Exhibit 10.1
ROBERT J. PALMISANO
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT
This EMPLOYMENT AND CHANGE IN CONTROL
AGREEMENT (this “ Agreement ”) is made as of
April 6, 2008 (the “ Effective Date ”) by and
among ev3 Inc., a Delaware corporation (“ ev3
”), and Robert J. Palmisano, an individual (“
Executive ”), with respect to the facts and
circumstances set forth below. Capitalized terms used herein
without definition shall have the respective meanings assigned
thereto in Article 12 of this Agreement.
RECITALS
WHEREAS, ev3 desires to employ
Executive as its President and Chief Executive Officer and to
appoint Executive as a member of the Board, and Executive desires
to accept such employment and appointment;
NOW, THEREFORE, in consideration of
the mutual promises, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
1.1
Employment . ev3 will hereby employ Executive as the
President and Chief Executive Officer of ev3 on the terms and
conditions hereinafter set forth. For purposes of payroll and
related corporate record, Executive will be deemed to be an
employee of ev3 Endovascular, Inc., a wholly-owned subsidiary of
ev3. Executive will also be appointed to serve as a member of the
Board.
1.2
Term of Agreement . This Agreement is effective immediately
and will continue for a period of three years until April 6,
2011 (the “ Term ”) and shall be automatically
extended thereafter for successive terms of one year each, unless
either party provides notice to the other at least ninety days
prior to the expiration of the original or any extension term that
the Agreement is not to be extended. The employment period may be
sooner terminated by either party in accordance with Articles 2 and
3.
1.3
Duties . Executive shall perform all the duties and
obligations reasonably associated with the position of President
and Chief Executive Officer consistent with the Bylaws of ev3 as in
effect from time to time, subject solely to the supervision of the
Board, and such other executive duties consistent with the
foregoing as are mutually agreed upon from time to time by
Executive and the Board. Executive shall perform the services
contemplated herein faithfully and diligently. Executive shall
devote substantially all of his business time and efforts to the
rendition of such services; provided, that Executive may
participate in social, civic, charitable, religious, business,
educational or professional associations and, with the prior
approval of the Board, serve on the boards of directors of no more
than two other companies at any given time, so long as such
participation does not materially interfere with the duties and
obligations of Executive hereunder.
1.4
Primary Work Location . Executive’s primary work
location for the performance of services hereunder will be at the
Company’s offices located in Plymouth, Minnesota. Executive
acknowledges and agrees that the nature of the Company’s
business will require travel from time to time. In addition, the
Company will pay or reimburse Executive for expenses incurred for
weekly air travel between his personal residences (in Massachusetts
and Florida) and Plymouth, Minnesota. To the extent that such
payments are subject to income taxes payable by Executive, the
Company shall, for each tax year of Executive in which such
payments are made or deemed made, pay Executive an amount to
reimburse Executive for such income taxes for such tax year, on a
gross-up basis.
1.5
Base Pay . In consideration for Executive’s services
hereunder, the Company will pay Executive an annual base salary at
the rate of not less than $600,000 per year during each year of the
Term (subject to further annual increases by the Board), payable in
accordance with the Company’s regular payroll schedule from
time to time (less any deductions required for Social Security,
state, federal and local withholding taxes, and any other
authorized or mandated similar withholdings).
1.6
Bonus Plan . Executive shall be entitled to earn a bonus
with respect to each year during the Term, based upon
Executive’s achievement of performance objectives set by the
Company’s compensation committee (the “ Compensation
Committee ”) after consultation with Executive, with a
targeted bonus opportunity of one hundred percent (100%) of
Executive’s Base Pay for such year. Any such bonus shall be
paid no later than annually within 2 1 / 2 months following the end of the calendar
year to which the bonus relates.
1.7
Equity Compensation . As an additional element of
compensation to Executive, in consideration of services to be
rendered hereunder, on the Effective Date, the Company shall grant
to Executive options to purchase an aggregate of 1,054,000 shares
of ev3 common stock (the “ Initial Options ”).
The Initial Options shall vest 25% on the first anniversary of the
grant date and the remaining 75% shall vest at a rate of 1/36
th per
month over the thirty-six months following the first anniversary of
the grant date. The terms and conditions of the Initial Options
shall be governed by Stock Option Agreements, substantially in the
forms attached to this Agreement as Exhibits A-1 and
A-2 reflecting such grant and, in each case, providing for,
among other things, the terms set forth in this Article 1.7.
In addition to the Initial Options, the Compensation Committee
shall review Executive’s long-term compensation at least
annually and, after consultation with Executive, shall consider
granting annual additional equity awards.
