Exhibit 3
SEVERANCE COMPENSATION AGREEMENT
[TIERS 2 and 3]
This Agreement ("Agreement") is dated as of ___________________
___________________________, 1995, by and between Cordis Corporation, a
Florida corporation having offices at 00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxx,
Xxxxxxx 00000 (the "Company"), and __________________, whose residence
address is _______________________________________ (the "Executive").
WHEREAS, the Company's Board of Directors considers the continued
services of key executives of the Company to be in the best interests of
the Company and its stockholders; and
WHEREAS, the Company's Board of Directors desires to assure, and
has determined that it is appropriate and in the best interests of the
Company and its stockholders to reinforce and encourage the continued
attention and dedication of key executives of the Company to their duties
of employment without personal distraction or conflict of interest in
circumstances arising from the possibility or occurrence of a change in
control of the Company; and
WHEREAS, the Company's Board of Directors has authorized the
Company to enter into severance agreements with those key executives of the
Company who are designated by the Compensation Committee of the Board of
Directors ("Committee"), such agreements to set forth the severance
compensation which the Company agrees under certain circumstances to pay
such executives; and
WHEREAS, the Executive is a key executive of the Company and has
been designated by the Committee as an executive to be offered such a
severance compensation agreement with the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the Company and the Executive agree as follows:
1. Change in Control. No compensation or other benefit shall
-----------------
be payable under this Agreement unless and until (i) a Change in Control of
the Company (as hereinafter defined) shall have occurred while the
Executive is an employee of the Company and (ii) the Executive's employment
by the Company thereafter shall have terminated in accordance with Sections
2 and 3 hereof. For purposes of this Agreement, a "Change in Control"
shall be defined as:
(a) any person or persons acting in concert (excluding Company
benefit plans) becomes the beneficial owner of securities of the Company
having at least 25% of the voting
2
power of the Company's then outstanding securities (unless the event
causing the 25% threshold to be crossed is an acquisition of securities
directly from the Company); or
(b) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale of more than 50% of the
Company's assets or combination of the foregoing transactions (the
"Transactions") other than a Transaction immediately following which the
------------
shareholders of the Company immediately prior to the Transaction and any
trustee or fiduciary of any Company employee benefit plan own, immediately
following the Transaction, at least 75% of the voting securities of the
surviving company (or its parent), in the event of a merger or other
business combination, or, in the event of a sale of assets, of the
purchaser of such assets; or
(c) within any 24 month period, the persons who were directors
immediately before the beginning of such period (the "Incumbent Directors")
-------------------
shall cease (for any reason other than death) to constitute at least a
majority of the Board or the board of directors of a successor to the
Company. For this purpose, any director who was not a director at the
beginning of such period shall be deemed to be an Incumbent Director if
such director was elected to the Board by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then
qualified as Incumbent Directors (so long as such director was not
nominated by a person who has entered into an agreement to effect a Change
in Control).
2. Termination Following Change in Control.
---------------------------------------
(a) If a Change in Control shall have occurred while the
Executive is an employee of the Company, the Executive shall be entitled to
the compensation provided for in Section 3 hereof upon the subsequent
termination of the Executive's employment with the Company within the
relevant periods herein provided, (i) by the Executive for Good Reason, as
hereinafter defined, or (ii) by the Company other than for Cause (as
hereinafter defined), or is as a result of (A) the Executive's Disability
(as hereinafter defined) or (B) the Executive's Retirement (as hereinafter
defined).
(b) Disability. For purposes of this Agreement, "Disability"
----------
shall mean the Executive's absence from the full-time performance of the
Executive's duties pursuant to a determination made in accordance with the
procedures established by the Company in connection with the Company's
disability benefits plan, which plan was in effect immediately prior to the
Change in Control, that the Executive is disabled as a result of incapacity
due to physical or mental illness.
