Exhibit 10.16


 


INDEPENDENT
CONTRACTOR AGREEMENT


 


THIS
INDEPENDENT CONTRACTOR AGREEMENT (“Agreement”) is entered into by and among AGA
Medical Corporation, a Minnesota corporation, with its principal office located
at 5050 Nathan Lane North, Plymouth, MN 55442 (the “Company”), and
Ronald Lund, residing at 9002 Riley Lake Rd., Eden Prairie, MN 55347, and
Ronald E. Lund, LLC, a Minnesota limited liability of which Ronald Lund is the
sole owner (individually and collectively, the “Contractor”), effective
as of the 1st day of June, 2007 (the “Effective Date”).


 


WHEREAS,
the Company desires to retain Contractor to provide certain services for the
Company, and Contractor desires to perform such services pursuant to the terms
and conditions set for the herein.


 


NOW,
THEREFORE, in consideration of their respective promises and covenants, the
parties hereby agree as follows:


 


1.             Services.  Subject to the terms and conditions set forth
in this Agreement, the Company agrees to engage Contractor as Chief Legal
Officer to provide services advising and directing the Company in all aspects
of its legal affairs along with such other services as the Company may, from
time to time, reasonably request (the “Services”).  In addition, and without further
compensation, Contractor shall provide Services as requested for the Company’s
parent, AGA Medical Holdings, Inc. (“Holdings”) and/or one or more
of the Company’s Subsidiaries.


 


2.             Status as an
Independent Contractor.  Contractor
is and shall remain an independent contractor of the Company and is not and
shall not be deemed to be an employee, partner or joint venturer with the
Company. Contractor shall be entirely and solely responsible for his acts and
the acts of his agents, employees and subcontractors, if any, while engaged in the
performance of the Services. Contractor acknowledges that the Company shall not
be responsible for deducting withholding taxes, payroll taxes, social security
taxes or other similar items from compensation paid to Contractor. Contractor
shall be solely responsible for any and all such taxes, payments, deductions,
or contributions.  As an independent
contractor, Contractor shall not be entitled to participate in or receive
benefits under any insurance, benefit or bonus plans offered by the Company to
its employees. Contractor agrees to indemnify the Company and hold the Company
harmless from any and all claims or penalties asserted against the Company for
any failure by Contractor to pay taxes due on any form of compensation provided
by the Company pursuant to this Agreement.


 


3.             Term.      The term of this Agreement
shall be three (3) years from the Effective Date (“Term”) unless
otherwise terminated according to the provisions set forth in Section 5
hereof.


 

















 


4.             Performance and
Compensation.


 


(a)           Hours.  Contractor shall perform Services to the
extent reasonably necessary to fulfill the responsibilities outlined in Section 2
hereof and which shall not be less than three (3) days per week.


 


(b)           Compensation and
Billing.  The Company shall pay
Contractor at the rate of $400 per hour worked up to a maximum of $3,200 per
day and a maximum of $16,000 per week. 
Contractor shall record time spent performing Services and shall provide
documentation to the Company in such form and time intervals as may be
requested by the Company to evidence hours worked.


 


(c)           Stock Options.  On the Effective Date or the date Contractor
commences Services for the Company, whichever is later, the Company shall grant
Contractor non-statutory stock options to purchase 600,000 shares of Class B
common stock of the Company (“Options”). 
The Options will have a ten-year term and an exercise price equal to
$2.00 per share.  One-third (1/3) of the
total Option shares will vest on each anniversary of the Effective Date subject
also to the pro rata vesting set forth in this Section 3(c).  The Options will be subject to the terms and
conditions of the 2006 Equity Investment Plan and applicable Form of Stock
Option Agreement, as they may be amended from time to time by the Compensation
Committee of the Board in its sole discretion. 
Upon a Change of Control, the Options will automatically vest provided
Contractor is performing Services at the time of the Change of Control.  Options and option shares shall be nonvoting
ownership and shall have only those rights as determined by the Compensation
Committee of the Board in its sole discretion. 
If Contractor’s Services are terminated for Cause, all vested and
unvested Options and option shares will be forfeited without further action.


