EXHIBIT 10.4
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
Edwards Lifesciences Corporation
April 2000
CONTENTS
- -------------------------------------------------------------------------------
Article 1. Definitions 1
Article 2. Severance Benefits 4
Article 3. Form and Timing of Severance Benefits 7
Article 4. Excise Tax 7
Article 5. The Company's Payment Obligation 8
Article 6. Term of Agreement 8
Article 7. Legal Remedies 9
Article 8. Successors 9
Article 9. Miscellaneous 9
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
EDWARDS LIFESCIENCES CORPORATION
THIS CHANGE-IN-CONTROL SEVERANCE AGREEMENT is made, entered into, and is
effective as of the _______ day of ________, 2000 (hereinafter referred to as
the "Effective Date"), by and between Edwards Lifesciences Corporation (the
"Company"), a Delaware corporation, and ____________________ (the "Executive").
WHEREAS, the Executive is currently employed by the Company in a key
management capacity; and
WHEREAS, the Executive possesses considerable experience and knowledge of
the business and affairs of the Company concerning its policies, methods,
personnel, and operations; and
WHEREAS, the Company is desirous of assuring insofar as possible, that it
will continue to have the benefit of the Executive's services; and the Executive
is desirous of having such assurances; and
WHEREAS, the Company recognizes that circumstances may arise in which a
Change in Control of the Company occurs, through acquisition or otherwise,
thereby causing uncertainty of employment without regard to the Executive's
competence or past contributions. Such uncertainty may result in the loss of the
valuable services of the Executive to the detriment of the Company and its
shareholders; and
WHEREAS, both the Company and the Executive are desirous that any proposal
for a Change in Control will be considered by the Executive objectively and with
reference only to the business interests of the Company and its shareholders;
and
WHEREAS, the Executive will be in a better position to consider the
Company's best interests if the Executive is afforded reasonable security, as
provided in this Agreement, against altered conditions of employment which could
result from any such Change in Control.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE 1. DEFINITIONS
Wherever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
1.1 "AGREEMENT" means this Change-in-Control Severance Agreement.
1
1.2 "BASE SALARY" means, at any time, the then-regular annual rate
of pay which the Executive is receiving as annual salary, excluding amounts:
(i) received under short- or long-term incentive or other bonus plans,
regardless of whether or not the amounts are deferred or (ii) designated by
the Company as payment toward reimbursement of expenses.
1.3 "BOARD" means the Board of Directors of the Company.
1.4 "CAUSE" shall be determined solely by the Board in the exercise
of good faith and reasonable judgment, and shall mean the occurrence of any
one or more of the following:
(i) A continuing material breach by the Executive of the
duties and responsibilities of the Executive, which duties
shall not differ in any material respect from the duties
and responsibilities of the Executive during the 90-day
period immediately prior to a Change in Control (other
than as a result of incapacity due to a physical or mental
condition or illness), which breach is demonstrably
willful and deliberate on the Executive's part, is
committed in bad faith and without a reasonable belief
that such a breach is in the best interests of the
Company, and is not remedied in a reasonable period of
time after receipt of written demand for substantial
performance is delivered to the Executive by the Board
that specifically identifies the manner in which the Board
believes the Executive has breached such duties and
responsibilities; or
(ii) The Executive's willfully engaging in conduct that is
demonstrably and materially injurious to the Company,
monetarily or otherwise; or
(iii) The Executive's conviction of a felony.
However, no act or failure to act on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the action or omission was in the best
interest of the Company.
1.5 "CHANGE IN CONTROL" of the Company shall mean the occurrence of
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)
(other than the Company, any corporation owned, directly
or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, and any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or such proportionately owned corporation), is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended),
directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined
voting power of the Company's then outstanding securities;
or
(b) During any period of not more than twenty-four (24)
months, individuals who at the beginning of such period
constitute the Board of Directors of the Company,
2
and any new director (other than a director designated by
a Person who has entered into an agreement with the
Company to effect a transaction described in Sections
1.5(a), 1.5(c), or 1.5(d) of this Section 1.5) whose
election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was previously
so approved, cease for any reason to constitute at least a
majority thereof; or
(c) The consummation of a merger or consolidation of the
Company with any other entity, other than: (i) 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) more than sixty percent (60%) of the
combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately
after such merger or consolidation; or (ii) a merger or
consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no Person
acquires more than thirty percent (30%) of the combined
voting power of the Company's then outstanding securities;
or
(d) The Company's stockholders approve a plan of complete
liquidation or dissolution of the Company, or an agreement
for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any
transaction having a similar effect).