(c) Retirement. For purposes of this Agreement, "Retirement"
----------
shall mean termination of the Executive's employment with the Company, on
or after the Executive's normal or early retirement date, under the
Company's retirement policy then generally applicable to its salaried
employees, or in accordance with any retirement plan or arrangement with
respect to the Executive in effect immediately prior to a Change in Control
or thereafter established by the Company with the Executive's consent.
3
(d) Cause. For purposes of this Agreement, "Cause" shall mean:
-----
(i) fraud, dishonesty or willful malfeasance by Executive in
connection with Executive's employment with the Company which results
in material harm to the Company;
(ii) Executive's continued failure to substantially perform the
duties and responsibilities of Executive's office after written notice
from the Company setting forth the particulars of such failure and a
reasonable opportunity, but not less than ten (10) business days, to
cure;
(iii) Executive's willful and material breach of the provisions
of Section 10 or 11 of this Agreement; or
(iv) Executive's plea of guilty or nolo contendere to, or
nonappealable conviction of, a felony.
Termination of Executive for Cause shall be made by delivery to Executive
of a copy of a resolution duly adopted by the affirmative vote of not less
than a two-thirds majority of the Directors of the Company or of the
ultimate parent of the entity which caused the Change in Control if the
Company has become a subsidiary at a meeting of such Board of Directors
called and held for such purpose (after 30 days prior written notice to
Executive specifying the basis for such termination and the particulars
thereof and reasonable opportunity for Executive to be heard before the
Board prior to such vote), finding that in the reasonable judgment of such
Board, the conduct or event set forth in any of clauses (i) through (iv)
above has occurred and that such occurrence warrants Executive's
termination.
(e) Good Reason. For purposes of this Agreement, "Good Reason"
-----------
shall mean the occurrence, after a Change in Control, of any of the
following without the Executive's express written consent:
(i) Any material diminution in the Executive's position, duties
or responsibilities with the Company from those in effect immediately
prior to the Change in Control or which would constitute a material
adverse alteration in the Executive's duties, responsibilities or
other conditions of employment from those in effect immediately prior
to the Change in Control;
(ii) Any material adverse change in the Executive's salary and
incentive compensation from the salary and incentive compensation in
effect immediately prior to the Change in Control;
(iii) Any failure by the Company either to continue in effect,
or to provide reasonably similar retirement, savings, medical, dental,
accident, disability and life insurance plans and any other similar
benefits, policy or program in which the Executive was a participant
immediately prior to the Change in Control;
4
(iv) Any relocation of the Executive's employment to a location
in excess of 50 miles from the location at which the Executive was
based immediately prior to the Change in Control;
(v) Any failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive was entitled, in
accordance with the Company's policy, in effect prior to the Change in
Control;
(vi) Any material breach by the Company of any provision of this
Agreement; and
(vii) Any failure by the Company to obtain from any successor to
the Company a satisfactory agreement to assume and perform this
Agreement, as contemplated by Section 7(a) hereof.
(f) Notice of Termination. Any purported termination of the
---------------------
Executive's employment with the Company shall be communicated by a Notice
of Termination to the Executive, if such termination is by the Company, or
to the Company, if such termination is by the Executive. For purposes of
this Agreement, "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment
under the provisions so indicated. For purposes of this Agreement, no
purported termination of Executive's employment with the Company shall be
effective without such a Notice of Termination having been given.
(g) Dispute Resolution. Any disputes arising from the operation
------------------
of this Agreement, including, but not necessarily being limited to, the
manner of giving the Notice of Termination, the reasons or cause for
Executive's termination or the amount of severance compensation due to
Executive subsequent to Executive's termination, shall be resolved solely
by arbitration. In the event that any such dispute, after notice thereof
is given to the other party, in writing, is not able to be resolved by
mutual agreement of the parties within sixty (60) days of the giving of
such notice, Executive and the Company hereby agree to promptly submit such
a dispute to binding arbitration in accordance with the rules of the
American Arbitration Association, such arbitration to be held in the
metropolitan area nearest to, and in the same country as, Executive's place
of residence, and further agree to be fully bound by the findings of such
arbitration.
