1
EXHIBIT 12
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is effective June 1, 2001
("Effective Date"), by and between Richard E. Riley (the "Executive") and
Cardiac Pathways Corporation (the "Company"). In consideration of the mutual
promises made herein, the Company and Executive agree as follows:
1. The Company hereby agrees to continue to employ Executive and Executive
hereby accepts continued employment as Executive Vice President,
Research & Development with the Company.
2. Executive states and acknowledges that, by entering into this
Agreement, he foregoes and extinguishes any rights existing in any
prior contract, either express or implied, with the Company. The
parties enter into this Agreement with the express understanding that
it supercedes and replaces the written agreement between Executive and
the Company, entered into on or about June 1, 1992, and that it
supercedes and replaces all the terms, including, but not limited to,
those governing compensation, benefits and grounds for termination,
either stated in or implied by that agreement.
3. The Company agrees to pay Executive an annual base salary of
$194,175.00 payable in accordance with the Company's standard payroll
policy.
4. Executive is entitled to participate in an incentive bonus program
established by the Company. The incentive bonus program is based upon
individual and Company performance and has a target payout of 30% of
Executive's base salary.
5. Executive has been previously granted options to acquire a specified
number of shares of the Company's Common Stock. The vesting of these
options shall be over a four-year period, with 12/48th having been
vested in Executive's first year of employment and the remaining
options vesting beginning with the 13th month and each month thereafter
at the rate of 1/48th of the total shares each month of Executive's
continued employment with the Company. The stock options shall be
awarded pursuant to the terms set forth in the Company's standard stock
option agreement, which is incorporated herein by reference. The
vesting schedule specified herein shall be modified upon the occurrence
of the events specified in and described by the terms of Sections 6 and
7 of this Agreement.
6. a. The term of this Agreement shall commence upon execution and shall
continue until terminated by either party in accordance with the
provisions of this Section 6.
b. This Agreement may be terminated by the Company at any time for
Justifiable Cause (as hereinafter defined) provided that the
Company shall pay Executive, as a severance payment, an amount
equal to the sum of his then current monthly base salary for one
month following the date of termination. For the purpose of this
2
Agreement, the term "Justifiable Cause" shall include the
occurrence of any of the following events: (i) Executive's
conviction for, or plea of nolo contendere, a felony or a crime
involving moral turpitude, (ii) Executive's commission of an act
of personal dishonesty or breach of fiduciary duty involving
personal profit in connection with the Company, iii) Executive's
commission of an act, or failure to act, which Executive's
supervisor at the Company shall reasonably have found to have
involved misconduct or gross negligence on the part of Executive,
in the conduct of his duties hereunder, iv) habitual absenteeism,
alcoholism or drug dependency on the part of Executive which
interfere with the performance of his duties hereunder, (v)
Executive's willful and material breach or refusal to perform his
services as provided herein, (vi) any other material breach of
this Agreement; or (vii) the willful and material failure or
refusal to carry out a direct request of Executive's supervisor.
The payment to Executive of the severance payment described in
this Section 6(b) will discharge all of the Company's obligations
to Executive.
c. This Agreement may be terminated by the Company at any time
without Justifiable Cause provided that the Company shall pay
Executive, as a severance payment, a lump sum payment equal to the
sum of the Executive's current annual base salary and the larger
of the Executive's prior year actual annual bonus or the
Executive's annual target incentive bonus. The Company will also
provide a lump sum payment to cover the full costs of COBRA
coverage for health, dental and vision benefits consistent with
the Executive's current election for a period of twelve months
following the date of termination. This payment will be grossed up
for taxes so as to provide the Executive with a net payment that
will cover the full cost of all COBRA coverage. In addition, the
Company will pay the executive for any excise tax liability he may
incur pursuant to section 280(G) of the Internal Revenue Code by
reason of payments made under this agreement. This payment will be
grossed up for taxes so as to assure that the Executive does not
incur any additional tax liability as a result of the excise tax
payment. All payments made pursuant to this Section 6(c) are
subject to Executive entering into a standard form of mutual
release of claims. The payment of Executive of the severance
payment described in this Section 6(c) will discharge all of the
Company's obligations (subject to the provisions noted in Section
7) to Executive.
d. This Agreement maybe terminated by Executive at any time upon 30
days written notice, in which case the Company shall have no
severance or other obligations to Executive.
e. The Constructive Termination (as defined herein) of the Executive
shall be treated as an involuntary termination of employment
without Justifiable Cause under this Section 6(d) and Section
6(c). Executive's employment need not terminate for a Constructive
Termination to occur hereunder. For purposes of this Agreement, a
Constructive Termination shall mean a material reduction in salary
or benefits, a material change in responsibilities, including a
reduction in duties only by virtue of the Company being acquired
and made part of a larger entity (for example, the Chief Financial
Officer of the Company remains as such following a Change of
Control and
3
is not made the Chief Financial Officer of the acquirer), a
requirement to relocate, except for office relocations that would
not increase Executive's one-way commute distance by more than
thirty-five (35) miles.
f. Upon Executive's involuntary termination of employment from the
Company (for any reason other than for Justifiable Cause),
including a Constructive Termination as defined above, and subject
to Executive entering into a standard form of mutual release of
claims, all unvested shares of Common Stock described in Section 5
above and any subsequent options that are awarded shall be fully
and immediately exercisable.
7. Upon a Change of Control (as defined below), all unvested shares of
Common Stock described in Section 5 above, and any subsequent options
that are awarded and that are not vested, shall be fully and
immediately vested and exercisable. For purposes of this Section 7, a
Change of Control shall be defined as a merger, acquisition,
reorganization, or sale of all or substantially all of the shares of
the Company in which the shareholders of the Company immediately prior
to the transaction possess less than fifty percent (50%) of the voting
power of the surviving entity (or its parent) immediately after the
transaction or as a merger, acquisition or sale of all or substantially
all of the assets of the Company.
8. Executive will be eligible to participate in any insurance or other
benefit plan as may be sponsored or maintained by the Company from time
to time for its employees. Cardiac Pathways currently offers medical,
dental, vision, life and long-term disability insurance, a 401k,
flexible benefits and an employee stock purchase plan. Executive's
rights or those of Executive's dependents under any benefits policies
or plans provided by the Company shall be governed solely by the terms
of such policies or plans, and to the extent those plans may conflict
with any term herein, the plans shall control. The Company reserves to
itself, or its designated administrators, exclusive authority and
discretion to determine all issues of eligibility, interpretation and
administration of each such benefit plan or policy. The Company's
employment benefits, and policies related thereto, are subject to
termination, modification or limitation at the Company's sole
discretion.
9. This Agreement is contingent upon the Executive adhering to and
maintaining an updated Proprietary Information agreement.
4
10. Executive's employment is at will, as defined under applicable law,
except as modified by the terms herein. If Executive's employment
terminates for any reason, Executive shall not be entitled to any
payments, benefits, damages, awards or compensation other than as
provided above, or as otherwise be available in accordance with the
Company's established employee plans and policies at the time of
termination. The terms of this agreement represent the entire
employment agreement between the Company and you and cannot be modified
except in writing signed by the President & CEO.
/s/ RICHARD E. RILEY June 19, 2001
- ------------------------------- ------------------
RICHARD E. RILEY DATE
/s/ THOMAS M. PRESCOTT June 19, 2001
- ------------------------------- ------------------
THOMAS M. PRESCOTT DATE
PRESIDENT & CEO
CARDIAC PATHWAYS CORPORATION