EXHIBIT 10.14
POSSIS MEDICAL, INC.
CHANGE IN CONTROL
TERMINATION PAY PLAN
Amended Effective
April 3, 2001
POSSIS MEDICAL, INC.
CHANGE IN CONTROL
TERMINATION PAY PLAN
TABLE OF CONTENTS
Page
CTION 1. INTRODUCTION 4
SECTION 2. PARTICIPATION 4
SECTION 3. TERMINATION OF EMPLOYMENT 4
3.1. Notice of Termination
3.2. Participant's Termination Rights
SECTION 4. TERMINATION PAYMENT 5
4.1. Qualification
4.2. Amount
4.2.1. Class I Participants
4.2.2. Class II Participants
4.2.3. Class III Participants
4.2.4. Class IV Participants
4.2.5. Class V Participants
4.2.6. Sales Personnel Compensation
4.3. Cash Transaction Bonus
4.4. Certain Additional Payments by the Company
4.5 Legal Fees and Expenses
SECTION 5. 28OG LIMITATON 11
SECTION 6. AMENDMENT OR TERMINATION OF THE PLAN 12
SECTION 7. MISCELLANEOUS PROVISIONS 12
7.1. Nonexclusivity of Rights
7.2. Successors
7.3. Payments as Compensation
7.4. Notice
7.5. Governing Law
7.6. Validity
7.7. Employment
7.8. Termination Prior to a Change in Control.
SECTION 8. CLAIMS PROCEDURE 14
8.1. General
8.2. Making a Claim
8.3. Requesting Review of a Denied Claim
8.4. Exhaustion of Administrative Remedies
8.5. Decisions
SECTION 9. DEFINITIONS 15
9.1. Cause
9.2. Change in Control
9.3. Code
9.4. Continuing Director
9.5. Date of Termination
9.6. Effective Date
9.7. Employer
9.8. Good Reason
9.9. Notice of Termination
9.10. Participant
9.11. Plan
9.12. Plan Year
9.13. Termination of Employment
SECTION 1
INTRODUCTION
Effective September 15, 1999, Possis Medical, Inc., a Minnesota corporation
(hereinafter sometimes referred to as "Employer" or the "Company"), hereby
creates a change in control termination pay plan for the benefit of certain
employees of the Employer in the event of a Change in Control. Capitalized terms
used herein shall have the meaning provided in Section 9.
The Board of Directors of the Company (the "Board), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of its officers and other key
management, sales and technical personnel, notwithstanding the possibility,
threat or occurrence of a Change in Control (as defined below) of the Company.
The Board believes it is essential to diminish the inevitable distraction of
these employees by virtue of the personal uncertainties and risks created by a
pending or threatened Change in Control and to encourage full attention and
dedication to the Company currently and in the event of any threatened or
pending Change in Control, and to provide specified individuals with
compensation and benefit arrangements upon a Change in Control which ensure that
the compensation and benefits expectations of these individuals will be
satisfied and which are competitive with those of other corporations. Therefore,
in order to accomplish these objectives, the Board has adopted this Change in
Control Termination Pay Plan.
SECTION 2
PARTICIPATION
All Participants in the Plan shall be identified at the discretion of the
Board. Participants shall be classified as Class I, Class II, Class III, Class
IV or Class V Participants. An employee who has become a Participant shall be
considered to continue as a Participant in the Plan until the date of the
Participant's death or, if earlier, the date when the Participant is no longer
employed by the Employer or is removed as a Participant at the discretion of the
Board; provided, however, that a Participant who has a Termination of Employment
within 24 months following the date of a Change in Control will not cease to be
a Participant.
SECTION 3
TERMINATION OF EMPLOYMENT
3.1. Notice of Termination. Any purported termination of a Participant's
employment by the Employer or the Participant, including a Termination of
Employment as defined herein, (other than by reason of the Participant's death)
within twenty-four (24) months following the month in which a Change in Control
occurs, shall be communicated by a Notice of Termination to the other. No
purported termination by the Employer of a Participant's employment shall be
effective if it is not pursuant to a Notice of Termination. Failure by a
Participant to provide Notice of Termination shall not limit any rights of the
Participant under the Plan except to the extent the Employer can demonstrate
that it suffered actual damages by reason of such failure.