1.8
Vacation . Executive shall be entitled to not less than four
(4) weeks of vacation each calendar year, without reduction in
compensation, and otherwise in accordance with the general policies
of the Company applicable generally to other senior executives of
the Company.
1.9
Employee Benefits . Executive shall receive all group
insurance, including but not limited to health and dental, and any
other benefits under any of the Company’s Benefit Plans, on
the same basis as are available to other senior executives of the
Company under the Company’s personnel policies in effect from
time to time. Executive shall receive all other such fringe
benefits as the Company may offer to other senior executives of the
Company generally under the Company personnel policies in effect
from time to time, such as health and disability insurance coverage
and paid sick leave.
1.10
Indemnification . Concurrently with the execution and
delivery of this Agreement, the Company and Executive are entering
into an indemnification agreement in the form attached hereto as
Exhibit B providing, among other things, for
indemnification of Executive to the fullest extent permitted by
applicable law.
1.11
Reimbursement for Expenses . Executive shall be reimbursed
by the Company for all documented reasonable expenses (including
legal expenses incurred in negotiating and executing this
Agreement) incurred by Executive in the performance of his duties
or otherwise in furtherance of the business of the Company in
accordance with the policies of the Company in effect from time to
time. Any reimbursements to Executive shall be paid as promptly as
practicable and in any event not later than the last day of the
calendar year in which the expenses are incurred, and the amount of
the expenses eligible for reimbursement during any calendar year
will not affect the amount of expenses eligible for reimbursement
in any other calendar year.
1.12
Housing . During the Term, the Company shall pay Executive
$5,000 per month for rental payments and utilities for an apartment
in or near Plymouth, Minnesota plus any reasonable future rent or
utility cost increases imposed by the landlord for such apartment
from time to time after the effective date hereof. By way of
clarification, Executive shall be responsible for all arrangements
related to renting an apartment in or near Plymouth, Minnesota, and
the Company’s obligations hereunder shall be limited to the
payment to Executive for rental and utility payments. To the extent
that such payments are subject to income taxes payable by
Executive, the Company shall, for each tax year of Executive in
which such payments are made or deemed made, pay Executive an
amount to reimburse Executive for such income taxes for such tax
year, on a gross-up basis.
1.13
Automobile Payments . During the Term, the Company shall pay
Executive $1,500 per month, in connection with Executive’s
leasing or purchase of an automobile (including without limitation
insurance and costs of maintenance). By way of clarification,
Executive shall be responsible for all arrangements related to
leasing or purchasing an automobile, and the Company’s
obligations hereunder shall be limited to the payment to Executive
for such lease or purchase payments. To the extent that such
payments are subject to income taxes payable by Executive, the
Company shall, for each tax year of Executive in which such
payments are made or deemed made, pay Executive an amount to
reimburse Executive for such income taxes for such tax year, on a
gross-up basis.
1.14
Stock Option Acceleration . In the event of a Change in
Control, regardless of whether the acquiring entity or Successor
assumes or replaces the unvested stock options or stock awards then
granted to Executive pursuant to any of the Stock Incentive Plans,
the vesting schedules under the applicable Stock Option Agreements
will be accelerated and all such stock options will become fully
vested and immediately exercisable upon the closing of the Change
in Control.
1.15
Gross-Up Payments . In the event that it is determined that
any payment or benefit provided by the Company to or for the
benefit of Executive, either under this Agreement or otherwise,
will be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code or any successor provision (“
Section 4999 ”), the Company will, prior to the
date on which any amount of the excise tax must be paid or
withheld, make an additional lump-sum payment (the “
Gross-Up Payment ”) to Executive. The Gross-Up Payment
will be sufficient, after giving effect to all federal, state and
other taxes and charges with respect to the Gross-Up Payment, to
make Executive whole for all taxes (including withholding taxes)
imposed under Section 4999.
Determinations under this section
1.15 will be made by the Company’s then current firm of
independent auditors (the “ Firm ”). The
determinations of the Firm will be binding upon the Company and the
Executive except as the determinations are established in
resolution (including by settlement) of a controversy with the
Internal Revenue Service to have been incorrect. All fees and
expenses of the Firm will be paid by the Company.
If the Internal Revenue Service
asserts a claim that, if successful, would require the Company to
make a Gross-Up Payment or additional Gross-Up Payment, the Company
and Executive will cooperate fully in resolving the controversy
with the Internal Revenue Service. The Company will make or advance
such Gross-Up Payments as are necessary to prevent Executive from
having to bear the cost of payments made to the Internal Revenue
Service in the course of, or as a result of, the controversy. The
Firm will determine the amount of such Gross-Up Payments or
advances and will determine after resolution of the controversy
whether any advances must be returned by Executive to the Company.