 


If Contractor’s Services
are terminated for any other reason other than for Cause then (i) Contractor
shall retain Options and option shares that were vested as of the date
immediately preceding the Termination Date; and (ii) Contractor shall
become vested in additional Options automatically on the Termination Date which
shall be calculated by the following formula (which shall be rounded to the
nearest whole number of Options): (F/365) X 200,000, where F is the number of
calendar days between the immediately preceding anniversary of the Effective
Date (or the Effective Date if no such anniversary thereof shall have occurred)
and the Termination Date; and (iii) remaining unvested Options and option
shares will be forfeited.  Options not
exercised by Contractor within ninety (90) days after the Termination Date will
be forfeited.


 


(d)           Business Expenses.  The Company shall pay or reimburse Contractor
for all reasonable and necessary business expenses incurred or paid by
Contractor in the performance of the Services, subject to any maximum annual
limit or other restrictions on such expenses set by the Company and to such
reasonable substantiation and documentation as may be specified by the Company
from time to time; provided, however, that notwithstanding the
policies of the Company regarding travel expenses, Contractor shall be
permitted reasonable reimbursement for fuel consumed in the use of Contractor’s
private airplane when used for travel in connection with the Services, subject
to a maximum reimbursement of $3,500 per trip.


 


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5.             Termination.  Subject to survival of obligations set forth
herein, this Agreement shall terminate under the following circumstances (the
date of each event of termination set forth below, by whatever cause, is
referred to as the “Termination Date”):


 


(a)           Expiration.  This Agreement shall terminate upon the
expiration of the Term pursuant to Section 3 hereof.


 


(b)           Death.  This Agreement shall immediately and
automatically terminate upon the death of Contractor during the Term.


 


(c)           Failure to Perform.  The Company may terminate this Agreement,
upon five (5) business days’ notice to Contractor, in the event that
Contractor fails to perform the Services requested by the Company for a period
of fifteen (15) consecutive business days or fails to perform Services totaling
at least 900 hours during any consecutive 365 calendar day period of the Term
for any reason other than expiration, death, or by the Company for Cause as
contemplated in Sections 5(a), 5(b) or 5(d) herein.


 


(d)           By the Company for
Cause.  The Company may terminate
this Agreement for Cause at any time upon notice to Contractor setting forth
the nature of such Cause.  The following
shall constitute “Cause” for termination: (i) Contractor’s conviction
of or plea of nolo contendere to a felony or
other crime involving moral turpitude; (ii) Contractor’s fraud, theft or
embezzlement committed with respect to the Company, Holdings or the Company’s
Subsidiaries; (iii) breach by Contractor of any of the provisions of
Sections 7, 8 and/or 9 hereof that causes material harm to the Company,
Holdings or any of the Company’s Subsidiaries; (iv) Contractor’s willful
and continued failure to perform the Services to the Company, Holdings or any
of its Subsidiaries; or (v) Contractor’s willful failure to comply with or
follow the directions or orders of the Company; provided, however,
that the Company may terminate this Agreement for Cause within the meaning of
these clauses (iv) or (v) only after the Company has provided written
notice to Contractor of the failure and Contractor shall have not have remedied
such failure within fifteen (15) business days following the effectiveness of
such notice.


 


(e)           By the Company Other
than for Cause.  This Agreement may
be terminated by the Company at any time without Cause.


 


(f)            By the Contractor.  The Contractor may terminate this Agreement
at any time upon the provision of sixty (60) days prior written notice to the
Company.


