EXHIBIT 10.14
SENIOR EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 4th day of June, 2004 by and between Medwave,
Inc., a Delaware corporation with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and ▇▇▇▇▇▇▇ ▇.
▇'▇▇▇▇▇▇ of ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Executive").
1. Purpose. The Company considers it essential to the best interests of its
stockholders to ▇▇▇▇▇▇ the continuous employment of key management personnel.
The Board of Directors of the Company (the "Board") recognizes, however, that,
as is the case with many publicly held corporations, the uncertainty and
questions which may arise among management in connection with a Change in
Control (as defined in Section 2 hereof) may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, 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 the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control. Nothing in this Agreement
shall be construed as creating an express or implied contract of employment and,
except as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
2. Change in Control. A "Change in Control" shall be deemed to have occurred
in any one of the following events:
(a) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act") (other than the
Company, any of its subsidiaries, or any trustee, fiduciary or other person or
entity holding securities under any employee benefit plan or trust of the
Company or any of its subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the "beneficial owner" (as such term is defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company
representing 30% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an election of
the Company's Board ("Voting Securities") or (B) the then outstanding shares of
the Company's common stock, $0.01 par value per share ("Common Stock") (other
than as a result of an acquisition of securities directly from the Company); or
(b) persons who, as of the date hereof, constitute the Company's
Board (the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board, provided that any
person becoming a director of the Company subsequent to the date hereof shall be
considered an Incumbent Director if such person's election was approved by or
such person was nominated for election by a vote of at least a majority of the
Incumbent Directors (or by a nominating committee, if a majority of its members
are Incumbent Directors); but provided further, that any such person whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of members of the Board or other
actual or threatened solicitation of proxies or consents by or on behalf of a
person other than the Board, including by reason of agreement intended to avoid
or settle any such actual or threatened contest or solicitation, shall not be
considered an Incumbent Director; or
(c) the consummation of (A) any consolidation or merger of the Company
where the stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger, beneficially
own (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, shares representing in the aggregate more than 50% of the voting
shares of the Company issuing cash or securities in the consolidation or merger
(or of its ultimate parent corporation, if any), or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or substantially
all of the assets of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed
to have occurred for purposes of the foregoing clause (a) solely as the result
of an acquisition of securities by the Company which, by reducing the number of
shares of Common Stock or other voting securities outstanding, increases the
proportionate number of shares beneficially owned by any person to 30% or more
of either (A) the combined voting power of all of the then outstanding voting
securities or (B) the Common Stock; provided, however, that if any person
referred to in this sentence shall thereafter become the beneficial owner of any
additional shares of voting securities or Common Stock (other than pursuant to a
stock split, stock dividend, or similar transaction or as a result of an
acquisition of
80
securities directly from the Company) and immediately thereafter beneficially
owns 30% or more of either (A) the combined voting power of all of the then
outstanding voting securities or (B) the Common Stock, then a "Change in
Control" shall be deemed to have occurred for purposes of the foregoing clause
(a).
3. Terminating Event. A "Terminating Event" shall mean any of the events
provided in this Section 3 occurring in connection with or subsequent to a
Change in Control as defined in Section 2:
(a) termination by the Company of the employment of the Executive with
the Company for any reason other than Cause. For purposes of this Section 3(a),
"Cause" shall mean: (i) conduct by Executive constituting a material act of
willful misconduct in connection with the performance of his duties, including,
without limitation, misappropriation of funds or property of the Company or any
of its affiliates other than the occasional, customary and de minimis use of
Company property for personal purposes; (ii) criminal or civil conviction or
indictment of Executive, a plea of nolo contendere by Executive or conduct by
Executive that would reasonably be expected to result in material injury to the
reputation of the Company if he were retained in his position with the Company,
including, without limitation, conviction of a felony involving moral turpitude;
(iii) continued, willful and deliberate non-performance by Executive of his
duties to the Company (other than by reason of Executive's physical or mental
illness, incapacity or disability) which has continued for more than thirty (30)
days following written notice of such non-performance from the Board; or (iv) a
violation by Executive of the Company's employment policies which has continued
following written notice of such violation from the Board; or
(b) termination by the Executive of the Executive's employment with the
Company for Good Reason. For purposes of this Section 3(b), "Good Reason" shall
mean that the occurrence of any of the following events: (i) a substantial
diminution or other substantive adverse change, not consented to by Executive,
in the nature or scope of Executive's responsibilities, authorities, powers,
functions or duties; (ii) any removal from Executive of his title of Chief
Executive Officer; (iii) an involuntary reduction in Executive's annual
compensation; (iv) the involuntary relocation of the Company's offices at which
Executive is principally employed or the involuntary relocation of the offices
of Executive's primary workgroup to a location more than thirty (30) miles from
such offices, or the requirement by the Company that Executive be based anywhere
other than the Company's offices at such location on an extended basis, except
for required travel on the Company's business to an extent substantially
consistent with Executive's business travel obligations; or (v) the failure of
the Company to obtain the agreement from any successor to the Company to assume
and agree to perform this Agreement as required by Section 16.