3.2. Participant's Termination Rights. A Participant's right to terminate
his or her employment pursuant to the terms of the Plan shall not be affected by
the Participant's incapacity due to physical or mental illness. A Participant's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason pursuant to the terms of
the Plan. Termination by a Participant of the Participant's employment for Good
Reason shall constitute termination for Good Reason for all purposes of the
Plan, notwithstanding that the Participant may also thereby be deemed to have
"retired" under any applicable retirement programs of the Employer.
SECTION 4
TERMINATION PAYMENT
4.1. Qualification. To qualify for a termination payment under the Plan, a
Participant must (a) be a Participant as of the date of the Change in Control,
and (b) have a Termination of Employment within 24 months following a Change in
Control.
4.2. Amount. Subject to the eligibility requirement set forth in Section
4.1, and the limitations set forth in Section 4.4 and Section 5, termination
payments for Class I, Class II, Class III, Class IV and Class V Participants
shall be determined as follows:
4.2.1. Class I Participants. Termination payments shall be made to a Class
I Participant in an amount equal to the sum of (a) thirty-six (36) times the
Class I Participant's highest monthly base compensation during the six (6)
months immediately before the Date of Termination; and (b) all annual incentive
payments that the Class I Participant would have received for the year in which
the Date of Termination occurs, had required performance targets been met, which
shall be deemed to have occurred on the Date of Termination, whether or not they
have occurred or could possibly occur. Said payments shall be paid in a single
lump sum, discounted to present value, or by periodic payments consistent with
payroll practices of the Employer during a term to be determined by the Board.
The manner of payment shall be at the discretion of the Board.
Additionally, the Class I Participant shall receive the following: (a)
until the end of the thirty-sixth (36th) month following the month in which
occurs the Class I Participant's Date of Termination, the Employer will arrange
to provide the Class I Participant with welfare benefits (including life and
health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class I Participant except as otherwise set forth below)
as the welfare benefits and other employee benefits available to the Class I
Participant immediately prior to the Notice of Termination or immediately prior
to the date of the Change in Control, whichever is greater; but benefits
otherwise receivable by the Class I Participant pursuant to this clause (a)
shall be discontinued if the Class I Participant obtains full-time employment
providing welfare benefits during such period following such termination; and
(b) group outplacement counseling services up to $20,000 in value.
Notwithstanding the foregoing, the health insurance benefits to be provided to a
Class I Participant following the Class I participant's Date of Termination
shall be provided pursuant to Section 4980B of the Internal Revenue Code of
1986, as amended ("COBRA"), except that the Corporation will continue to pay the
employer portion of the premiums for such coverage, until the end of the period
of time provided under COBRA and thereafter the Corporation's obligation to
provide health insurance benefits shall be limited to the obligation to
contribute to the purchase of a health insurance policy selected and obtained by
the Class I participant, by payment to the Class I participant of an amount up
to but not exceeding the Corporation's cost of providing coverage under COBRA at
the time the COBRA period expired (not including any portion of such cost
contributed by the Class I participant). Notwithstanding the foregoing, the
Employer shall not be required to continue to provide disability benefits
following a Class I Participant's Date of Termination other than with respect to
benefits to which the Class I Participant became entitled prior to the Date of
Termination and which are required to be paid following such Date of Termination
in accordance with the terms of applicable disability plans or policies in
effect prior to such Date of Termination. The Class I Participant shall not be
required to mitigate the amount of any payment provided for under the Plan by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under the Plan be reduced by any compensation earned by the Class I
Participant as the result of employment by another employer after the Date of
Termination, or otherwise, except as set forth in clause (a) of this paragraph.
4.2.2. Class II Participants. Termination payments shall be made to a Class
II Participant in an amount equal to the sum of (a) twenty-four (24) times the
Class II Participant's highest monthly base compensation during the six (6)
months immediately before the Date of Termination; and (b) all annual incentive
payments that the Class II Participant would have received for the year in which
the Date of Termination occurs, had required performance targets been met, which
shall be deemed to have occurred on the Date of Termination, whether or not they
have occurred or could possibly occur. Said payments shall be paid in a single
lump sum, discounted to present value, or by periodic payments consistent with
payroll practices of the Employer during a term to be determined by the Board.
