Exhibit 10.1
CHANGE OF CONTROL EMPLOYMENT
AGREEMENT
CHANGE
OF CONTROL EMPLOYMENT AGREEMENT by and between Medtronic, Inc., a
Minnesota corporation (the “Company”), and
________________________ (the “Executive”), dated as of
the ______ day of ____________________.
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 the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined in Section
2) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive’s full
attention and dedication to the Company currently and in the event
of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change
of Control which are competitive with those of other corporations
and which ensure that the compensation and benefits expectations of
the Executive will be satisfied. Therefore, in order to accomplish
these objectives, the Board has caused the Company to enter into
this Agreement.
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.
Certain Definitions .
(a) The
“Effective Date” shall mean the first date during the
Change of Control Period (as defined in Section l(b)) on which a
Change of Control) occurs. Anything in this Agreement to the
contrary notwithstanding, if (i) the Executive’s employment
with the Company is terminated by the Company or the Executive
terminates employment because the Executive ceases to be an officer
of the Company, (ii) the Date of Termination occurs prior to the
date on which a Change of Control occurs, and (iii) it is
reasonably demonstrated by the Executive that such termination of
employment or cessation of status as an officer (A) was at the
request of a third party who has taken steps reasonably calculated
to effect the Change of Control or (B) otherwise arose in
connection with or anticipation of the Change of Control, then for
all purposes of this Agreement the “Effective Date”
shall mean the date immediately prior to such Date of
Termination.
(b) The
“Change of Control Period” shall mean the period
commencing on the date hereof and ending on the third anniversary
of such date; provided , however , that commencing on
the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary
thereof shall be hereinafter referred to as the “Renewal
Date”), unless previously terminated, the Change of Control
Period shall be automatically extended so as to terminate three
years from such Renewal Date, unless at least 60 days prior to the
Renewal Date the Company shall give written notice to the Executive
that the Change of Control Period shall not be so
extended.
2.
Change of Control . For the purpose of this Agreement, a
“Change of Control” shall mean:
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(a) Any
individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person) becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 30% or more of either (i) the
then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (ii) the
combined voting power of the then-outstanding voting securities of
the Company entitled to vote generally in the election of directors
(the “Outstanding Company Voting Securities”);
provided , however , that, for purposes of this
Section 2(a), the following acquisitions shall not constitute a
Change of Control: (1) any acquisition directly from the Company,
(2) any acquisition by the Company or any of its subsidiaries, (3)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries,
(4) any acquisition by an underwriter temporarily holding
securities pursuant to an offering of such securities or (5) any
acquisition pursuant to a transaction that complies with clauses
(i), (ii) and (iii) of Section 2(c); or
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(b) Individuals
who, as of the date hereof, constitute the Board (the
“Incumbent Directors”) cease for any reason to
constitute at least a majority of the Board; provided ,
however , that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at
least a majority of the Incumbent Directors then on the Board shall
be considered as though such individual was an Incumbent Director,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
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(c) Consummation
of a reorganization, merger, statutory share exchange or
consolidation (or similar corporate transaction) involving the
Company or any of its subsidiaries, a sale or other disposition of
all or substantially all of the assets of the Company, or the
acquisition of assets or stock of another entity by the Company or
any of its subsidiaries (each, a “Business
Combination”), in each case, unless, immediately following
such Business Combination, (i) substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of,
respectively, the then-outstanding shares of common stock (or, for
a non-corporate entity, equivalent securities) and the
then-outstanding voting securities entitled to vote generally in
the election of directors (or, for a non-corporate entity,
equivalent governing body), as the case may be, of (A) the entity
resulting from such Business Combination (the “Surviving
Corporation”) or (B) if applicable, the ultimate parent
entity that directly or indirectly has beneficial ownership of 80%
or more of the voting securities eligible to elect directors of the
Surviving Corporation (the “Parent Corporation”), in
substantially the same proportion as their ownership, immediately
prior to the Business Combination, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the
case may be, (ii) no person (other than any employee benefit plan
(or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 30% or more of the
outstanding shares of common stock and the total voting power of
the outstanding voting securities eligible to elect directors of
the Parent Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and (iii) at least a majority of the members
of the board of directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) following the
consummation of the Business Combination were Incumbent Directors
at the time of the Board’s approval of the execution of the
initial agreement providing for such Business Combination;
or
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(d) Approval
by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
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3.