4. Severance Payment. In the event a Terminating Event occurs within 36
months after a Change in Control:
(a) the Company shall pay to the Executive an amount equal to three
times the sum of (i) the Executive's base salary immediately prior to the
Terminating Event (or immediately prior to the Change in Control, if higher) and
(ii) the Executive's highest annual bonus paid with respect to any of the three
years preceding the year of the Change in Control, payable in one lump-sum
payment on the Date of Termination, such payment to be expressly subject to the
Executive signing and delivering a release to the Company in the form attached
hereto as Exhibit A;
(b) the Company shall continue to provide health and dental insurance
coverage to the Executive, on the same terms and conditions as though the
Executive had remained an active employee, for 36 months after the Terminating
Event;
(c) all stock options and other equity awards theretofore granted or
issued to the Executive which are unvested immediately prior to the Terminating
Event shall, as a consequence of the Terminating Event, become fully vested, and
shall thereafter be fully exercisable by the Executive in accordance with their
respective terms; and
(d) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Limitation.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any compensation, payment or distribution
by the Company to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Severance
81
Payments"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the following provisions
shall apply:
(i) If the Severance Payments, reduced by the sum of (A) the
Excise Tax and (B) the total of the Federal, state, and local income and
employment taxes payable by Executive on the amount of the Severance
Payments which are in excess of the Threshold Amount, are greater than or
equal to the Threshold Amount, Executive shall be entitled to the full
benefits payable under this Agreement.
(ii) If the Threshold Amount is less than (x) the Severance
Payments, but greater than (y) the Severance Payments reduced by the sum
of (A) the Excise Tax and (B) the total of the Federal, state, and local
income and employment taxes on the amount of the Severance Payments which
are in excess of the Threshold Amount, then the benefits payable under
this Agreement shall be reduced (but not below zero) to the extent
necessary so that the maximum Severance Payments shall not exceed the
Threshold Amount. To the extent that there is more than one method of
reducing the payments to bring them within the Threshold Amount, Executive
shall determine which method shall be followed; provided that if Executive
fails to make such determination within 45 days after the Company has sent
Executive written notice of the need for such reduction, the Company may
determine the amount of such reduction in its sole discretion.
For the purposes of this Section 5, "Threshold Amount" shall mean
three times Executive's "base amount" within the meaning of Section
280G(b)(3) of the Code and the regulations promulgated thereunder less one
dollar ($1.00).
(b) All determinations required to be made under this Section 5 shall be
made by BDO ▇▇▇▇▇▇▇, LLP or any other nationally recognized accounting firm
selected by the Company (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the Date of Termination, if applicable, or at such earlier time as is
reasonably requested by the Company or the Executive. For purposes of the
determinations required to be made under this Section 5, the Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal
income taxation applicable to individuals for the calendar year with respect to
which the determinations are to be made and state and local income taxes at the
highest marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive.
6. Term. This Agreement shall take effect on the date first set forth above
and shall terminate upon the earlier of (a) the resignation or termination of
the Executive's employment for any reason prior to a Change in Control, or (b)
the date which is 36 months after a Change in Control if the Executive is still
employed by the Company or its successor.
7. Withholding. All payments made by the Company under this Agreement shall
be net of any tax or other amounts required to be withheld by the Company under
applicable law.
8. Notice and Date of Termination; Disputes; etc.
(a) Notice of Termination. After a Change in Control and during the term
of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
this Section 8. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the Date of Termination.
(b) Date of Termination. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean 30 days after the Notice of
Termination is given (provided, that if the Executive's employment is terminated
for disability, the Executive shall not have returned to the full-time
performance of the Executive's duties during such 30-day period). In the case of
a termination by the Executive, the Date of Termination shall not be less than
15 days from the date such Notice of Termination is given. Notwithstanding
Section 3(a) of this Agreement, in the event that the Executive gives a Notice
of Termination to the Company, the Company may unilaterally accelerate the Date
of Termination and such acceleration shall not result in a Terminating Event for
purposes of Section 3(a) of this Agreement.
82
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a), (b) and (c) hereof. Further, the amount of any payment provided for in
this Agreement shall not be reduced by any compensation earned by the Executive
as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company or
otherwise.
(d) Settlement and Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the State of
Delaware by three arbitrators, one of whom shall be appointed by the Company,
one by the Executive and the third by the first two arbitrators. If the first
two arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association for commercial
arbitrations, except with respect to the selection of arbitrators which shall be
as provided in this Section 8(d). Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
9. Successor to Executive. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal representatives, executors,
administrators, heirs, distributees, devisees and legatees. In the event of the
Executive's death after a Terminating Event but prior to the completion by the
Company of all payments due him under Section 4(a), (b) and (c) of this
Agreement, the Company shall continue such payments to the Executive's
beneficiary designated in writing to the Company prior to his death (or to his
estate, if the Executive fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to require
the performance of any term or obligation of this Agreement, or the waiver by
any party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
12. Notices. Any notices, requests, demands and other communications provided
for by this agreement shall be sufficient if in writing and delivered in person
or sent by registered or certified mail, postage prepaid, to the Executive at
the last address the Executive has filed in writing with the Company, or to the
Company at its main office, attention of the Board of Directors.