The manner of payment shall be at the discretion of the Board.
Additionally, the Class II Participant shall receive the following: (a)
until the end of the twenty-fourth (24th) month following the month in which
occurs the Class II Participant's Date of Termination, the Employer will arrange
to provide the Class II Participant with welfare benefits (including life and
health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class II Participant except as otherwise set forth
below) as the welfare benefits and other employee benefits available to the
Class II Participant immediately prior to the Notice of Termination or
immediately prior to the date of the Change in Control, whichever is greater;
but benefits otherwise receivable by the Class II Participant pursuant to this
clause (a) shall be discontinued if the Class II Participant obtains full-time
employment providing welfare benefits during such period following such
termination; and (b) group outplacement counseling services up to $15,000 in
value. Notwithstanding the foregoing, the health insurance benefits to be
provided to a Class II participant following the Class II participant's Date of
Termination shall be provided pursuant to Section 4980B of the Internal Revenue
Code of 1986, as amended ("COBRA"), except that the Corporation will continue to
pay the employer portion of the premiums for such coverage, until the end of the
period of time provided under COBRA, and thereafter the Corporation's obligation
to provide health insurance benefits shall be limited to the obligation to
contribute to the purchase of a health insurance policy selected and obtained by
the Class II participant, by payment to the Class II participant of an amount up
to but not exceeding the Corporation's cost of providing coverage under COBRA at
the time the COBRA period expired (not including any portion of such cost
contributed by the Class II participant). Notwithstanding the foregoing, the
Employer shall not be required to continue to provide disability benefits
following a Class II Participant's Date of Termination other than with respect
to benefits to which the Class II Participant became entitled prior to the Date
of Termination and which are required to be paid following such Date of
Termination in accordance with the terms of applicable disability plans or
policies in effect prior to such Date of Termination. The Class II Participant
shall not be required to mitigate the amount of any payment provided for under
the Plan by seeking other employment or otherwise, nor shall the amount of any
payment provided for under the Plan be reduced by any compensation earned by the
Class II Participant as the result of employment by another employer after the
Date of Termination, or otherwise, except as set forth in clause (a) of this
paragraph.
4.2.3. Class III Participants. Termination payments shall be made to a
Class III Participant in an amount equal to the sum of (a) twelve (12) times the
Class III Participant's highest monthly base compensation during the six (6)
months immediately before the Date of Termination; (b) all annual incentive
payments that the Class III Participant would have received for the year in
which the Date of Termination occurs, had required performance targets been met,
which shall be deemed to have occurred on the Date of Termination, whether or
not they have occurred or could possibly occur. Said payments shall be paid in a
single lump sum, discounted to present value, or by periodic payments consistent
with payroll practices of the Employer during a term to be determined by the
Board. The manner of payment shall be at the discretion of the Board.
Additionally, the Class III Participant shall receive the following: (a)
until the end of the twelfth (12th) month following the month in which occurs
the Class III Participant's Date of Termination, the Employer will arrange to
provide the Class III Participant with welfare benefits (including life and
health insurance benefits) and other employee benefits of substantially similar
design and cost (to the Class III Participant) as the welfare benefits and other
employee benefits available to the Class III Participant immediately prior to
the Notice of Termination or immediately prior to the date of the Change in
Control, whichever is greater; but benefits otherwise receivable by the Class
III Participant pursuant to this clause (a) shall be discontinued if the Class
II Participant obtains full-time employment providing welfare benefits during
such period following such termination; and (b) group outplacement counseling
services up to $10,000 in value. Notwithstanding the foregoing, the Employer
shall not be required to continue to provide disability benefits following a
Class III Participant's Date of Termination other than with respect to benefits
to which the Class III Participant became entitled prior to the Date of
Termination and which are required to be paid following such Date of Termination
in accordance with the terms of applicable disability plans or policies in
effect prior to such Date of Termination. The Class III Participant shall not be
required to mitigate the amount of any payment provided for under the Plan by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under the Plan be reduced by any compensation earned by the Class
III Participant as the result of employment by another employer after the Date
of Termination, or otherwise, except as set forth in clause (a) of this
paragraph.