 


6.             Compensation
Upon Termination.


 


(a)                                  By
the Company Other than for Cause.  In
the event of any termination of this Agreement by the Company other than for
Cause as contemplated by Section 5(e), the Company shall pay Contractor a
total sum equal to the number of complete calendar weeks remaining in the Term
times $3,200. Any obligation of the Company
to the Contractor pursuant to this Section 6(a) is conditioned upon (i) the
Contractor signing a release of claims in the form appended hereto as Attachment
A (the “Contractor Release”) within twenty-one (21) days (or such
greater period as the Company may 


 


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specify) following the date
notice of termination of this Agreement is given under Section 5(e) and
upon the Contractor’s not revoking the Contractor Release in a timely manner
thereafter and (ii) the Contractor’s continued full performance of
Contractor’s continuing obligations under Sections 7, 8 and/or 9  hereof.  The sum paid under this Section 6(a) shall
be paid to Contractor in accordance with the normal billing periods and maximum
amount set forth in Section 4(b) and will begin at the next regular
billing period which is at least five business days following the effective
date of the Contractor Release, but shall be retroactive to the next business
day following the Termination Date.


 


(b)           Other Causes.  In
the event this Agreement is terminated upon expiration, death, failure to
perform, by the Company for Cause, or by Contractor as contemplated by Sections
5(a), 5(b), 5(c), 5(d) or 5(f) hereunder, the Company shall pay
Contractor (or Contractor’s estate in the case of death) any outstanding sums
due and owing for Services performed and expenses incurred through the
Termination Date, within the 30 day period following his Termination Date.


 


7.             Restricted
Activities.  The Contractor agrees
that some restrictions on Contractor’s activities during and after the Term of
this Agreement are necessary to protect the goodwill, Confidential Information
and other legitimate interests of the Company and its Subsidiaries:


 


(a)           During the Term of this
Agreement and for eighteen (18) months after the Termination Date (in the
aggregate, the “Non-Competition Period”), Contractor shall not, directly or
indirectly, whether as owner, partner, investor, consultant, agent, employee,
independent contractor, co-venturer or otherwise (other than through ownership
of  publicly-traded capital stock of a
corporation which represents less than one percent (1%) of the outstanding
capital stock of such corporation), (i) compete with the Company, Holdings
or any of the Company’s Subsidiaries in any business related to developing,
selling, licensing or otherwise providing Products and related services to
physicians, hospitals or other medical establishments in the United States or
such other business activities which the Company, Holdings or any of the
Company’s Subsidiaries shall conduct or intend to conduct as of the Termination
Date, or (ii) undertake any planning for any business competitive with the
Company, Holdings or any of the Company’s Subsidiaries.  Specifically, but without limiting the
foregoing, Contractor agrees not to engage in any manner in any activity that
is directly or indirectly competitive or potentially competitive with the
business of the Company, Holdings or any of the Company’s Subsidiaries as
conducted or under consideration at any time during the Term of this Agreement
or performance of the Services for the Company or any of its Subsidiaries
(including prior to the date hereof).


 


(b)           Contractor agrees that,
during the Term of this Agreement, Contractor will not undertake any outside
activity, whether or not competitive with the business of the Company, Holdings
or the Company’s Subsidiaries, that could reasonably give rise to a conflict of
interest or otherwise interfere with the performance of the Services for the
Company, Holdings or any of the Company’s Subsidiaries; provided, however,
that Contractor may continue to perform as counsel in the case entitled Innovair
Aviation, 


 


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Ltd. v. United States, so long as
such representation does not violate conflict of interest rules.


 


(c)           Contractor further
agrees that during the Term of this Agreement and during the Non-Competition
Period, Contractor will not, directly or indirectly, (i) hire or attempt
to hire any employee of the Company, Holdings or any of the Company’s
Subsidiaries or anyone who was such an employee within the six (6) months
preceding such hire or attempt to hire, (ii) hire or attempt to hire any
independent contractor providing services to the Company, Holdings or any of
the Company’s Subsidiaries or anyone who was such an independent contractor
within six (6) months preceding such hire or attempt to hire, (iii) assist
in hiring or any attempt to hire of anyone identified in clauses (i) or (ii) of
this sentence by any other Person, (iv) encourage any Contractor or
independent contractor of the Company, Holdings or any of the Company’s
Subsidiaries to terminate his or her relationship with the Company, Holdings or
any of the Company’s Subsidiaries, or (v) solicit or encourage any
customer or vendor of the Company, Holdings or any of the Company’s
Subsidiaries to terminate or diminish its relationship with any of them, or, in
the case of a customer, to conduct with any Person any business or activity
which such customer conducts or could conduct with the Company, Holdings or any
of the Company’s Subsidiaries.


