1
Exhibit 10.15
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement is entered into this 12th day of August,
2000 between MiniMed Inc., a Delaware corporation (the "Company") and Steven
Schultz (the "Executive").
R E C I T A L S
The Company considers it essential and in the best interest of its
stockholders to foster the continuous employment of key management personnel.
The Company further recognizes that, as in the case of many publicly held
corporations, the possibility of a change of control of the Company may exist
and that such possibility, and the uncertainty and questions which it may raise
among management, may create concerns for, and the distraction of, management
personnel and may even result in departures which might have otherwise not have
taken place, all to the detriment of the Company and its stockholders. The
Company now desires to take steps 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 of
control of the Company.
A G R E E M E N T
1. Payment of Severance Benefits Upon Change of Control. In the event of a
Change of Control of the Company (as defined in Section 3) during the two-year
period from the date of this Agreement, the Executive shall be entitled to the
benefits set forth in Section 2 (the "Severance Benefits"), but only if:
(a) the Executive's employment by the Company or the successor owner
of its business is terminated by the Company or such successor without
Cause (as defined in Section 4) during the two years after the occurrence
of the Change of Control;
(b) the Executive terminates his or her employment with the Company or
its successor (i) for Good Reason (as defined in Section 5) during the two
years after the occurrence of the Change of Control or (ii) with or without
Good Reason during the thirty day period after the first anniversary of the
Change of Control provided that the Executive gives the Company at least
sixty (60) days prior written notice of any such termination pursuant to
this clause (ii);
(c) the Executive's employment by the Company is terminated by the
Company within three months prior to the Change of Control and such
termination (i) was at the request of a third party who had taken steps to
effect the Change of Control at the time of the request or (ii) otherwise
arose in connection with or in anticipation of the Change of Control; or
(d) the Executive terminates his or her employment with the Company
for Good Reason within three months prior to the Change of Control and the
event referred to in Section 5 (a), (b) or (c) constituting Good Reason (i)
occurs at the request of a third party who had taken steps to effect the
Change of Control at the time of the request or (ii) otherwise arose in
connection with or in anticipation of the Change of Control.
A termination of the Executive's employment coupled with an offer of
employment by an Affiliate of the Company will not constitute a termination of
employment for purposes of this Agreement unless the terms of employment offered
would constitute Good Reason for the Executive to terminate his or her
employment if they were imposed by the Company and then only if the Executive
does not accept the offer. Any resignation by the Executive at the request of
the Board of Directors shall be treated as a termination by the Company pursuant
to (a) or (c) above (whichever is applicable) but shall not necessarily mean
that the requirements of (c)(i) or (ii) have been satisfied. An "Affiliate" of
the Company is an entity controlling, controlled by or under common control with
the Company as defined in Rule 405 of the Securities and Exchange Commission
under the Securities Act of 1933.
The effective date of any termination of employment referred to in (a) or
(c) above shall be the date specified by the Company or the successor owner of
its business, and the effective date of any termination of employment referred
to in (b) or (d) above shall be the date specified in the notice of termination
delivered pursuant to Section 5 or, if no date is specified in the notice, the
2
date specified by the Executive orally or, if no such date is specified orally,
the date the Executive ceases working for the Company or the successor owner of
its business on a full time basis.