4.2.4. Class IV Participants. Termination payments shall be made to a Class
IV Participant in an amount equal to the sum of (a) Nine (9) times the Class IV
Participant's highest monthly base compensation during the six (6) months
immediately before the Date of Termination; (b) all annual incentive payments
that the Class IV Participant would have received for the year in which the Date
of Termination occurs, had required performance targets been met, which shall be
deemed to have occurred on the Date of Termination, whether or not they have
occurred or could possibly occur. Said payments shall be paid in a single lump
sum, discounted to present value, or by periodic payments consistent with
payroll practices of the Employer during a term to be determined by the Board.
The manner of payment shall be at the discretion of the Board.
Additionally, the Class IV Participant shall receive the following: (a)
until the end of the ninth (12th) month following the month in which occurs the
Class IV Participant's Date of Termination, the Employer will arrange to provide
the Class IV Participant with welfare benefits (including life and health
insurance benefits) and other employee benefits of substantially similar design
and cost (to the Class IV Participant) as the welfare benefits and other
employee benefits available to the Class IV Participant immediately prior to the
Notice of Termination or immediately prior to the date of the Change in Control,
whichever is greater; but benefits otherwise receivable by the Class IV
Participant pursuant to this clause (a) shall be discontinued if the Class IV
Participant obtains full-time employment providing welfare benefits during such
period following such termination; and (b) group outplacement counseling
services up to $8,000 in value. Notwithstanding the foregoing, the Employer
shall not be required to continue to provide disability benefits following a
Class IV Participant's Date of Termination other than with respect to benefits
to which the Class IV Participant became entitled prior to the Date of
Termination and which are required to be paid following such Date of Termination
in accordance with the terms of applicable disability plans or policies in
effect prior to such Date of Termination. The Class IV Participant shall not be
required to mitigate the amount of any payment provided for under the Plan by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under the Plan be reduced by any compensation earned by the Class
IV Participant as the result of employment by another employer after the Date of
Termination, or otherwise, except as set forth in clause (a) of this paragraph.
4.2.5. Class V Participants. Termination payments shall be made to a Class
V Participant in an amount equal to the sum of (a) six (6) times the Class V
Participant's highest monthly base compensation during the six (6) months
immediately before the Date of Termination; (b) all annual incentive payments
that the Class V Participant would have received for the year in which the Date
of Termination occurs, had required performance targets been met, which shall be
deemed to have occurred on the Date of Termination, whether or not they have
occurred or could possibly occur. Said payments shall be paid in a single lump
sum, discounted to present value, or by periodic payments consistent with
payroll practices of the Employer during a term to be determined by the Board.
The manner of payment shall be at the discretion of the Board.
Additionally, the Class V Participant shall receive the following: (a)
until the end of the sixth (6th) month following the month in which occurs the
Class V Participant's Date of Termination, the Employer will arrange to provide
the Class V Participant with welfare benefits (including life and health
insurance benefits) and other employee benefits of substantially similar design
and cost (to the Class V Participant) as the welfare benefits and other employee
benefits available to the Class V Participant immediately prior to the Notice of
Termination or immediately prior to the date of the Change in Control, whichever
is greater; but benefits otherwise receivable by the Class V Participant
pursuant to this clause (a) shall be discontinued if the Class V Participant
obtains full-time employment providing welfare benefits during such period
following such termination; and (b) group outplacement counseling services up to
$5,000 in value. Notwithstanding the foregoing, the Employer shall not be
required to continue to provide disability benefits following a Class V
Participant's Date of Termination other than with respect to benefits to which
the Class V Participant became entitled prior to the Date of Termination and
which are required to be paid following such Date of Termination in accordance
with the terms of applicable disability plans or policies in effect prior to
such Date of Termination. The Class V Participant shall not be required to
mitigate the amount of any payment provided for under the Plan by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
the Plan be reduced by any compensation earned by the Class V Participant as the
result of employment by another employer after the Date of Termination, or
otherwise, except as set forth in clause (a) of this paragraph.
4.2.6 Sales Personnel Compensation. Notwithstanding the provisions herein
pertaining to the calculation of termination payments to Participants under
Sections 4.2.1 - 4.2.5 of the Plan, payments to sales personnel identified as
Participants shall be as follows: Termination payments shall be made to sales
personnel Participants in an amount equal to the number of months identified in
the Class to which each Participant is assigned times the average base salary
plus commissions earned on a monthly basis during the six (6) months immediately
before the Date of Termination. No additional incentive payments or bonuses
shall be included in the calculation of termination payments.