3. Compensation Upon Termination After a Change in Control.
-------------------------------------------------------
(a) If within three (3) years after a Change in Control, the
Executive's employment by the Company shall be terminated by the Company
for any reason other than (i) the Executive's Disability, (ii) the
Executive's Retirement, or (iii) for Cause, or if within three (3) years
after a Change in Control, the Executive terminates his employment for Good
Reason, the Company shall (subject only to any applicable payroll and other
taxes required to be withheld) pay or cause to be paid to the Executive, a
lump sum cash amount equal [two (2)][one and one-half (1.5)] times the sum
of (i) Executive's base salary (including the annual
5
amount of any automobile allowance [Tier 2 only]) immediately prior to the
Change in Control and (ii) the highest bonus paid to the Executive under
the Company's executive incentive compensation plans during the three years
preceding the Change in Control. In addition, Executive shall be entitled
to (i) continued medical, dental and life insurance coverage for Executive
and executive's eligible dependents on the same basis as in effect prior to
Executive's termination of employment until the earlier of (A) [twenty-
four] [eighteen] months after the Executive's termination or (B) the
commencement of comparable coverage with a subsequent employer; provided,
--------
however, that such continued coverage shall not count against any continued
-------
coverage required by law; (ii) payment, in a cash lump sum, of all amounts
deferred by Executive under any non-qualified plan of deferred compensation
maintained by the Company (notwithstanding the payment provisions of any
such plans to the contrary) and any accrued but unused vacation time and
(iii) [twenty-four] [eighteen] months of age and service credit for all
purposes under all retirement plans of the Company; provided, however, that
-------- -------
to the extent any increase in benefits which would result from such
additional age and service credits could not be paid under the terms of any
plan, the amount of such increase shall be calculated under the terms of
each such plan and paid directly by the Company in the same form and at the
same time that the benefits under each such plan are otherwise paid.
[The Following Paragraph (b) Applies to Tier 3 Only]
(b) Parachute Payment Limitation. If any payment or benefit to the
----------------------------
Executive under this Agreement would be considered a "parachute payment" within
the meaning of Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") and if, after reduction for any applicable federal excise
tax imposed by Code Section 4999 (the "Excise Tax") and federal income tax
imposed by the Code, the Executive's net proceeds of the amounts payable and the
benefits provided under this Agreement would be less than the amount of the
Executive's net proceeds resulting from the payment of the Reduced Amount
described below, after reduction for federal income taxes, then the amount
payable and the benefits provided under this Agreement shall be limited to the
Reduced Amount. The "Reduced Amount" shall be the largest amount that could be
received by the Executive under this Agreement such that no amount paid to the
Executive under this Agreement and any other agreement, contract, or
understanding heretofore or hereafter entered into between the Executive and the
Company (the "Other Agreements") and any formal or informal plan or other
arrangement heretofore or hereafter adopted by the Company for the direct or
indirect provision of compensation to the Executive (including groups or classes
of participants or beneficiaries of which the Executive is a member), whether or
not such compensation is deferred, is in cash, or is in the form if a benefit to
or for the Executive (a "Benefit Plan") would be subject to the Excise Tax. In
the event that the amount payable to the Executive shall be limited to the
Reduced Amount, then the Executive shall have the right, in the Executive's sole
discretion, to designate those payments or benefits under this Agreement, any
Other Agreements, and/or any Benefit Plans, that should be reduced or eliminated
so as to avoid having the payment to the Executive under this Agreement be
subject to the Excise Tax.