 


8.             Confidential
Information.


 


(a)           Contractor acknowledges
that the Company, Holdings or any of the Company’s Subsidiaries continually
develop Confidential Information, that Contractor has in the past and may in
the future develop Confidential Information for the Company, Holdings or any of
the Company’s Subsidiaries and that Contractor has in the past and may in the
future learn of Confidential Information during the course of this Agreement or
in the performance of the Services.  
Contractor will comply with the policies and procedures of the Company
and its Subsidiaries for protecting Confidential Information and shall never
use or disclose to any Person (except as required by applicable law or for the
proper performance of his duties and responsibilities to the Company and its
Subsidiaries), any Confidential Information obtained by Contractor incident to
this Agreement, or in the performance of the Services or other association with
the Company, Holdings or any of the Company’s Subsidiaries.  Contractor understands that this restriction
shall continue to apply after this Agreement terminates, regardless of the
reason for such termination.


 


(b)           All documents, records,
tapes and other media of every kind and description relating to the business,
present or otherwise, of the Company, Holdings or any of the Company’s
Subsidiaries and any copies, in whole or in part, thereof (the “Documents”),
whether or not prepared by Contractor, shall be the sole and exclusive property
of the Company, Holdings and the Company’s Subsidiaries.  Contractor shall safeguard all Documents and
shall surrender to the Company at the time this Agreement terminates, or at
such earlier time or times as the Board or its designee may specify, all
Documents then in Contractor’s possession or control.


 


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9.             Assignment of
Rights to Intellectual Property. 
Contractor shall promptly and fully disclose all Intellectual Property
to the Company, and Contractor hereby acknowledges that all such Intellectual
Property is the property of the Company. 
Contractor hereby assigns and agrees to assign to the Company (or as
otherwise directed by the Company) Contractor’s full right, title and interest
in and to all Intellectual Property. 
Contractor agrees to execute any and all applications for domestic and
foreign patents, copyrights or other proprietary rights and to do such other
acts (including without limitation the execution and delivery of instruments of
further assurance or confirmation) requested by the Company to assign the
Intellectual Property to the Company and to permit the Company to enforce any
patents, copyrights or other proprietary rights to the Intellectual
Property.  Contractor will not charge the
Company for time spent in complying with these obligations.  All copyrightable works that Contractor
creates shall be considered “work made for hire”.  Notwithstanding the foregoing, this Section 9
shall not apply to any Intellectual Property which no equipment, supplies,
facility or trade secret information of the Company, Holdings or any of the
Company’s Subsidiaries was used and which was developed entirely on Contractor’s
own time, and (i) which does not relate (A) directly to the business
of the Company, Holdings or any of the Company’s Subsidiaries or (B) such
entities’ actual or demonstrably anticipated research development, or (ii) which
does not result from any work performed by the Contractor for the Company,
Holdings or any the Company’s Subsidiaries.


 


10.           Enforcement of
Covenants.  Contractor acknowledges
that Contractor has carefully read and considered all the terms and conditions
of this Agreement, including the restraints imposed upon Contractor pursuant to
Sections 7, 8 and/or 9 hereof. 
Contractor agrees that said restraints are necessary for the reasonable
and proper protection of the Company, Holdings and the Company’s Subsidiaries
and that each and every one of the restraints is reasonable in respect to
subject matter, length of time and geographic area.  Contractor further acknowledges that, were
Contractor to breach any of the covenants contained in Sections 7, 8 and/or 9
hereof, the damage to the Company would be irreparable.  Contractor therefore agrees that the Company,
in addition to any other remedies available to it, shall be entitled to
preliminary and permanent injunctive relief against any breach or threatened
breach by Contractor of any of said covenants. 
The parties further agree that, in the event that any provision of
Sections 7, 8 and/or 9  hereof shall
be determined by any court of competent jurisdiction to be unenforceable by
reason of its being extended over too great a time, too large a geographic area
or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.