The Company will bear all expenses of the controversy and will
gross Executive up for any additional taxes that may be imposed
upon Executive as a result of payment of such expenses.
ARTICLE 2
2.1
Death or Disability . This Agreement will terminate
immediately upon Executive’s death or Disability.
2.2
Termination for Cause . This Agreement may be terminated by
the Company for Cause, by providing the Executive with a Notice of
Termination that contains a proposed Date of Termination.
2.3
Termination for Good Reason . This Agreement may be
terminated by Executive for Good Reason.
2.4
Any Other Reason . The Company shall have to right to
terminate Executive’s employment under this Agreement at any
time without Cause and Executive shall have the right to terminate
employment under this Agreement at any time without Good
Reason.
ARTICLE 3
3.1
Termination without Cause or for Good Reason . In the event
that this Agreement is terminated by either (a) the Company
for any reason other than for Cause or (b) Executive for Good
Reason, but excluding such a termination following a Change in
Control, Executive shall be entitled to receive a single lump sum
payment equal to the sum of the following amounts: (1) the
amount of any accrued and unpaid Base Pay then due to Executive and
any accrued and unpaid bonus, (2) the value of any accrued and
unused vacation, and (3) a single lump sum payment equal to
(i) 150% of Executive’s then current Base Pay and
(ii) a pro rata portion of Executive’s bonus that would
have been earned with respect to the year in which the termination
had the Executive remained employed through the end of the
performance period based upon the number of months in the year of
termination ending on the Date of Termination (assuming for this
Article 3.1 that Executive has worked the full month of the
month in which the Date of Termination Control occurs) to the
extent the performance goals for the performance period have been
achieved, for any performance periods beginning after
January 1, 2009; provided, that, by way of clarification, in
no event shall any such payment be made in the event this Agreement
is terminated pursuant to Section 2.1. In addition, the
Executive shall be entitled to (i) elect continuation coverage
under COBRA during the Severance Period and the Company hereby
agrees to pay the premiums for such continuation coverage,
(ii) elect health care continuation coverage on substantially
the same terms as existed prior to the Date of Termination for an
additional eighteen months following the termination of the
Severance Period provided that the Executive shall pay to the
Company a monthly amount equal to the COBRA premium that would be
payable had the Executive been entitled to COBRA coverage under the
applicable health care plan, and (iii) for the duration of the
Severance Period, to receive all fringe benefits and perquisites to
which he is entitled under this Agreement and which may legally be
provided by the Company to non-employees (including without
limitation cellular telephone, blackberry (or other PDA) and the
car allowance provided for under Article 1.13 of this
Agreement, but excluding the housing allowance other than amounts
(on a grossed-up basis) necessary to pay lease or rental payments
for Executive’s apartment described in Section 1.12 with
respect to any lease existing at the Date of Termination, provided
that lease or rental payments shall not exceed the duration of the
Severance Period regardless of the length of the lease).
3.2
Termination without Cause or for Good Reason Following a Change
in Control . Executive will become entitled to the benefits
described in this Article 3.2 if Executive’s employment
is terminated by the Company for any reason other than Cause or
Executive terminates employment for Good Reason following a Change
in Control that occurs during the Term.
(a) The
Company will be responsible for paying to Executive all of the Base
Pay owed through such date, the value of any accrued and unused
vacation, and a pro rata portion of Executive’s Bonus Plan
Payment based upon the number of months in the current year which
Executive has worked prior to the date of the Change in Control,
assuming for this Article 3.2(a) that Executive has worked the full
month of the month in which the Change in Control occurs.
(b) The
following terms shall control notwithstanding any conflicting terms
contained in any employment agreement, or Stock Option Agreement.
In addition to the payments under Article 3.2(a), the Company will
be responsible for making a lump sum payment to Executive equal to
the sum of (A) 36 months of Executive’s then
current Base Pay, and (B) an amount equal to 300% of
Executive’s Bonus Plan Payment for the current year.
(c) The
Executive shall also be entitled to (i) elect continuation
coverage under COBRA during the Severance Period and the Company
hereby agrees to pay the premiums for such continuation coverage
for the duration of the Severance Period, (ii) elect health
care continuation coverage on substantially the same terms as
existed prior to the Date of Termination for an additional
18 months following the termination of the Severance Period
provided that the Executive shall pay to the Company a monthly
amount equal to the COBRA premium that would be payable had the
Executive been entitled to COBRA coverage under the applicable
health care plan, and
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