4.3 Cash Transaction Bonus. In the event of a Change in Control, and
notwithstanding their employment status following a Change in Control,
Participants identified by the Board may receive a Cash Bonus based on the value
of the Employer at the time of a Change in Control. To qualify for this Cash
Bonus payment, the Participant must be a Participant as of the date of the
Change in Control and must hold the same position, or have essentially the same
or higher level of responsibility, as held when being named as a Participant.
The Cash Bonus payments provided herein are intended to be paid to senior
executive officers and other key management personnel of the Employer. Cash
Bonus payments shall be paid only if the Employer achieves substantial growth in
value. Said Cash Bonus Awards are intended and designed to be in an amount, in
aggregate, between one percent (1%) and a maximum of four percent (4%) of the
value of the Employer at the time of a Change in Control, as measured based on
revenue levels.
4.4 Certain Additional Payments by the Company.
4.4.1 Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of a Participant identified by
the Board as eligible for the benefit provided in this Section 4.4 (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 4.4 (a "Payment") would be subject to the excise tax
imposed by Code Section 4999 or any interest or penalties are incurred by said
Participant 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 said Participant shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
said Participant retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
4.4.2 Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 4.4, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the Company, with the input of the Company's certified public accounting firm,
which shall provide detailed supporting calculations to the Participant within
15 business days of the receipt of notice that there has been a Payment. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to said Participant within a reasonable time. As a result of the
uncertainty in the application of Code Section 4999, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 4.4.3 and said Participant thereafter is required to make a payment of
any Excise Tax, the Company shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company.
4.4.3 Said Participant shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after said Participant is
informed in writing of such claim and shall appraise the Company of the nature
of such claim and the date on which such claim is requested to be paid. Said
Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which he or she gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies said Participant in
writing prior to the expiration of such period that it desires to contest such
claim, said participant shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company;
(iii) cooperate with the Company in good faith in order to effectively
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such
claim.
Provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold said Participant
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 4.4.3, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Participant to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the said Participant
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs said Participant to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to said Participant, on an
interest-free basis and shall indemnify and hold said Participant harmless, on
an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of said Participant with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and said
Participant shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
4.4.4 If, after the receipt by said Participant of an amount advanced by
the Company pursuant to Section 4.4.3, the said Participant becomes entitled to
receive any refund with respect to such claim said participant shall (subject to
the Company's complying with the requirements of Section 4.4.3) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by said
Participant of an amount advanced by the Company pursuant to Section 4.4.3, a
determination is made the said Participant shall not be entitled to any refund
with respect to such claim and the Company does not notify said Participant in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
4.5 Legal Fees and Expenses. The Employer will pay any legal fees and
expenses incurred by a Participant in connection with any dispute with any
Federal, state or local governmental agency with respect to benefits claimed
under the Plan. If the Participant utilizes arbitration to resolve any such
dispute, the Employer will pay any legal fees and expenses incurred by the
Participant in connection therewith.
SECTION 5
280G LIMITATION
The amount of any cash payment to be received by a Participant, other than
a Participant identified by the Board as eligible for the benefits provided in
Section 4.4, pursuant to the Plan shall be reduced (but not below zero) by the
amount, if any, necessary to prevent any part of any payment or benefit received
or to be received by the Participant in connection with a Change in Control
(whether payable pursuant to the terms of the Plan or any other plan, contract,
agreement or arrangement with the Employer, with any person whose actions result
in a Change in Control of the Employer or with any person constituting a member
of an "affiliated group" (as defined in section 280G(d)(5) of the Code)) (such
foregoing payments or benefits referred to collectively as the "Total
Payments"), from being treated as an "excess parachute payment" within the
meaning of section 280G(b) (l) of the Code, but only if and to the extent such
reduction will also result in, after taking into account all applicable state or
federal taxes (computed at the highest marginal rate), including any taxes
payable pursuant to section 4999 of the Code, a greater after-tax benefit to the
Participant than the after-tax benefit to the Participant of the Total Payments
computed without regard to any such reduction. For purposes of the foregoing,
(a) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Employer and acceptable to the
Participant does not constitute a "parachute payment" within the meaning of
section 280G (b) (2) of the Code; (b) any reduction in payments pursuant to the
Plan shall be computed by taking into account that portion of Total Payments
which constitute reasonable compensation within the meaning of section
28OG(b)(4) of the Code in the opinion of such tax counsel; (c) the value of any
non-cash benefit or of any deferred cash payment included in the Total Payments
shall be determined by the Employer in accordance with the principles of section
28OG(d)(4) of the Code; and (d) in the event of any uncertainty as to whether a
reduction in Total Payments to the Participant is required pursuant to the Plan,
the Employer shall initially make the payment to the Participant and the
Participant shall be required to refund to the Employer any amounts ultimately
determined not to have been payable under the terms of the Plan.