 


11.           Conflicting
Agreements. Contractor hereby represents and warrants that the execution of
this Agreement and the performance of Contractor’s obligations hereunder will
not breach or be in conflict with any other agreement to which Contractor is a
party or is bound and that Contractor is not now subject to any covenants against
competition or similar covenants or any court order or other legal obligation
that would affect the performance of his obligations hereunder.  Contractor will not disclose to or use on
behalf of the Company any proprietary information of a third party without such
party’s consent.


 


12.           Definitions.  Words or phrases which are initially
capitalized or are within quotation marks shall have the meanings provided in
this Section 12 and as provided elsewhere herein.  For purposes of this Agreement, the following
definitions apply:


 


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(a)           “Affiliate”
means, with respect to the Company or any other specified Person, any other
Person directly or indirectly controlling, controlled by or under common
control with the Company or such other specified Person, where control may be
by management authority, equity interest or other means.


 


(b)           “Change of Control” means (i) a consolidation or
merger of the Company with or into any other corporation (other than a merger in
which the Company is the surviving corporation and which will not result in
more than 50% of the capital stock of the Company being owned of record or
beneficially by persons other than the holders of such capital stock
immediately prior to such merger), (ii) a sale or disposition of all or
substantially all of the properties and assets of the Company as an entirety to
any other person or persons in a single transaction or series of related
transactions, (iii) an acquisition of beneficial ownership by any person
or group of voting stock of the Company representing more than 50% of the
voting power of all outstanding shares of such voting stock, whether by way of
merger or consolidation or otherwise, or (iv) any other transaction which
results in the disposition of 50% or more of the voting power of all classes of
capital stock of the Company on a combined basis.


 


(c)           “Confidential
Information” means any and all information of the Company, Holdings and the
Company’s Subsidiaries that is not generally known by others with whom they
compete or do business, or with whom they plan to compete or do business and
any and all information which, if disclosed by the Company, Holdings or the
Company’s Subsidiaries, would assist in competition against them.  Confidential Information includes without
limitation such information relating to (i) the development, research,
testing, manufacturing, marketing and financial activities of the Company,
Holdings or the Company’s Subsidiaries, (ii) the Products, (iii) the
costs, sources of supply, financial performance and strategic plans of the
Company, Holdings or the Company’s Subsidiaries, (iv) the identity and
special needs of the customers of the Company, Holdings or the Company’s
Subsidiaries and (v) the people and organizations with whom the Company,
Holdings or the Company’s Subsidiaries have business relationships and those
relationships.  Confidential Information
also includes any information that the Company, Holdings or any of the Company’s
Subsidiaries have received, or may receive hereafter, from others which was
received by the Company, Holdings or any of the Company’s Subsidiaries with any
understanding, express or implied, that the information would not be disclosed.


 


(d)           “Intellectual
Property” means inventions, discoveries, developments, methods, processes,
compositions, works, concepts and ideas (whether or not patentable or
copyrightable or constituting trade secrets) conceived, made, created,
developed or reduced to practice by Contractor (whether alone or with others
and whether or not during normal business hours or on or off the premises of
the Company, Holdings or any of the Company’s Subsidiaries) during the Term of
this Agreement (including prior to the Effective Date) that relate to either
the Products or any prospective activity of the Company, Holdings or any of the
Company’s Subsidiaries or that make use of 
Confidential Information or any of the equipment or facilities of the
Company, Holdings or any of the Company’s Subsidiaries.