1.6 "CODE" means the Internal Revenue Code of 1986, as amended.
1.7 "COMPANY" means Edwards Lifesciences Corporation, a Delaware
corporation (including any and all subsidiaries), or any successor thereto as
provided in Article 8 herein.
1.8 "DISABILITY" shall have the meaning ascribed to such term in
the Executive's governing long-term disability plan as of the Effective Date.
1.9 "EFFECTIVE DATE" means the date specified in the opening
sentence of this Agreement.
1.10 "EFFECTIVE DATE OF TERMINATION" means the date on which a
Qualifying Termination occurs, as provided in Section 2.2 herein, which
triggers the payment of Severance Benefits hereunder.
1.11 "GOOD REASON" means, without the Executive's express written
consent, the occurrence after a Change in Control of the Company of any one
or more of the following:
(i) The assignment of the Executive to duties materially
inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles,
and reporting requirements) as an executive and/or officer
of the Company, or a material reduction or alteration in
the nature or status of the Executive's authorities,
duties, or responsibilities from those in effect as of
ninety (90)
3
calendar days prior to the Change in Control, other than
an insubstantial and inadvertent act that is remedied by
the Company promptly after receipt of notice thereof given
by the Executive;
(ii) The Company's requiring the Executive to be based at a
location in excess of fifty (50) miles from the location
of the Executive's principal job location or office
immediately prior to the Change in Control; except for
required travel on the Company's business to an extent
substantially consistent with the Executive's then present
business travel obligations;
(iii) A reduction by the Company of the Executive's Base Salary
in effect on the Effective Date hereof, or as the same
shall be increased from time to time;
(iv) The failure of the Company to continue in effect any of
the Company's short- and long-term incentive compensation
plans, or employee benefit or retirement plans, policies,
practices, or other compensation arrangements in which the
Executive participates, unless the Executive is permitted
to participate in other plans that provide the Executive
with substantially comparable benefits; or the failure by
the Company to continue the Executive's participation
therein on substantially the same basis, both in terms of
the amount of benefits provided and the level of the
Executive's participation relative to other participants,
as existed immediately prior to the Change in Control of
the Company;
(v) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform the Company's obligations under this
Agreement, as contemplated in Article 8 herein; and
(vi) The Company, or any successor company, commits a material
breach of any of the material provisions of this
Agreement.
The Executive's right to terminate employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason herein.
1.12 "QUALIFYING TERMINATION" means any of the events described in
Section 2.2 herein, the occurrence of which triggers the payment of Severance
Benefits hereunder.
1.13 "SEVERANCE BENEFITS" means the payment of severance
compensation as provided in Section 2.3 herein.
ARTICLE 2. SEVERANCE BENEFITS
2.1 RIGHT TO SEVERANCE BENEFITS. The Executive shall be entitled to
receive from the Company Severance Benefits as described in Section 2.3
herein, if there has been a Change in Control of the Company and if, within
twenty-four (24) calendar months thereafter, the Executive's employment with
the Company shall end for any reason specified in Section 2.2 herein as being
a Qualifying Termination.
4
The Executive shall not be entitled to receive Severance Benefits if he is
terminated for Cause, or if his employment with the Company ends due to death,
Disability, voluntary normal retirement (as defined under the then established
rules of the Company's tax-qualified retirement plan), or due to a voluntary
termination of employment for a reason other than that specified in Section
2.2(b) herein.
2.2 QUALIFYING TERMINATION. The occurrence of either of the
following events within twenty-four (24) calendar months after a Change in
Control of the Company shall trigger the payment of Severance Benefits to the
Executive under this Agreement:
(a) The Company's involuntary termination of the Executive's
employment without Cause; or
(b) The Executive's voluntary employment termination for Good
Reason.
In addition, if the Executive's employment is involuntarily terminated
without Cause by the Company within six (6) months prior to a Change in Control,
such termination shall also be considered a Qualifying Termination occurring
during the twenty-four (24) month period following a Change in Control. For
purposes of this Agreement, a Qualifying Termination shall not include a
termination of employment by reason of death, Disability, or voluntary normal
retirement (as such term is defined under the then established rules of the
Company's tax-qualified retirement plan), the Executive's voluntary termination
for a reason other than that specified in Section 2.2(b) herein, or the
Company's involuntary termination for Cause.