Employment Period . The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company, for the period commencing on
the Effective Date and ending on the second anniversary of such
date (the “Employment Period”), provided ,
that nothing stated in this Agreement shall restrict the
right of the Company or the Executive at any time to terminate the
Executive’s employment with the Company, subject to the
obligations of the Company provided for in this Agreement in the
event of such terminations. The Employment Period shall terminate
upon the Executive’s termination of employment for any
reason.
4.
Terms of Employment .
(a)
Position and Duties .
(i) During
the Employment Period, (A) the Executive’s position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 90-day
period immediately preceding the Effective Date; and (B) the
Executive’s services shall be performed at the location where
the Executive was employed immediately preceding the Effective Date
or any office or location less than 50 miles from such
location.
(ii) Except
as otherwise expressly provided in this Agreement, during the
Employment Period, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of
the Executive’s responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities
have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the
Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive’s responsibilities to the
Company.
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(b)
Compensation .
(i)
Base Salary . During the Employment Period, the Executive
shall receive an annual base salary (“Annual Base
Salary”) at an annual rate at least equal to 12 times the
highest monthly base salary paid or payable, including any base
salary that has been earned but deferred, to the Executive by the
Company and the affiliated companies in respect of the 12-month
period immediately preceding the month in which the Effective Date
occurs. The Annual Base Salary shall be paid at such intervals as
the Company pays executive salaries generally. During the
Employment Period, the Annual Base Salary shall be reviewed at
least annually and shall be increased at any time and from time to
time as shall be substantially consistent with increases in base
salary generally awarded in the ordinary course of business to
other peer executives of the Company and its affiliated companies.
Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase and
the term “Annual Base Salary” as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As
used in this Agreement, the term “affiliated companies”
shall include any company controlled by, controlling or under
common control with the Company.
(ii)
Annual Incentive Payments . In addition to Annual Base
Salary, the Executive shall be paid, for each fiscal year ending
during the Employment Period, an annual bonus (“Annual
Bonus”) in cash at least equal to the Executive’s
average annual or annualized (for any fiscal year consisting of
less than 12 full months or with respect to which the Executive has
been employed by the Company for less than 12 full months) award
earned by the Executive, including any award earned but deferred,
under the Company’s Executive Incentive Plan, as amended from
time to time prior to the Effective Date (or under any successor or
replacement annual incentive plan of the Company or any of the
affiliated companies), for the last three fiscal years immediately
preceding the fiscal year in which the Effective Date occurs (the
“Three-Year Average Bonus”). If the Executive has not
been eligible to earn, or has not been employed, for each of the
last three fiscal years immediately preceding the fiscal year
during which the Effective Date occurs but has earned a bonus for
at least one fiscal year during the last three fiscal years
immediately preceding the fiscal year during which the Effective
Date occurs, the “Three-Year Average Bonus” shall mean
the average of any annual or annualized bonus actually earned over
any such years. If the Executive has not been eligible to earn, or
has not received, such a bonus for any fiscal year prior to the
Effective Date, the “Three-Year Average Bonus” shall
mean the Executive’s Target Annual Bonus for the year during
which the Effective Date occurs. Each such Annual Bonus shall be
paid no later than two and a half months after the end of the
fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus
pursuant to an arrangement that meets the requirements of Section
409A of the Internal Revenue Code of 1986, as amended (the
“Code”).
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(iii)
Long-Term Cash and Equity Incentives, Savings Plans and
Retirement Plans . During the Employment Period, the Executive
shall be entitled to participate in all long-term cash incentive,
equity incentive, savings and retirement plans, practices, policies
and programs (any such arrangement a “Plan” for
purposes of this Agreement) applicable generally to other peer
executives of the Company and the affiliated companies, but in no
event shall such Plans provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company
and the affiliated companies for the Executive under such Plans as
in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective
Date to other peer executives of the Company and the affiliated
companies.
(iv)
Welfare Benefit Plans . During the Employment Period, the
Executive and/or the Executive’s family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit Plans provided by the Company and
the affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident insurance
Plans) to the extent applicable generally to other peer executives
of the Company and the affiliated companies, but in no event shall
such Plans provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such Plans
in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the
affiliated companies.