 


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(e)           “Person” means
an individual, a corporation, a limited liability company, an association, a
partnership, an estate, a trust and any other entity or organization, including
an Affiliate or a Subsidiary.


 


(f)            “Products” mean
all products planned, researched, developed, tested, manufactured, sold,
licensed, leased or otherwise distributed or put into use by the Company or any
of its Subsidiaries, together with all services provided or planned by the
Company or any of its Subsidiaries, during the Term of this Agreement or the
performance of Services for the Company or any of its Subsidiaries (including
prior to the Effective Date).


 


(g)           “Subsidiary”
shall mean any Person of which the Company (or other specified Person) shall,
directly or indirectly, own beneficially or control the voting of at least a
majority of the outstanding capital stock (or other shares of beneficial
interest) entitled to vote generally or at least a majority of the partnership,
membership, joint venture or similar interests, or in which the Company (or
other specified Person) or a Subsidiary thereof shall be a general partner or
joint venturer without limited liability.


 


13.           Survival.  The provisions of this Agreement shall
survive following the Termination Date if so provided herein or desirable to
accomplish the purposes of other surviving provisions, including without
limitation the provisions of Section 6, 7, 8 and 9 hereof.


 


14.           Assignment.  Neither the Company nor Contractor may make
any assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of Contractor in the event that the Company shall hereafter
effect a reorganization, consolidation or merger or to whom the Company
transfers all or substantially all of its properties or assets.  This Agreement shall inure to the benefit of
and be binding upon the Company and Contractor, their respective successors,
executors, administrators, heirs and permitted assigns.


 


15.           Severability.  If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.


 


16.           Waiver.  No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.  The failure of either party to require the
performance of any term or obligation of this Agreement, or the waiver by
either party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.


 


17.           Notices.  Any and all notices, requests, demands and
other communications provided for by this Agreement shall be in writing and
shall be effective when delivered in person, when delivered by courier at
Contractor’s last known address on the books of the 


 


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Company, or five (5) business
days following deposit in the United States mail, postage prepaid, registered
or certified, and addressed to Contractor at his last known address on the
books of the Company or, in the case of the Company, at its principal place of
business, attention of the Chairman of the Board, or to such other address as
either party may specify by notice to the other actually received.


 


18.           Entire Agreement.  This Agreement and the other plans and
documents specifically referred to herein constitute the entire agreement
between the parties regarding the subject matter of this Agreement and such
other plans and documents and supersede all prior communications, agreements
and understandings, written or oral, with respect to such subject matter,
including any prior agreements between Contractor and the Company.


 


19.           Amendment.  This Agreement may be amended or modified
only by a written instrument signed by Contractor and by an expressly
authorized representative of the Company.


 


20.           Headings.  The headings and captions in this Agreement
are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement.


 


21.           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together
shall constitute one and the same instrument.


 


22.           Compliance with Laws.  If the Company and Contractor reasonably
determine that the terms of this Agreement are not in compliance with applicable
laws or regulations, including without limitation as would result in the
imposition of extraordinary current taxation, the Company and Contractor agree
to undertake commercially reasonable efforts to amend this Agreement to cure
such noncompliance.  In furtherance of
the foregoing, it is the intent of the Company and Contractor that this
Agreement comply with the provisions and principles established by the Internal
Revenue Service pursuant to Section 409A of the Internal Revenue Code of
1986, as amended.


 


23.           Governing Law.  This contract and shall be construed and
enforced under and be governed in all respects by the laws of Minnesota,
without regard to the conflict of laws principles thereof.


 


IN
WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the
Company, by its duly authorized representative, and by Contractor, as of the
date first above written.


 


 


	
  THE CONTRACTOR:

  	
   

  	
  AGA MEDICAL
  CORPORATION:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Ronald Lund

  	
   

  	
  By:

  	
  /s/ Franck Gougeon

  
	
  Ronald Lund and

  	
   

  	
  Franck Gougeon

  
	
  Ronald E. Lund, LLC

  	
   

  	
  Its: President and CEO

  



 


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