2. Definition of Severance Benefits.
2.1 Amount of Benefits. Except as provided in Section 2.2, the Severance
Benefits referred to in Section 1 shall include and be limited to the following:
(a) a lump sum payment equal to two times (2X) the Executive's annual
base salary (at the greater of the rate in effect immediately prior to the
Change of Control or the rate in effect immediately prior to the
termination of his or her employment);
(b) a lump sum payment equal to two times (2X) the Executive's
Three-Year Average Bonus (as defined and calculated in accordance with
Section 6);
(c) a lump sum payment with respect to the Executive's bonus for the
year of termination of employment as follows:
(i) if the performance and other criteria for earning the
Executive's bonus for the year of termination of employment have been
established for the quarterly periods of that year and the criteria
through the end of the last full quarter prior to the effective date
of termination have been been satisfied (excluding any criterion that
the Executive continued to be employed through the end of the year),
then the pro rata portion of the full bonus that would have been
earned for that year if the performance criteria for the full year
were satisfied to the same extent as they have been satisfied for such
interim period (such pro rata portion to be determined on the basis of
the number of days in the year prior to the termination of employment
as compared to the full year);
(ii) if the performance and other criteria for earning the
Executive's bonus for the year of termination of employment have been
established as provided in (i) above and the criteria for earning any
bonus through the end of the last full quarter prior to the effective
date of termination have not been satisfied (and the Executive would
be deemed to not be eligible for any portion of any bonus in
connection therewith), then no payment pursuant to this Section 2.1
(c);
(iii) if the performance and other criteria for earning the
Executive's bonus are not established on a quarterly basis as provided
in (i) and (ii) above and all performance and other criterial for
earning the bonus for the full year have been satisfied as of the date
of termination (other than the criterion that Executive continue to be
employed through the end of the year), then a pro rata portion of the
full bonus for that year determined as provided in (i) above; and
(iv) if none of (i) through (iii) apply, then a prorated portion
of the Executive's Three-Year Average Bonus (such prorata portion to
be determined as provided in (i) above.
(d) continuation of the Company's contribution to any health,
disability and life insurance benefits being offered at the time of
termination of his or her employment for the period from the effective date
of termination of employment until the earlier of the date two (2) years
thereafter or the date the Executive becomes employed on a full-time basis
by another employer and is covered by a medical plan provided by such
employer with no applicable exclusions for pre-existing conditions;
(e) if the Executive has the right to use of a Company car or is
granted a car allowance, continuation of such use or allowance for a period
of one year after the effective date of termination of the Executive's
employment or until such earlier date as the Executive becomes employed on
a full time basis by another employer; and
(f) acceleration of the exercise dates of all outstanding options to
purchase shares of capital stock of the Company (or any other security or
property as to which any such option may have become exercisable pursuant
to its terms) held by the Executive and granted under stock option plans
adopted by the Company for employees and others so that such options
2
3
become fully exercisable on the date of the termination of the
Executive's employment to the extent they were not otherwise exercisable.
The payments in (a), (b) and (c) above shall be made within thirty (30) days
after the effective date of the termination of the Executive's employment.
Notwithstanding (a) through (e) above, in the case of a termination of
employment prior to the occurrence of a Change of Control, the Company shall
have no obligation to pay or provide any Severance Benefits with respect to the
period prior to the occurrence of the Change of Control. In such event, and to
the extent Section 1 (c) or (d) applies, the amount of Severance Benefits shall
be determined as if the Executive's employment terminated effective upon the
occurrence of the Change of Control, except that, if any of the benefits
referred to in (a) through (e) above have been paid or provided for all or any
portion of the period between the termination of employment and the Change of
Control, the amount of the Severance Benefits which would otherwise be paid
shall be reduced by the amount of the benefits paid or provided for the period
prior to the Change of Control. With respect to acceleration of the exercise
dates of stock options pursuant to (f) above for an Executive whose termination
of employment occurred prior to the occurrence of the Change of Control, such
acceleration shall not occur until the Change of Control and any such stock
option which shall have expired without being fully exercised during the period
from the termination of employment to the date of the Change of Control shall be
deemed to have been reinstated and extended to permit acceleration as
contemplated by (f) above and exercise of the option concurrently with the
consummation of any transaction constituting a Change of Control or, in the
event of such a change referred to in Section 3.1 (a) or (d), within thirty days
thereafter.
Notwithstanding (b) and (c) above, the benefits set forth in those
subparagraphs shall not be payable if the Executive had been advised, prior to
the Change of Control, that he or she would not be eligible to earn a bonus for
the year in which the termination of employment becomes effective unless (i)
such advice was at the request of a third party who had taken steps to effect
the Change of Control or (ii) otherwise arose in connection with the Change of
Control.
