EXHIBIT 10.1
CHANGE OF CONTROL BONUS AND SEVERANCE AGREEMENT
THIS
CHANGE OF CONTROL BONUS AND SEVERANCE AGREEMENT (this
“Agreement”) is made and entered into as of this 9th
day of August, 2007 (the “Effective Date”) by and
between Kenneth E. Imler (the “Executive”), and Arrow
International, Inc., a Pennsylvania corporation, having its
principal offices at 2400 Bernville Road, Reading, Pennsylvania
19605 (the “Company”).
WITNESSTH:
WHEREAS,
the Executive has extensive experience in the business and affairs
of the Company and is a valuable member of the management team;
and
WHEREAS,
the Board of Directors of Arrow International, Inc. (the
“Board”) has determined that it is appropriate to
reinforce the continued attention of certain key management
employees, including the Executive, to their assigned duties
without distraction upon a change in control of the Company;
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. TERM OF AGREEMENT . This Agreement
shall have an original term expiring on the second anniversary of
Effective Date, and shall thereafter be automatically renewed for
successive one-year terms unless the Company has notified the
Executive of its election not to renew the term of this Agreement
not less than 120 days before the expiration of the current
term (collectively, with any applicable renewals, the
“Term”). Notwithstanding anything in this Agreement to
the contrary, in the event that a Change in Control (as defined
herein) occurs, the Term shall be automatically renewed and shall
not be terminated by the Company (except as provided in
Section 10 of this Agreement) until at least twenty-four
(24) months after such Change in Control. During the Term, the
Executive shall continue to perform the Executive’s regular
duties as an executive of the Company.
2. CHANGE IN CONTROL . No benefits shall
be payable hereunder unless there shall have been a Change in
Control (as defined below) of the Company. For purposes of this
Agreement, a “Change in Control” shall mean the
occurrence of any of the following events after the date of this
Agreement:
(a) the
acquisition after the Effective Date by an individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934 (the “Exchange
Act”)) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than
30% of the combined voting power of the voting securities of the
Company entitled to vote generally in the election of directors
(the “Voting Securities”); provided, however, that the
following acquisitions shall not constitute a Change in Control:
(a) any acquisition, directly or indirectly by or from the
Company or any subsidiary of the Company, or by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any subsidiary of the Company, (b) any acquisition
by any underwriter in
connection with any firm commitment underwriting of securities to
be issued by the Company, or (c) any acquisition by any
corporation if, immediately following such acquisition, 70% or more
of the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting
securities of such corporation (entitled to vote generally in the
election of directors), are beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who, immediately prior to such acquisition, were the
beneficial owners of the then outstanding common stock of the
Company (“Common Stock”) and the Voting Securities in
substantially the same proportions, respectively, as their
ownership, immediately prior to such acquisition, of the Common
Stock and Voting Securities; or
(b) The
occurrence after the Effective Date of a reorganization, merger or
consolidation, other than a reorganization, merger or consolidation
with respect to which all or substantially all of the individuals
and entities who were the beneficial owners, immediately prior to
such reorganization, merger or consolidation, of the Common Stock
and Voting Securities, beneficially own, directly or indirectly,
immediately after such reorganization, merger or consolidation, 70%
or more of the then outstanding common stock and voting securities
(entitled to vote generally in the election of directors) of the
corporation resulting from such reorganization, merger or
consolidation in substantially the same proportions as their
respective ownership, immediately prior to such reorganization,
merger or consolidation, of the Common Stock and Voting Securities;
or
(c) The
occurrence after the Effective Date of (a) a complete
liquidation or substantial dissolution of the Company, or
(b) the sale or other disposition of all or substantially all
of the assets of the Company, in each case other than to a
subsidiary, wholly-owned, directly or indirectly, by the Company or
to a holding company of which the Company is a direct or indirect
wholly owned subsidiary prior to such transaction; or `
(d) During
any period of twelve (12) consecutive months commencing upon
the Effective Date, the individuals at the beginning of any such
period who constitute the Board and any new director (other than a
director designated by a person or entity who has entered into an
agreement with the Company or other person or entity to effect a
transaction described in Sections 2(a), 2(b) or 2(c) above)
whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least a
majority of the directors then still in office who either were
directors at the beginning of any such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board.
Notwithstanding the above, a “Change in Control” shall
not include any event, circumstance or transaction which results
from the action of any entity or group which includes, is
affiliated with or is wholly or partially controlled by one or more
executive officers of the Company and in which the Executive
participates
3. CHANGE IN CONTROL BENEFITS .
Provided that the Executive is still employed by the Company on the
date on which a Change in Control occurs, the Executive will become
fully vested in all outstanding, unvested stock options granted to
the Executive by the Company (the “Options”).
4. CHANGE IN CONTROL RETENTION BONUS .
Provided that the Executive is then still employed by the Company
on the date on which a Change of Control occurs and further
provided that (a) the Executive is employed by the Company or
its successor on the six-month anniversary of the date of the
Change of Control, (b) the Executive terminated his employment
for “Good Reason” (as defined below) prior to the
six-month anniversary of the date of the Change of Control or
(c) the Company or its successor terminated the
Executive’s employment for reasons other than for
“Cause” (as defined below) prior to the six-month
anniversary of the date of the Change of Control, then on the
six-month anniversary of the date of the Change of Control the
Executive shall receive a lump sum payment equal to 0.5 times the
annual base salary the Executive received from the Company as of
the Effective Date.