2.3 DESCRIPTION OF SEVERANCE BENEFITS. In the event that the
Executive becomes entitled to receive Severance Benefits, as provided in
Sections 2.1 and 2.2 herein, the Company shall pay to the Executive and
provide him with total Severance Benefits equal to all of the following:
(a) A lump-sum amount equal to the Executive's unpaid Base
Salary, accrued vacation pay, unreimbursed business
expenses, and all other items earned by and owed to the
Executive through and including the Effective Date of
Termination.
(b) A lump-sum amount equal to the Executive's annual target
bonus amount, established under the annual bonus plan in
which the Executive is then participating, for the bonus
plan year in which the Executive's Effective Date of
Termination occurs, multiplied by a fraction the numerator
of which is the number of full completed months in the
bonus plan year through the Effective Date of Termination,
and the denominator of which is twelve (12). This payment
will be in lieu of any other payment to be made to the
Executive under the annual bonus plan in which the
Executive is then participating for that plan year.
(c) A lump-sum amount equal to three (3) multiplied by the
higher of the Executive's annual rate of Base Salary in
effect upon the Effective Date of Termination, or the
Executive's highest annual rate of Base Salary in effect
during the twelve (12) months preceding the date of the
Change in Control.
5
(d) A lump-sum amount equal to three (3) multiplied by the
higher of the Executive's annual target bonus established
under the annual bonus plan in which the Executive is then
participating for the bonus plan year in which the
Executive's Effective Date of Termination occurs, or the
actual annual bonus payment made to the Executive under the
annual bonus plan in which the Executive participated in
the year preceding the year in which the Effective Date of
Termination occurs.
(e) All long-term incentive awards shall be subject to the
treatment provided under the Company's Long-Term Stock
Incentive Compensation Program (as amended, or any
successor plans thereto) and/or the applicable award
agreements thereunder.
(f) A continuation for thirty-six (36) months of the
Executive's medical insurance and dental insurance
coverage. These benefits shall be provided by the Company
to the Executive beginning immediately upon the Effective
Date of Termination. Such benefits shall be provided to the
Executive at the same coverage level (with all premium
costs borne by the Company) as in effect as of the
Executive's Effective Date of Termination for a period of
thirty-six (36) months following the Executive's Effective
Date of Termination.
Notwithstanding the above, these medical and dental
insurance benefits shall be discontinued prior to the end
of the stated continuation period in the event the
Executive receives substantially similar benefits from a
subsequent employer, as determined solely by the Board in
good faith. However, if the benefits received from the
subsequent employer do not cover the preexisting medical
conditions of the Executive or a covered member of the
Executive's family, the continuation period shall continue,
but not beyond the thirty-sixth (36th) month following the
Executive's Effective Date of Termination. For purposes of
enforcing this offset provision, the Executive shall be
deemed to have a duty to keep the Company informed as to
the terms and conditions of any subsequent employment and
the corresponding benefits earned from such employment and
shall provide, or cause to provide, to the Company in
writing correct, complete, and timely information
concerning the same.
(g) For a period of up to thirty-six (36) months following a
Change in Control, the Executive shall be entitled, at the
expense of the Company, to receive standard outplacement
services from a nationally recognized outplacement firm of
the Executive's selection. However, the Company's total
obligation shall not exceed seventy-five thousand dollars
($75,000.00).
2.4 TERMINATION DUE TO DISABILITY. Following a Change in Control,
if the Executive's employment is terminated with the Company due to
Disability, the Executive's benefits shall be determined in accordance with
the Company's retirement, insurance, and other applicable plans and programs
then in effect.
2.5 TERMINATION DUE TO RETIREMENT OR DEATH. Following a Change in
Control, if the Executive's employment with the Company is terminated by
reason of his voluntary normal retirement (as defined under the then
established rules of the Company's tax-qualified retirement
6
plan), or death, the Executive's benefits shall be determined in accordance with
the Company's retirement, survivor's benefits, insurance, and other applicable
programs then in effect.
2.6 TERMINATION FOR CAUSE OR BY THE EXECUTIVE OTHER THAN FOR GOOD
REASON. Following a Change in Control, if the Executive's employment is
terminated either: (i) by the Company for Cause; or (ii) voluntarily by the
Executive for a reason other than that specified in Section 2.2(b) herein,
the Company shall pay the Executive his full Base Salary at the rate then in
effect, accrued vacation, and other items earned by and owed to the Executive
through the Effective Date of Termination, plus all other amounts to which
the Executive is entitled under any compensation plans of the Company at the
time such payments are due, and the Company shall have no further obligations
to the Executive under this Agreement.