[The Following Paragraphs (b), (c) and (d) Apply to Tier 2 Only]
(b) Gross Up. In the event it shall be determined that any payment,
--------
benefit or distribution (or combination thereof) by the Company or one or more
trusts established by the Company for the benefit of its employees, to or for
the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, or under the terms of any
other plan, program agreement or arrangement) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, hereinafter collectively referred
to as the "Excise Tax"), Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and the Excise Tax imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(c) Subject to the provisions of Section 3(d), all determinations
required to be made under this Section 3, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm as may be designated by Executive
(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and Executive within fifteen (15) business days of the
receipt of notice from Executive that there has been a Payment, or such earlier
time as is requested by the Company. All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid
by the Company to Executive within five (5) days after the receipt of the
Accounting Firm's determination.
(d) As soon as practicable, Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment. If the Company
notifies Executive in writing that it desires to contest such claim, Executive
shall cooperate in all reasonable ways with the Company in such contest and the
Company shall be entitled to participate in all proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all costs
-------- -------
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive harmless, on
an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 3, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such
-------- -------
claim and xxx for a refund, the Company shall advance the amount of such payment
to Executive, on an interest-free basis, and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and
provided, further, that if Executive is required to extend the statute of
-------- -------
limitations to enable the Company to contest such claim, Executive may limit
this extension solely to such contested amount. The Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
6
4. Obligations Absolute; No Effect On Other Rights.
-----------------------------------------------
(a) The obligations of the Company to make the payment to the
Executive, and to make the arrangements, provided for herein shall be
absolute and unconditional and shall not be reduced by any circumstances,
including without limitation any setoff, counterclaim, recoupment, defense
or other right which the Company may have against the Executive or any
third party at any time.
(b) The provision of this Agreement, and any payment provided
for herein, shall not supersede or in any way limit the rights, benefits,
duties or obligations which the Executive may now or in the future have
under any benefit, incentive or other plan or arrangement of the Company or
any other agreement with the Company.
5. Not an Employment Agreement. This Agreement is not, and
---------------------------
nothing herein shall be deemed to create, a contract of employment between
the Executive and the Company. The Company may terminate the employment of
the Executive by the Company at any time, subject to the terms of any
employment agreement or arrangement between the Company and the Executive
that may then be in effect.
6. Term of Agreement. This Agreement shall commence on the
-----------------
date hereof and shall continue in effect for a period of three (3) years.
Any renewal of this Agreement shall be by means of a new Agreement, in
writing, executed with the same formality as this Agreement and, on behalf
of the Company, by an officer duly authorized by the Board of Directors to
so enter into such a renewal of the Agreement. Notwithstanding, however,
the requirement for a new Agreement, in writing, for a renewal of this
Agreement subsequent to its initial three-year term, if a Change in Control
shall have occurred during the initial term of this Agreement, this
Agreement shall continue in effect for a period of 36 months beyond the
date of such Change in Control.
7. Successors; Binding Agreement, Assignment.
-----------------------------------------
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business of the Company, by agreement to
expressly, absolutely and unconditionally assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure
of the Company to obtain such agreement prior to the effectiveness of any
such succession shall be a material breach of this Agreement and shall
entitle the Executive to terminate the Executive's employment with the
Company or such successor for Good Reason immediately prior to or at any
time after such succession. As used in this Agreement, "Company shall mean
(i) the Company as hereinbefore defined, and (ii) any successor to all or
substantially all of the Company's business or assets which executes and
delivers an agreement provided for in this Section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law, including any parent or subsidiary of such a successor.
7
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would be payable to
the Executive hereunder if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there be no such designee, to the Executive's estate.
Neither this Agreement nor any right arising hereunder may be assigned or
pledged by the Executive.
8. Notice. For purpose of this Agreement, notices and all
------
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered or when
mailed United States certified or registered mail, return receipt
requested, postage prepaid, address to (i) the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Committee with a copy
directed to the Secretary of the Company, or (ii) such other address for a
party as such party may have furnished to the other in writing in
accordance with this Section 8, except that notices of change of address
shall be effective only upon receipt.
