance with the
provisions of either J.A.M.S./ENDISPUTE's Streamlined Arbitration Rules and
Procedures (if the amount in dispute does not exceed $250,000) or
J.A.M.S./ENDISPUTE's Comprehensive Arbitration Rules and Procedures (if the
amount in dispute exceeds $250,000) in effect at the time of filing of the
demand for arbitration. The parties will cooperate with J.A.M.S./ENDISPUTE and
with one another in selecting an arbitrator from J.A.M.S./ENDISPUTE's panel of
neutrals, and in scheduling the arbitration proceedings. The parties covenant
that they will participate in the arbitration in good faith. The arbitrator, in
his or her discretion, shall be authorized to award the prevailing party
reimbursement of the costs and fees of J.A.M.S./ENDISPUTE and the arbitrator,
and reimbursement for its reasonable attorneys' fees, disbursements (inlcuding,
for example, expert witness fees and expenses, photocopy charges, travel
expenses, etc.) and costs arising from the arbitration; provided, however, that
until any such order is issued, the parties shall bear equally the costs and
fees of J.A.M.S./ENDISPUTE and the arbitrator. The arbitration will be conducted
in San Francisco, California. The arbitrator's decision may be enforced by any
court of competent jurisdiction, and the party seeking enforcement shall be
entitled to an award of all costs, fees and expenses, including reasonable
attorneys' fees, to be paid by the party against whom enforcement is ordered.
The arbitrator is specifically authorized to grant injunctive relief, either as
part of the final decision or prior to the final decision. The parties desire
that the courts promptly enforce all injunctive relief granted prior to final
decision as though it were part of the final decision, even though such
enforcement may be requested prior to final decision.
4.10 Choice of Law. All questions concerning the construction, validity
and interpretation of this Agreement will be governed by the law of the State of
California.
4.11 Non-Disclosure. The parties mutually agree not to disclose
publicly the fact that they are parties to this Agreement except to the extent
that disclosure is mandated by applicable law.
4.12 Construction. In the event of a conflict between the text of this
Agreement and any summary, description or other information regarding this
Agreement, the text of this Agreement shall control.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year written above.
ARTERIAL VASCULAR ENGINEERING, INC. EMPLOYEE
By:
------------------------------------ ------------------------------------
Xxxxxx X. Xxxxxxxxx
Duly Authorized by the Compens. Name:
Committee of the Board of Directors
Spousal Consent
Spousal consent not applicable (check if true) ___________
Spousal consent applicable: I hereby consent to this Agreement for purposes of
any community property interest I may have in the foregoing arrangements. I have
had the opportunity to seek independent counsel with regard to this consent and
have either consulted with counsel or voluntarily waive the right to such
counsel.
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Signature of Spouse Date Printed Name of Spouse
Exhibit A: Employee Agreement and Release
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EXHIBIT A
EMPLOYEE AGREEMENT AND RELEASE
I understand and agree completely to the terms set forth in the
foregoing agreement.
I hereby confirm my obligations under the Company's standard form of
proprietary information agreement.
Except as otherwise set forth in this Agreement, I hereby release,
acquit and forever discharge the Company, its parents and subsidiaries, and
their officers, directors, agents, servants, employees, shareholders,
successors, 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 (other than
any claim for indemnification I may have as a result of any third-party action
against me based on my employment with the Company), arising out of or in any
way related to agreements, events, acts or conduct at any time prior to and
including the execution date of this Agreement, including but not limited to:
all such claims and demands directly or indirectly arising out of or in any way
connected with my employment with the Company or the termination of that
employment, including but not limited to, claims of intentional and negligent
infliction of emotional distress; any and all tort claims for personal injury;
any and all claims or demands related to salary, bonuses, commissions, stock,
stock options, or any other ownership interests in the Company, vacation pay,
fringe benefits, expense reimbursements, severance pay, or any other form of
compensation(other than any claim for benefits expressly contemplated by the
Agreement); claims pursuant to any federal, state or local law or cause of
action including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as amended
("ADEA"); the federal Americans with Disabilities Act of 1990; the California
Fair Employment and Housing Act, as amended; tort law; contract law; wrongful
discharge; discrimination; fraud; defamation; emotional distress; and breach of
the implied covenant of good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise after the Effective Date of this Agreement; (B) I have the right to
consult with an attorney prior to executing this Agreement; (C) I have
twenty-one (21) days to consider this Agreement (although I may choose to
voluntarily execute this Agreement earlier); (D) I have seven (7) days following
the execution of this Agreement by the parties to revoke the Agreement; and (E)
this Agreement shall not be effective until the date upon which the revocation
period has expired, which shall be the eighth day after this Agreement is
executed by me, provided that the Company has also executed this Agreement by
that date ("Effective Date").
In giving this release, which includes claims that may be unknown to me
at present, I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company
By:
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Name:
Date:
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