2.7 NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company for Cause or by the Executive for Good Reason shall
be communicated by Notice of Termination to the other party. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied
upon, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provision so indicated.
ARTICLE 3. FORM AND TIMING OF SEVERANCE BENEFITS
3.1 FORM AND TIMING OF SEVERANCE BENEFITS. The Severance Benefits
described in Sections 2.3(a), 2.3(b), 2.3(c), and 2.3(d) herein shall be paid
in cash to the Executive in a single lump sum as soon as practicable
following the Effective Date of Termination, but in no event beyond ten (10)
calendar days from such date. The Severance Benefits described in Section
2.3(f) shall be provided over the period specified; the Severance Benefits
described in Section 2.3(g) shall be paid or provided as and when invoiced.
3.2 WITHHOLDING OF TAXES. The Company shall withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes
as legally shall be required.
ARTICLE 4. EXCISE TAX
4.1 EXCISE TAX PAYMENT. If any portion of the Severance Benefits or
any other payment under this Agreement, or under any other agreement with, or
plan of the Company (in the aggregate, "Total Payments") would constitute an
"excess parachute payment," such that a golden parachute excise tax is due,
the Company shall provide to the Executive, in cash, an additional payment in
an amount sufficient to cover the full cost of any excise tax and all of the
Executive's additional state and federal income, excise, and employment taxes
that arise on this additional payment (cumulatively, the "Full Gross-Up
Payment"), such that the Executive is in the same after-tax position as if he
had not been subject to the excise tax. For this purpose, the Executive shall
be deemed to be in the highest marginal rate of federal and state taxes. This
payment shall be made as soon as possible following the date of the
Executive's Qualifying Termination, but in no event later than ten (10)
calendar days from such date.
For purposes of this Agreement, the term "excess parachute payment" shall
have the meaning assigned to such term in Section 280G of the Internal Revenue
Code, as amended (the "Code"), and the term "excise tax" shall mean the tax
imposed on such excess parachute payment pursuant to Sections 280G and 4999 of
the Code.
7
4.2 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service subsequently adjusts the excise tax computation herein described, the
Company shall reimburse the Executive for the full amount necessary to make
the Executive whole on an after-tax basis (less any amounts received by the
Executive that the Executive would not have received had the computations
initially been computed as subsequently adjusted), including the value of any
underpaid excise tax, and any related interest and/or penalties due to the
Internal Revenue Service.
ARTICLE 5. THE COMPANY'S PAYMENT OBLIGATION
5.1 PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to make
the payments and the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances including,
without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else. All
amounts payable by the Company hereunder shall be paid without notice or
demand. Each and every payment made hereunder by the Company shall be final,
and the Company shall not seek to recover all or any part of such payment
from the Executive or from whomsoever may be entitled thereto, for any
reasons whatsoever.
The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any provision of
this Agreement, and the obtaining of any such other employment shall in no
event effect any reduction of the Company's obligations to make the payments
and arrangements required to be made under this Agreement, except to the
extent provided in Section 2.3(f) herein.
5.2 CONTRACTUAL RIGHTS TO BENEFITS. This Agreement establishes and
vests in the Executive a contractual right to the benefits to which he is
entitled hereunder. However, nothing herein contained shall require or be
deemed to require, or prohibit or be deemed to prohibit, the Company to
segregate, earmark, or otherwise set aside any funds or other assets, in
trust or otherwise, to provide for any payments to be made or required
hereunder.
ARTICLE 6. TERM OF AGREEMENT
This Agreement will commence on the Effective Date first written above,
and shall continue in effect irrevocably for three (3) full calendar years.
However, at the end of the first year of such three-year (3) period, this
Agreement shall be extended automatically for one (1) additional year, unless
the Company notifies the Executive in writing, prior to the occurrence of the
automatic extension, that the term of this Agreement will not be extended.
Moreover, upon the end of each subsequent year, this Agreement shall also be
extended automatically for one (1) additional year, unless the Company
otherwise notifies the Executive in writing prior to the occurrence of such
automatic extension. In the case where the Company properly notifies the
Executive that the Agreement will no longer be extended, the Agreement will
terminate at the end of the term, or extended term, then in progress.
However, in the event a Change in Control occurs during the original or
any extended term, this Agreement will remain in effect for twenty-four (24)
months beyond the month in which such Change in Control occurred.