SECTION 6
AMENDMENT OR TERMINATION OF THE PLAN
The Plan may be terminated or amended at any time, at the discretion of the
Board. Except to the extent benefits have become payable but have not actually
been paid, the Plan terminates automatically on the second anniversary of the
date of a Change in Control.
SECTION 7
MISCELLANEOUS PROVISIONS
7.1. Non-exclusivity of Rights. Nothing in the Plan shall prevent or limit
any Participant's continuing or future participation in any benefit, bonus,
incentive, retirement or other plan or program provided by the Employer and for
which the Participant may qualify, nor shall anything in the Plan limit or
reduce such rights as any Participant may have under any other agreement with,
or plan, program, policy or practice of, the Employer. Amounts which are vested
benefits or which a Participant is otherwise entitled to receive under any
agreement with, or plan, program, policy or practice of, the Employer shall be
payable in accordance with such agreement, plan, program, policy or practice,
except as explicitly modified by the Plan.
7.2. Successors. The Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Employer or of any
division or subsidiary thereof employing any Participant to expressly assume and
agree to perform under the terms of the Plan in the same manner and to the same
extent that the Employer would be required to perform if no such succession had
taken place. Failure of the Employer to obtain such assumption and agreement
prior to the effectiveness of any such succession shall entitle each affected
Participant to compensation from the Employer in the same amount and on the same
terms as the Participant would be entitled under the Plan if the Participant
terminated employment for Good Reason following a Change in Control, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination and Notice
of Termination shall be deemed to have been given on such date.
7.3 Payments as Compensation. Payments under the Plan shall not be deemed
compensation for purposes for any retirement or 401(k) Plan maintained by the
Company.
7.4. Notice. Notices and all other communications provided for under the
Plan shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, postage prepaid, addressed
to the other party as follows:
If to the Employer, to:
Possis Medical, Inc.
Attention: General Counsel
9055 Evergreen Blvd. N.W.
Minneapolis, MN 55433
If to the Participant, to the address shown on the records of the Employer,
which the Employer shall keep up to date.
Either party may change its address for purposes of this Section 7.4 by
giving appropriate notice to the other party.
7.5. Governing Law. The validity, interpretation and construction of the
Plan shall be governed by the laws of the State of Minnesota, except to the
extent that federal law controls.
7.6. Validity. The invalidity or unenforceability of any provision of the
Plan shall not affect the validity or enforceability of any other provision of
the Plan, which shall remain in full force and effect.
7.7. Employment. The Plan does not constitute a contract of employment or
impose on the Employer any obligation to retain any Participant as an employee,
to continue any Participant's current employment status or to change any
employment policies of the Employer.
7.8. Termination Prior to a Change in Control. Any termination of the
Participant's employment by the Employer without Cause prior to a Change in
Control, and which occurs at the request or insistence of any person (other than
the Employer) in connection with a Change in Control shall be deemed to have
occurred after the Change in Control for purposes of the Plan.
SECTION 8
CLAIMS PROCEDURE
8.1. General. If a Participant believes that he or she may be entitled to
benefits, or the Participant is in disagreement with any determination that has
been made, the Participant may present a claim to the Employer.
8.2. Making a Claim. A Participant's claim must be written and must be
delivered to the Employer. Within 30 days after delivery of such claim, the
Participant shall receive either: (a) a decision; or (b) a notice describing
special circumstances requiring a specified amount of additional time (but no
more than 60 days from the date of delivery of such claim) to reach a decision.