2.2 Reduction of Amount of Severance Benefits In the event the Company
determines that payment of any of the Severance Benefits would result in the
imposition of any tax imposed by Section 4999 of the Internal Revenue Code of
1986 and the regulations thereunder (or any successor provisions), the Severance
Benefits referred to in Section 2.1 (a) through (e) shall be reduced to such
extent as the Company determines is necessary to avoid the imposition of any
such tax. Such determination shall be made taking into account all other
"parachute payments" (as defined in Section 280G of the Internal Revenue Code
and the regulations thereunder or any successor provisions), to which the
Executive would be entitled, including without limitation the acceleration of
the exercise date of stock options. Such reductions shall first be made in the
bonus payments referred to in Section 2.1(b) and thereafter, if necessary, to
the bonus payments referred to in Section 2.1(c), the salary payments referred
to in Section 2.1(a) and the other benefits referred to in Section 2.1(e) and
(d), all in that order of priority.
In no event shall any reductions in Severance Benefits pursuant to this
Section 2.2 affect the Executive's rights under 2.1(f) or under any then
existing stock option agreement or plan. If the Company determines that, after
the reduction of the other Severance Benefits referred to above, the
acceleration of the exercise dates of stock options pursuant to 2.1(f) above or
pursuant to the terms of the option agreements or plans themselves would still
result in the imposition of a tax imposed by Section 4999 of the Internal
Revenue Code, then all of the reductions in Severance Benefits referred to in
Section 2.1 (a) through (e) shall be made and there shall be no further
reduction in Severance Benefits except to the extent that the Executive elects
in writing, prior to the delivery of any notice of termination of his or her
employment, to not have any stock options so accelerate.
2.3 Resolution of Disagreements. The Company shall make its determination
as to whether any reduction in Severance Benefits is required pursuant to
Section 2.2 within 15 days after the termination of the employment of the
Executive and again promptly after the Executive exercises any stock options and
shall deliver to the Executive written notice of the determination together with
the Company's detailed calculations supporting its conclusion. If the Executive
does not agree with the Company's determination, he or she shall notify the
Company in writing of that disagreement within 30 days after receipt of the
Company's notice and detailed calculations. Failure to give such notice of
disagreement shall be deemed to constitute acceptance of the determination by
the Company, and such determination shall become final and binding on the
parties. The notice by the Executive shall set forth in reasonable detail why
the Executive disagrees with the determination made by the Company and shall be
accompanied by the Executive's detailed calculations supporting his or her
conclusion.
If the Company and the Executive have not resolved their disagreement
within ten days after the Company receives the Executive's notice and detailed
calculations, the Company and the Executive will each have the right, acting
without the other, to refer the matter to the firm then serving as the
independent certified public accountants of the Company, whose determination
shall be final
3
4
and binding on both parties. The Company will endeavor to cause the accounting
firm to give both the Executive and the Company written notice of its
determination accompanied by its detailed calculations. If (i) neither party
refers the dispute to the independent accounting firm within thirty days after
the Company receives the Executive's notice, (ii) the Company does not then have
a firm serving as its independent certified public accountants or (iii) the firm
then serving in that capacity refuses to resolve the matter or fails to provide
written notice of its determination accompanied by its detailed calculations
within 30 days after the matter is referred to it, then either party will have
the right to commence an arbitration pursuant to Section 13 to resolve the
matter. The fees and expenses of the accounting firm will be paid by the
Company.
If the Company determines that payment of the full Severance Benefits will
result in the imposition of a tax as provided above, the Company will have the
right to withhold from the payment of Severance Benefits the amount of any
reduction determined by it in accordance with Section 2.2. If the Executive
disagrees with the determination by the Company, the Company shall have the
right to continue to withhold the payments of such amounts until the matter is
finally resolved. If such resolution indicates that the Company's determination
was incorrect, the Company shall promptly pay to the Executive any amount of
Severance Benefits which should not have been withheld, with interest for the
period that the payment was withheld at the reference rate then in effect of the
Bank of America National Trust and Savings Association.