8
ARTICLE 7. LEGAL REMEDIES
7.1 DISPUTE RESOLUTION. The Executive shall have the right and
option to elect to have any good faith dispute or controversy arising under
or in connection with this Agreement settled by litigation or arbitration. If
arbitration is selected, such proceeding shall be conducted by final and
binding arbitration before a panel of three (3) arbitrators in accordance
with the rules and under the administration of the American Arbitration
Association.
7.2 PAYMENT OF LEGAL FEES. In the event that it shall be necessary
or desirable for the Executive to retain legal counsel and/or to incur other
costs and expenses in connection with the enforcement of any or all of his
rights under this Agreement, the Company shall pay (or the Executive shall be
entitled to recover from the Company) the Executive's attorneys' fees, costs,
and expenses in connection with a good faith enforcement of his rights
including the enforcement of any arbitration award. This shall include,
without limitation, court costs and attorneys' fees incurred by the Executive
as a result of any good faith claim, action, or proceeding, including any
such action against the Company arising out of, or challenging the validity
or enforceability of this Agreement or any provision hereof.
ARTICLE 8. SUCCESSORS
The Company shall require any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of property or
stock, liquidation, or otherwise) of all or substantially all of the assets
of the Company by agreement, in form and substance satisfactory to the
Executive, 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. Regardless of whether such
agreement is executed, this Agreement shall be binding upon any successor in
accordance with the operation of law and such successor shall be deemed the
"Company" for purposes of this Agreement.
ARTICLE 9. MISCELLANEOUS
9.1 EMPLOYMENT STATUS. This Agreement is not, and nothing herein
shall be deemed to create, an employment contract between the Executive and
the Company or any of its subsidiaries. Subject to the terms of any
employment contract between the Executive and the Company, the Executive
acknowledges that the rights of the Company remain wholly intact to change or
reduce at any time and from time to time his compensation, title,
responsibilities, location, and all other aspects of the employment
relationship, or to discharge him prior to a Change in Control (subject to
such discharge possibly being considered a Qualifying Termination pursuant to
Section 2.2).
9.2 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the Company and the Executive with respect to the subject
matter hereof. In addition, the payments provided for under this Agreement in
the event of the Executive's termination of employment shall be in lieu of
any severance benefits payable under any employment contract between the
Executive and the Company or any severance plan, program, or policy of the
Company to which he might otherwise be entitled.
9.3 NOTICES. All notices, requests, demands, and other
communications hereunder shall be sufficient if in writing and shall be
deemed to have been duly given if delivered by hand or if sent by registered
or certified mail to the Executive at the last address he has filed in
writing with the Company or, in the case of the Company, at its principal
offices.
9
9.4 EXECUTION IN COUNTERPARTS. This Agreement may be executed by
the parties hereto in counterparts, each of which shall be deemed to be an
original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
9.5 CONFLICTING AGREEMENTS. The executive hereby represents and
warrants to the Company that his entering into this Agreement, and the
obligations and duties undertaken by him hereunder, will not conflict with,
constitute a breach of, or otherwise violate the terms of, any other
employment or other agreement to which he is a party, except to the extent
any such conflict, breach, or violation under any such agreement has been
disclosed to the Board in writing in advance of the signing of this Agreement.
9.6 SEVERABILITY. In the event any provision of this Agreement
shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Agreement, and the Agreement
shall be construed and enforced as if the illegal or invalid provision had
not been included. Further, the captions of this Agreement are not part of
the provisions hereof and shall have no force and effect.
Notwithstanding any other provisions of this Agreement to the contrary,
the Company shall have no obligation to make any payment to the Executive
hereunder to the extent, but only to the extent, that such payment is prohibited
by the terms of any final order of a Federal or state court or regulatory agency
of competent jurisdiction; provided, however, that such an order shall not
affect, impair, or invalidate any provision of this Agreement not expressly
subject to such order.
9.7 MODIFICATION. No provision of this Agreement may be modified,
waived, or discharged unless such modification, waiver, or discharge is
agreed to in writing and signed by the Executive and by a member of the
Board, as applicable, or by the respective parties' legal representatives or
successors.
9.8 APPLICABLE LAW. To the extent not preempted by the laws of the
United States, the laws of Delaware shall be the controlling law in all
matters relating to this Agreement without giving effect to principles of
conflicts of laws.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
_____ day of _________, 2000.
10