(v)
Expenses . During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and the
affiliated companies in effect for the Executive at any time during
the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
the affiliated companies.
(vi)
Business Allowance . During the Employment Period, the
Executive shall be entitled to a business allowance in accordance
with the most favorable Plans of the Company and the affiliated
companies in effect for the Executive at any time during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
the affiliated companies.
(vii)
Office and Support Staff . During the Employment Period, the
Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and the affiliated companies at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the affiliated
companies.
(viii)
Vacation . During the Employment Period, the Executive shall
be entitled to paid vacations in accordance with the most favorable
Plans of the Company and the affiliated companies as in effect for
the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the affiliated
companies.
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5. Termination
of Employment.
(a)
Death or Disability . The Executive’s employment shall
terminate automatically upon the Executive’s death during the
Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth below),
it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the
Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate on the 30th day after
receipt of such notice by the Executive (the “Disability
Effective Date”), provided , that , within the
30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive’s duties. For
purposes of this Agreement, “Disability” shall mean the
absence of the Executive from the Executive’s duties with the
Company on a full-time basis for 180 consecutive days as a result
of incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company or
its insurers and acceptable to the Executive or the
Executive’s legal representative (such agreement as to
acceptability not to be unreasonably withheld).
(b)
Cause . (i) The Company may terminate the Executive’s
employment during the Employment Period with or without Cause. For
purposes of this Agreement, “Cause” shall mean (A)
repeated violations by the Executive of the Executive’s
obligations under Section 4(a) of this Agreement (other than as a
result of incapacity due to physical or mental illness) which are
demonstrably willful and deliberate on the Executive’s part,
which are not remedied in a reasonable period of time after receipt
of written notice from the Company specifying such violations or
(B) the conviction of the Executive of a felony involving moral
turpitude.
(ii) For
purposes of Section 5(b)(i)(A) of this Agreement, no act, or
failure to act, on the part of the Executive shall be considered
“willful” unless it is done, or omitted to be done, by
the Executive in bad faith and without reasonable belief that the
Executive’s action or omission was in the best interests of
the Company. Any act, or failure to act, based upon (A) authority
given pursuant to a resolution duly adopted by the Board, or if the
Company is not the ultimate parent corporation of the affiliated
companies and is not publicly traded, the board of directors of the
Parent Corporation (the “Applicable Board”), (B) the
instructions of the Chief Executive Officer of the Company or the
Parent Corporation or a senior officer of the Company or the Parent
Corporation or (C) the advice of counsel for the Company or the
Parent Corporation shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Applicable Board
(excluding the Executive, if the Executive is a member of the
Applicable Board) at a meeting of the Applicable Board called and
held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with
counsel for the Executive, to be heard before the Applicable
Board), finding that, in the good faith opinion of the Applicable
Board, the Executive is guilty of the conduct described in Section
5(b)(i)(A) of this Agreement, and specifying the particulars
thereof in detail.
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(c)
Good Reason . The Executive’s employment may be
terminated by the Executive for Good Reason or by the Executive
voluntarily without Good Reason. For purposes of this Agreement,
“Good Reason” shall mean:
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(i) the
assignment to the Executive of any duties inconsistent in any
respect with the Executive’s position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement,
or any diminution in such position, authority, duties or
responsibilities (whether or not occurring solely as a result of
the Company ceasing to be a publicly traded entity or becoming a
subsidiary), excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and that is remedied
by the Company promptly after receipt of notice thereof given by
the Executive;
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(ii) any
failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith
and that is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
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(iii) the
Company’s requiring the Executive to be based at any office
or location other than that described in Section 4(a)(i)(B) of this
Agreement or the Company’s requiring the Executive to be
based at a location other than the principal executive offices of
the Company (if the Executive were employed at such location
immediately preceding the Effective Date) or the Company’s
requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
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(iv) any
purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this Agreement;
or
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(v) any
failure by the Company to comply with and satisfy Section 11(c) of
this Agreement.
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For purposes of this Section 5(c)
of this Agreement, any good faith determination of “Good
Reason” made by the Executive shall be conclusive. The
Executive’s mental or physical incapacity following the
occurrence of an event described above in clauses (i) through (v)
shall not affect