(a)
Cause . The Company shall have the right to terminate
Executive’s employment for “Cause” upon:
(i) the Executive’s conviction of or plea of guilty or
nolo contendere to a felony; (ii) the Executive’s gross
negligence or willful misconduct in the performing of his duties
that harms the Company; (iii) the Executive’s failure to
comply with this Agreement or to carry out his duties and
responsibilities, which failure results in harm to the Company or
diminution in the value of the Company; or (iv) the
Executive’s commission of fraud, theft against or
embezzlement from the Company.
(b)
Good Reason . The Executive shall have the right to
terminate his employment for “Good Reason” if:
(i) the Executive’s base salary is reduced or
(ii) the Executive’s primary office location is
relocated to a place that increases the distance from
Executive’s home (as of the Effective Date of this Agreement)
to such new location, by more than 40 miles.
5. CHANGE IN CONTROL SEVERANCE . If
within the twenty-four (24) months following a Change in
Control (a) the Executive terminates his employment with the
Company for Good Reason or (b) the Company terminates the
Executive’s employment with the Company without Cause, then
subject to the terms of this Agreement, and contingent upon
execution and effectiveness of the general release attached hereto
as Exhibit A, the Company shall pay to the Executive the
following benefits:
(a)
Severance Pay . Equal payments of $20,288 (each, a
“Severance Payment”) paid on a monthly basis for twenty
four (24) months (the “Severance Period”)
following the date on which the Executive’s employment with
the Company terminates (“Termination Date”), commencing
with the first day of the month following the Termination Date.
Notwithstanding the foregoing, if the Executive is employed by any
entity or person (other than self-employment or employment for an
entity in which the Executive owns more than 50% of the voting
interests in such entity) (a “Subsequent Employer”),
then the Severance Payment made on the first of a month shall be
reduced on a dollar for dollar basis for all compensation paid by
the Subsequent Employer to the Executive in the month prior to the
month in which the Severance Payment is made.
(b)
Medical . The Executive and the Executive’s spouse
will receive continuation of medical benefits in effect as of the
Termination Date (or such benefits as the Company or its successor
may subsequently provide from time to time to the senior executives
of the Company) at the Company’s (or its successor’s)
sole expense until the earliest of (i)
December 31, 2010, (ii) the date on which the Executive
becomes eligible for medical benefits under a group health plan of
any employer or (iii) the date on which the Executive dies.
Additionally, solely with respect to continuation of medical
benefits for the Executive’s spouse, such coverage shall
immediately cease on the date on which the Executive’s spouse
attains age 65, if earlier than any date so provided in the
foregoing sentence. Any claims for reimbursement of a proper
medical expense shall be paid as soon as administratively feasible
following the proper submission of such expense; provided however,
that all such claims must be submitted and paid by the end of the
year following the year in which such expense is incurred.
(c)
Specified Employee Delay . Notwithstanding anything herein
to the contrary, if any payments due under this Section 5
would subject Executive to any tax imposed under Section 409A
of the Internal Revenue Code of 1986, as amended (the
“Code”) if such payments were made at the time
otherwise provided herein due to the Executive being a
“specified employee” (as such term is defined in Code
Section 409A(a)(2)(B)(i)) of a publicly traded company on the
Termination Date, then such payments that would otherwise cause
such taxation shall be payable in a single lump sum on the first
day which is at least six months after the date of the
Executive’s “separation of service” as set forth
in Code Section 409A and any remaining payments will be made
monthly thereafter.
(d)
Restrictive Covenants . Additionally, the payments and
benefits contained in Section 5(a) and Section 5(b) shall be
contingent upon the Executive’s compliance with the
restrictive covenants contained in this Agreement.
(e)
Code Section 280G Cutback . The Severance Payments to
be provided to the Executive hereunder and all other payments or
benefits which are “parachute payments” (as defined in
Section 280(G)(b)(2)(A) of the Code) payable to the Executive under
other arrangements or agreements (the “Total Payments”)
shall be adjusted as set forth in the following sentence. If the
Total Payments as a result of any Change in Control would (in the
aggregate) result in an amount not being deductible under Code
Section 280G or an excise tax under Section 4999, the
Total Payments shall be reduced to the extent necessary so that the
deductibility of the full amount of such reduced Total Payments is
not limited by Code Section 280G or such Total Payment is not
subject to an excise tax under Section 4999.
6. CONFIDENTIAL INFORMATION AND
NON-DISPARAGEMENT .
(a)
Confidential Information . The Executive shall not, without
the prior express written consent of the Company, directly or
indirectly divulge, disclose or make available or accessible any
Confidential Information (as defined below) to any person, firm,
partnership, corporation, trust or any other entity or third party
(other than when required to do so by a lawful order of a court of
competent jurisdiction, any governmental authority or agency, or
any recognized subpoena power). In addition, the Executive shall
not create any derivative work or other product based on or
resulting from any Confidential Information (except in the good
faith performance of his duties under this Agreement). The
Executive sha
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