If such claim is wholly or partially denied, the Participant shall receive
a written notice specifying: (a) the reasons for denial; (b) the Plan provisions
on which the denial is based; and (c) any additional information needed from the
Participant in connection with the claim and the reason such information is
needed. The Participant also shall receive a copy of Section 8.3 below
concerning the Participant's right to request a review.
8.3 Requesting Review of a Denied Claim. A Participant may request that a
denied claim be reviewed. Such request for review must be written and must be
delivered to the Employer within 30 days after the Participant receives the
written notice that the participant's claim was denied. Such request for review
may (but is not required to) include issues and comments the Participant wants
considered in the review. The Participant may examine pertinent Plan documents
by asking the Employer. Within 30 days after delivery by the Participant of the
Participant's request for review, the Participant shall receive either: (a) a
decision; or (b) a notice describing special circumstances requiring a specified
amount of additional time (but no more than 60 days from the date of delivery of
such request for review) to reach a decision. The decision shall be in writing
and shall specify the Plan provisions on which it is based.
8.4. Exhaustion of Administrative Remedies. No Participant (nor the estate
of any deceased Participant) may commence any legal action to recover Plan
benefits or to enforce or clarify rights under the Plan under Section 502 or
Section 510 of ERISA, or under any other provision of law, whether or not
statutory, until the claims and review procedures set forth herein have been
exhausted in their entirety.
8.5. Decisions. All decisions on claims and on reviews of denied claims
will be made by the Employer. The Employer may, in its discretion, hold one or
more hearings. If a Participant does not receive a decision within the specified
time, the Participant should assume that the claim was denied or re-denied on
the date the specified time expired. The Employer reserves the right to delegate
its authority to make decisions.
SECTION 9
DEFINITIONS
When the following terms are used in this document with initial capital
letters, they shall have the following meanings.
9.1. Cause - shall mean (i) the material breach by a Participant of any
obligation to the Company under the terms of this Plan; (ii) any acts of a
Participant constituting gross negligence or conduct which is demonstrably and
materially injurious to the Employer, monetarily or otherwise; (iii) Employees
breach of any fiduciary duty to the Employer; or (iv) a Participant's conviction
or the entry of a pleading of guilty or nolo contendere to any crime involving
moral turpitude. For purposes of this definition, no act, or failure to act, on
a Participant's part shall be deemed "willful" unless done, or omitted to be
done, by the Participant with reasonable belief that the Participant's action or
omission was not in the best interest of the Employer. Failure by a Participant
to perform the Participant's duties with the Employer during any period of
disability shall not constitute Cause.
9.2. Change in Control - shall mean:
(a) a change in 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 Employer is then subject to such reporting requirement; or
(b) 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 Employer 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 Employer (i) representing 25% or more, but
not more than 50%, of the combined voting power of the Employer's then
outstanding securities unless the transaction resulting in such ownership has
been approved in advance by the Continuing Directors (as hereinafter defined) or
(ii) representing more than 50% of the combined voting power of the Employer's
then outstanding securities (regardless of any approval by the Continuing
Directors); provided, however, that notwithstanding the foregoing, no Change in
Control shall be deemed to have occurred for purposes of the Plan by reason of
the ownership of 25% or more of the total voting capital stock of the Employer
then issued and outstanding by the Employer, any subsidiary of the Employer or
any employee benefit plan of the Employer or of any subsidiary of the Employer
or any entity holding shares of the common stock organized, appointed or
established for, or pursuant to the terms of, any such plan (any such person or
entity described in this clause is referred to herein as a "Employer Entity");
or
(c) the announcement of a tender offer by any person or entity (other than
an Employer Entity) for 20% or more of the Employer's voting capital stock then
issued and outstanding, which tender offer has not been approved by the Board, a
majority of the members of which are Continuing Directors, and recommended to
the shareholders of the Employer; or
(d) the Continuing Directors cease to constitute a majority of the
Employer's Board of Directors; or
(e) the shareholders of the Employer approve (i) any consolidation or
merger of the Employer in which the Employer is not the continuing or surviving
corporation or pursuant to which shares of Employer stock would be converted
into cash, securities or other property, other than a merger of the Employer in
which shareholders immediately prior to the merger have the same proportionate
ownership of stock of the surviving corporation immediately after the merger;
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of the
Employer; or (iii) any plan of liquidation or dissolution of the Employer.