4
5
3. Definition of Change of Control.
3.1 Events Constituting Change of Control. For purposes of this Agreement,
a "Change of Control" of the Company shall be deemed to have occurred if any one
of the following events occurs:
(a) except as provided in Section 3.3, the acquisition by any person
or group of beneficial ownership (as defined in Section 3.5) of more than
30% of the outstanding shares of Common Stock of the Company or, if there
are then outstanding any other voting securities of the Company, such
acquisition of 30% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors;
(b) the Company sells all or substantially all of its assets (or
consummates any transaction having a similar effect) or the Company merges
or consolidates with another entity or completes a reorganization except as
provided in Section 3.4;
(c) the Company is liquidated; or
(d) The Board of Directors of the Company (if the Company continues to
own its business) or the board of directors or comparable governing body of
any successor owner of its business (as a result of a transaction which is
not itself a Change of Control) consists of a majority of directors or
members who are not Incumbent Directors (as defined in Section 3.2)..
Any purchase or redemption of outstanding shares of Common Stock or other voting
securities by the Company resulting in an increase in the percentage of
outstanding shares or other voting securities beneficially owned by any person
or group shall be deemed to constitute a reorganization pursuant to (b) above
except as provided in Section 3.4.
3.2 Definition of Incumbent Directors. For purposes of Section 3.1 and
subject to the last sentence of this Section 3.2, "Incumbent Directors" includes
only those persons who are:
(i) serving as directors of the Company on the date of this Agreement
or,
(ii) elected by a majority of the directors who then constitute
Incumbent Directors or selected by a majority of such directors to be
nominated for election by the stockholders and are elected.
In no event, however, shall any director whose election to office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by on behalf of a person or entity other than the Board of Directors of
the Company be an Incumbent Director.
3.3 Exception for Certain Acquisitions of Stock. Section 3.1(a) shall not
include the acquisition of beneficial ownership of Common Stock or other voting
securities of the Company
(a) by the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any entity controlled by the
Company.
(b) by Alfred E. Mann,
(c) by any person or entity as a result of the death of Mr. Mann if
the shares acquired were beneficially owned by Mr. Mann immediately before
his death; or
(d) by any person or entity during Mr. Mann's lifetime if the shares
acquired were beneficially owned by Mr. Mann immediately prior to their
acquisition and the acquisition is a charitable contribution or a transfer
to a trust, partnership, corporation or other entity in which Mr. Mann's
family and/or any charity or charities own a majority of the beneficial
interests.
5
6
3.4 Exceptions for Certain Reorganizations. Section 3.1(b) shall not apply
to any transaction described therein if the holders of the voting securities of
the Company outstanding immediately prior to the transaction own immediately
after the transaction in approximately the same proportions 70% or more of the
combined voting power of the voting securities of the entity purchasing the
assets or surviving the merger or consolidation or, in the case of a
reorganization, 70% or more of the combined voting power of the voting
securities of the Company. No increase in the percentage of outstanding shares
or other voting securities beneficially owned by Alfred E. Mann resulting from
any redemption of shares or other voting securities by the Company shall result
in a Change of Control pursuant to Section 3.1.
3.5 Definition of Person, Acquisition, Group and Beneficial Ownership. For
purposes of this Agreement the term "person" shall have the meaning set forth in
the Securities Exchange Act of 1934 and the terms "acquisition," "group, " and
"beneficial ownership" shall have the meanings set forth in Rules 13d-3 and
13d-5 of the Rules of the Security and Exchange Commission adopted under the
Securities Exchange Act of 1934 except that shares which a person or group has
the right to acquire shall be deemed beneficially owned whether or not that
right is presently exercisable and regardless of when it becomes exercisable.