9. Expenses. In addition to all other amounts payable to the
--------
Executive under this Agreement, the Company shall pay or reimburse the
Executive for all costs and expenses (including without limitation, any and
all court costs and attorneys' fees and expenses) incurred by the Executive
in connection with or as a result of any claim, action or proceeding
brought by the Company or the Executive with respect to or arising out of
this Agreement or any provision hereof; unless, in the case of an action
brought by the Executive, it is determined by an arbitrator or by a court
of competent jurisdiction that such action was frivolous and was not
brought in good faith.
10. Confidentiality. The Executive shall retain in confidence
---------------
any and all confidential information concerning the Company and its
respective business which is now known or hereafter becomes known to the
Executive, except information (i) ascertainable or obtained from public
information, (ii) received by the Executive at any time after the
Executive's employment by the Company shall have terminated, from a third
party not employed by or otherwise affiliated with the Company or (iii)
which is or becomes known to the public by any means other than a breach of
this Section 10. Upon termination of employment, the Executive will not
take or keep any proprietary information or documentation belonging to the
Company.
11. Non-Competition. The Executive covenants and agrees that,
---------------
during the Executive's employment and for a period of six (6) months
thereafter, the Executive will not directly or indirectly own, operate,
manage, consult with, control, participate in the management or control of,
be employed by, maintain or continue any interest whatsoever in any
enterprise that designs, manufactures, distributes, markets or promotes
medical devices or their components in competition with the Company, in any
technical area of expertise in which the Executive was involved during the
year prior to termination of employment, without the written consent of an
officer of the Company. The Executive further agrees that
8
after termination of employment, the Executive will not, either directly or
indirectly or in concert with others, seek to influence any employee to
leave the Company's employment. The Executive further acknowledges that a
lawsuit for damages for any of the provisions of paragraph 11 of this
Agreement will be inadequate and agrees that the Company is entitled to
injunctive relief in case of any such breach. If any part of this
Agreement is held to be invalid or unenforceable, such holding will not
affect any other part of the Agreement. If, moreover, any part of this
Agreement is for any reason held to be excessively broad as to time,
duration, geographical scope, activity or subject, it will be construed by
limiting or reducing it, so as to be enforceable to the extent compatible
with the applicable law as it then exists.
12. Miscellaneous. No provision of this Agreement may be
-------------
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such officer
of the Company as shall be specifically designated by the Committee or by
the Board of Directors of the Company. No waiver by either party, at any
time, of any breach by the other party of, or of compliance by the other
party with, any condition or provision of this Agreement to be performed or
complied with by such other party shall be deemed a waiver of any similar
or dissimilar provision or condition of this Agreement or any other breach
of or failure to comply with the same condition or provision at the same
time or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in
this Agreement. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Florida
without giving effect to its conflict of laws rules.
13. Severability. If any one or more of the provisions of this
------------
Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not be affected thereby. To the extent permitted by
applicable law, each party hereto waives any provision of law which renders
any provision of this Agreement invalid, illegal or unenforceable in any
respect.
14. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Florida.
15. Amendment/Waiver. This Agreement shall not be amended,
----------------
altered, or modified except by an instrument in writing duly executed by
the parties hereto. Neither the waiver by either of the parties hereto of
a breach of or a default under any of the provisions of this Agreement, nor
the failure of either of the parties, on one or more occasions, to enforce
any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall thereafter be construed as a waiver of any
subsequent breach or default of a similar nature, or as a waiver of any
such provisions, rights or privileges hereunder.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original and all of which shall be
deemed to constitute one and the same instrument.
9
17. Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all prior oral or written agreements, commitments or
understanding with respect to the matters provided for herein.
10
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CORDIS CORPORATION
-------------------------------------
Witnesses:
---------------------------------- -------------------------------------
Name:
-------------------------------
Title:
-------------------------------
---------------------------------- -------------------------------------
Executive