9.3. Code - shall mean the Internal Revenue Code of 1986, as amended.
9.4. Continuing Director - shall mean any person who is a member of the
Board of Directors of the Employer, while such person is a member of the Board
of Directors, who is not an Acquiring Person (as hereinafter defined) or an
Affiliate or Associate (as hereinafter defined) of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
who (i) was a member of the Board of Directors as of the Effective Date 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 definition. "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 Employer representing 20% or more of the
combined voting power of the Employer's then outstanding securities, but shall
not include the Investors or any Employer Entity; and "Affiliate" and
"Associate" shall have their respective meanings ascribed to such terms in Rule
12(b)-2 promulgated under the Exchange Act.
9.5. Date of Termination - shall mean the date specified in the Notice of
Termination (except in the case of a Participant's death, in which case Date of
Termination shall be the date of death); provided, however, that if the
Participant's employment is terminated by the Employer, the date specified in
the Notice of Termination shall be at least 30 days from the date the Notice of
Termination is given to the Participant and if the Participant's employment is
terminated by the Participant for Good Reason, the date specified in the Notice
of Termination shall not be more than 60 days from the date the Notice of
Termination is given to the Employer.
9.6. Effective Date - shall mean September 15, 1999.
9.7. Employer - shall mean Possis Medical, Inc., a Minnesota corporation,
or any successor thereto pursuant to Section 7.2 hereof or by operation of law.
9.8. Good Reason - shall mean the occurrence, without a Participant's
express written consent, within 24 months following a Change in Control of any
one or more of the following:
(a) a significant reduction by the Employer in the Participant's base
salary as in effect immediately prior to the Change in Control or as the same
shall be increased from time to time;
(b) the Employer's requiring the Participant to be based at a location in
excess of thirty (30) miles from the location of the Participant's office
immediately prior to the Change in Control:
(c) the failure by the Employer to (i) continue in effect any material
compensation or benefit plan, program, policy or practice in which the
Participant was participating at the time of the Change in Control or (ii)
provide the Participant with compensation and benefits at least equal (in terms
of benefit levels and/or reward opportunities) to those provided for under each
employee benefit plan, program, policy and practice as in effect immediately
prior to the Change in Control (or as in effect following the Change in Control,
if greater);
(d) the failure of the Employer to obtain a satisfactory agreement from any
Successor to the Employer to assume and agree to perform under the Plan, as
contemplated in Section 7.2 hereof;
(e) any purported termination by the Employer of the Participant's
employment that is not effected pursuant to a Notice of Termination (as
hereinafter defined); and
(f) the assignment by the Employer to the Participant of any duties
inconsistent in any respect with Participant's position (including status,
offices, titles, and reporting requirements), authorities, duties, or other
responsibilities as in effect immediately prior to the Change in Control or any
other action of the Employer which results in a diminishment in such position,
authority, duties, or responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Employer promptly after receipt of
notice thereof given by the Participant.
9.9. Notice of Termination - shall mean a written notice, which shall set
forth the Date of Termination and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Participant's employment.
9.10. Participant - shall mean the employees of the Employer identified as
such by the Board, as the same may be modified by the Employer from time to
time. Each Participant shall be assigned to Class I, Class II, Class III, Class
IV or Class V provided in Section 4 herein.
9.11. Plan - shall mean the termination pay plan of the Employer
established for the benefit of the Participants in the event of a Change in
Control. The Plan shall be referred to as the "Possis Medical, Inc. Change in
Control Termination Pay Plan."
9.12. Plan Year - the twelve consecutive month period ending on any
December 31.
9.13. Termination of Employment - shall mean termination of a Participant's
employment (a) by the Employer for any reason other than Cause or (b) by a
Participant for Good Reason; but shall not include termination by reason of a
Participant's death.
Approved by action of the Executive Committee
of the Possis Medical, Inc. Board of Directors
by Action in Writing effective October 28, 1999
Irving R. Colacci, Secretary
Amended Effective
December 6, 1999
Irving R. Colacci, Secretary
Amended Effective
April 3, 2001
Irving R. Colacci, Secretary