4. Definition of Termination for Cause. The Executive's employment shall be
deemed to have been terminated for "Cause" if such employment terminates as a
result of:
(a) the death of the Executive;
(b) the Executive becoming unable to perform the essential duties of
his or her position, even with reasonable accommodation, as a result of any
physical or mental condition for a period of more than ninety (90)
consecutive days or for ninety (90) nonconsecutive days in any three
hundred sixty five (365) day period;
(c) the Executive reaching a mandatory retirement age established by
the Company before the Change of Control and not in anticipation thereof;
or
(d) the Executive's gross negligence; willful misconduct; breach of
fiduciary duty to the Company involving self-dealing or personal profits or
conviction, entry of a plea of guilty or nolo contendre to a charge of a
felony or other crime involving moral turpitude.
5. Definition of "Good Reason." For purposes of this Agreement the
Executive shall be deemed to have terminated his or her employment for "Good
Reason" if such a termination results from:
(a) the Company substantially reducing or increasing the duties,
responsibilities or volume of work of the Executive compared to those he or
she had in the position he or she held immediately prior to the Change of
Control except in connection with a promotion accepted by the Executive;
(b) the Company requiring the Executive to have as his or her
principal location of work any location which is not within 35 miles of
either the Executive's principal location of work or the Executive's
residence immediately prior to the Change of Control;
(c) the Company (i) reducing the base salary of the Executive, (iiiii)
reducing the employee benefits available to the Executive (not including
bonuses or stock options) to an extent which is material to all such
benefits taken as a whole, or (iii) changing any objective criteria for
calculating the annual bonus that can be earned by the Executive or, if no
such objective criteria exist, changing the amount of the annual bonus such
that the Executive cannot reasonably be expected to earn in salary and
bonus combined at least 90% of the average amount he or she had earned in
salary and bonus combined for the last three full fiscal years preceding
the year for which the bonus is changed or such lesser number of full
fiscal years during which the Executive has been employed by the Company;
(d) the Company reducing the employee benefits available to the
Executive (not including bonuses or stock options) to an extent which is
material to all such benefits taken as a whole; or
(e) the Company failing to require a successor to expressly assume
this Agreement as required in Section 9 below unless such assumption occurs
and is effective by operation of law.
6
7
Notwithstanding the foregoing, none of the events referred to in (a)
through (c) above shall constitute Good Reason unless the Executive gives
written notice to the Company of his or her election to terminate his or her
employment for such reason within 90 days after he or she becomes aware of the
existence of facts or circumstances constituting Good Reason. Such notice shall
set forth in reasonable detail the facts and circumstances constituting the Good
Reason and, if the Good Reason is a curable condition, shall provide the Company
with 30 days to cure such condition. The notice shall also specify the date when
the termination of employment is to become effective (if the Good Reason is not
curable or is curable but not cured within the 30 days), which date shall be not
less than 60 days and not more than 180 days from the date the notice is given.
6. Definition of "Three-Year Average Bonus." For purposes of determining
the amount of the Severance Benefit referred to in Section 2.1 (b) and (c)
(subject to the last paragraph of Section 2.1), an Executive's "Three-Year
Average Bonus" shall be deemed to be the average of the bonuses paid for the
three most recent full fiscal years preceding the date of termination of the
Executive's employment, or, if the Executive was not an executive officer of the
Company during such three year period or could not have earned a bonus during
such three year period, then (subject to the last paragraph of Section 2.1) the
average annual bonus for such shorter time that he or she was an executive
officer of the Company and could have earned a bonus. Notwithstanding the
foregoing, if all performance and other criteria for earning the bonus for the
year in which termination of the Executive's employment occurs have been
satisfied as of the effective date of such termination (other than the criterion
that the Executive continued to be employed), then the full bonus for that year
and the two most recent full fiscal years shall be averaged to determine the
Three-Year Average Bonus.
If the two year period referred to in Section 2.1(b) includes any partial
fiscal year of the Company, the bonus for such partial fiscal year shall be
calculated by prorating the Three Year Average Bonus based on the number of says
in the partial fiscal year.
7. Employment At Will. The employment relationship contemplated by this
Agreement is an at will relationship under which either the Executive or the
Company has the right at any time to terminate the employment relationship with
or without Cause or Good Reason and without notice, subject only to the payment
of the Severance Benefits set forth in Section 2 to the extent that they become
payable under the terms of this Agreement. Nothing in this Agreement is intended
to create a term of employment for a period of years or otherwise.