13. Effect on Other Plans. An election by the Executive to resign after a
Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan.
14. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Company.
15. Governing Law. This is a Delaware contract and shall be construed under
and be governed in all respects by the laws of Delaware.
16. Obligations of Successors. 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 if no such succession had
taken place.
83
17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs, customer lists, customer requirements, or other information used in
the manufacture, sale or marketing of any of the respective products or services
of the Company or any subsidiary or other affiliate of the Company; provided,
however, that no breach or alleged breach of this Section 17 shall entitle the
Company to fail to comply fully and in a timely manner with any other provision
hereof. Nothing in this Agreement shall preclude the Company from seeking money
damages, or equitable relief by injunction or otherwise without the necessity of
proving actual damage to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company by its duly authorized officer, and by the Executive, as of the
date first above written.
MEDWAVE, INC.
__________________________________
Name:
Title:
EXECUTIVE
__________________________________
▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇
EXHIBIT A
General Release of Claims
In exchange for and as a condition to those promises of Medwave, Inc.
("Medwave") contained in the Senior Executive Severance Agreement dated as of
________________, 2004 (the "Agreement"), that are subject to my agreement to a
General Release, I agree as follows:
I hereby irrevocably and unconditionally release, acquit and forever
discharge Medwave, its predecessors, successors, affiliates, other related
entities and assigns, and the directors, officers, employees, shareholders and
representatives of any of the foregoing, and any persons acting on behalf or
through any of the foregoing (any and all of whom or which are hereinafter
referred to as the "Company"), from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and expenses
(including attorneys' fees and costs actually incurred), of any nature
whatsoever, known or unknown (collectively, "Claims"), that I now have, own or
hold, or claim to have, own or hold, or that I at any time had, owned or held,
or claimed to have had, owned or held against the Company. This General Release
of Claims includes, without implication of limitation, the complete release of
all Claims of breach of express or implied contract; all Claims of wrongful
termination of employment whether in contract or tort; all Claims of
intentional, reckless or negligent infliction of emotional distress; all Claims
of breach of any express or implied covenant of employment, including the
covenant of good faith and fair dealing; all Claims of interference
84
with contractual or advantageous relations, whether those relations are
prospective or existing; all Claims of discrimination under state or federal
law, including, without implication of limitation, Title VII of the Civil Rights
Act of 1964, 42 U.S.C. ss. 2000e et seq., as amended, the Age Discrimination in
Employment Act of 1967, 29 U.S.C. ss. 621 et seq., as amended, and Chapter 151B
of the Massachusetts General Laws; all Claims of defamation or damage to
reputation; all Claims for reinstatement; all Claims for punitive or emotional
distress damages; all Claims for wages, bonuses, severance, back or front pay or
other forms of compensation; and all Claims for attorneys' fees and costs. This
General Release of Claims shall not be construed to include a release of Claims
that arise from the Company's obligations under the Agreement. Also excluded
from the scope of this General Release of Claims is any right of indemnification
or contribution pursuant to the Articles of Incorporation, By-Laws or Directors'
and Officers' coverage of Medwave that I have or hereafter acquire if any claim
is asserted or proceedings are brought against me by any governmental or
regulatory agency, or by any customer, creditor, employee or shareholder of
Medwave or any other person or entity, or by any self-regulatory organization,
stock exchange or the like, related or allegedly related to my having been a
director, officer or employee of Medwave or to any of my activities as a
director, officer or employee of Medwave.
I acknowledge that I have been advised to consult with an attorney before
signing this General Release.
I further understand that I have been given an adequate opportunity, if I so
desired, to consider this General Release for up to twenty-one (21) days before
deciding whether to sign it. If I signed this General Release before the
expiration of that twenty-one (21) day period, I acknowledge that such decision
was entirely voluntary. I understand that for a period of seven (7) days after I
execute this General Release I have the right to revoke it by a written notice
to be received by the Director, Human Resources of Medwave by the end of that
period. I also understand that this General Release shall not be effective or
enforceable until the expiration of that period.
Notwithstanding the foregoing, I agree that nothing in this General Release
of Claims is intended to affect any of my obligations that continue after the
termination of my employment contained in the Agreement or in any written
agreement entered into between Medwave and myself with respect to
confidentiality, ownership of inventions, non-competition and/or
non-solicitation.
I represent and agree that I have carefully read and fully understand all of
the provisions of this General Release and that I am voluntarily agreeing to
such provisions.
Name: ________________________________ Date: ___________________________
85