8. Mitigation. The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any Severance Benefit provided for in this
Agreement be reduced by any compensation earned by Executive as a result of
employment by another employer, except as provided in Section 2.1(d) and (e).
Notwithstanding the foregoing, in the event that the Executive is entitled, by
operation of any applicable law, to unemployment compensation benefits or
benefits under the Worker Adjustment and Retraining Act of 1988 (known as the
"WARN" Act) in connection with the termination of his or her employment in
addition to those required to be paid to him or her under this Agreement, then
to the extent permitted by applicable law governing severance payments or notice
of termination of employment, the Company shall be entitled to offset against
the amounts payable hereunder the amounts of any such mandated payments.
9. Assumption of Agreement. The Company will require any successor (whether
by purchase of assets, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform all of the obligations of the Company under this
Agreement (including the obligation to cause any subsequent successor to also
assume the obligations of this Agreement) unless such assumption occurs by
operation of law. Nothing in this Section 9 is intended, however, to require
that a person or group referred to in Section 3.1(a) as being the beneficial
owner of shares of stock of the Company assume the obligations under this
Agreement as a result of such stock ownership.
10. Assignment and Successors in Interest. This Agreement is personal to
the Executive and is not assignable by him or her. This Agreement shall inure to
the benefit of and be enforceable by the Executive and his or her personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees, and is binding upon the successors and
assigns of the Company.
11. Withholding Taxes. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
12. Covenants of Executive. During the period that Executive is receiving
payments described in Section 1(a) above, he or she will not actively solicit
any employees of the Company or its Affiliates to accept employment for any
other person or entity and, during that period and thereafter, will not disclose
to any person or entity any information concerning the Company or its
7
8
business that the Executive knows to be of a confidential or non-public nature
except as necessary to enforce this Agreement or as required by law. "Affiliate"
is defined as any entity controlling, controlled by or under common control
with, the Company within the meaning of Rule 405 of the Securities and Exchange
Commission under the Securities Act of 1933.
13. Notice. All notices, requests, demands and other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered, in the case of the Company to an
executive officer other than the Executive, or when mailed by United States
mail, postage prepaid, return receipt requested, addressed, in the case of the
Company to 12744 San Fernando Road, Sylmar, California 91342 or, in the case of
the Executive to the address set forth beneath his or her signature hereto, or
such other address as may be provided by either party as to himself, herself or
itself in the manner set forth above.
14. Arbitration. Except as provided in Section 2.3, all disputes or
controversies arising under or in connection with this Agreement shall be
settled exclusively by arbitration conducted in Los Angeles County, California
in accordance with the rules of the American Arbitration Association then in
effect, provided that the arbitrator or arbitrators shall decide the dispute or
controversy in accordance with California law as applied to this Agreement.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California applicable to the agreements between residents of California to be
performed entirely within California.
16. Attorneys' Fees. In the event of any litigation or arbitration arising
out of or relating to this Agreement, the prevailing party shall be entitled to
recover his, her or its reasonable attorneys' fees incurred in connection
therewith.
17. Entire Agreement. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter contained herein and supersedes all
prior agreements, promises, covenants, arrangements, commitments,
communications, representations, or warranties, whether oral or written except
that nothing in this Agreement shall amend or supersede any employment or stock
option agreement in effect on the date hereof.
18. Waiver. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by parties hereto. No waiver by either party hereto at any time of
any breach by the other party or of any right or remedy under this Agreement
shall constitute a waiver of any other breach, right or remedy, whether or not
similar in nature.
19. Counterparts. This Agreement may be executed in two counterparts each
of which shall be deemed an original but both of which together shall constitute
one and the same instrument.
MINIMED INC.
By: /s/ ALFRED E. MANN /s/ STEVEN SCHULTZ
-------------------------------- -------------------------------
Alfred E. Mann Steven Schultz
8