Document:

Exhibit

Exhibit 10.7

EXECUTIVE CHANGE OF CONTROL SEVERANCE AGREEMENT
 

__________________ 
__________________
__________________

Dear __: 
 
Owens & Minor, Inc. (the “Company”) considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly held corporations, the possibility of a change in control of the Company may exist and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. 
 
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s senior management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company. 
 
In order to induce you to remain in the employ of the Company, the Company agrees that you shall receive the severance benefits set forth in this Executive Change of Control Severance Agreement (the “Agreement”) in the event your employment with the Company is terminated under the circumstances described below. 
 
1.    Term of Agreement. 
 
(a)    The Initial Term of this Agreement shall commence on __________ 20__ (the “Commencement Date”), and shall end on December 31, 20__.  Commencing January 1, 20__, and each other January 1 thereafter, the term of this Agreement shall be automatically extended for one additional year unless the Company, not later than September 30 of the preceding year, shall have given you written notice (a “Nonrenewal Notice”) that it does not wish to extend this Agreement.  For purposes of this Agreement, the word “Term” means the Initial Term and the period of any extension pursuant to the preceding sentence or the following Paragraph 1(b).  

(b)    Paragraph 1(a) to the contrary notwithstanding, if a Change in Control occurs during the Term of this Agreement, the Term shall be extended for a period of twenty-four (24) months after the month in which the Change in Control occurs and the Term shall expire at the end of such period.

(c)    Paragraph 1(a) to the contrary notwithstanding, the Company may not give a Nonrenewal Notice during the period beginning on the date a Potential Change in Control occurs and ending on the earlier of (i) the date that is twelve (12) months after the date the Potential Change in Control occurs or (ii) the date a Change in Control occurs.

(d)    Notwithstanding any other provision of this Paragraph 1, the Term of this Agreement shall end, i.e., this Agreement shall cease to be in effect (other than Paragraphs 5 and 11 which shall continue to apply) 

if, before a Change in Control or Potential Change in Control your position with the Company is changed such that you no longer serve in your current position with the Company or a more senior position.

2.    Change in Control; Potential Change in Control. 
 
(a) No benefits shall be payable hereunder unless there is a Change in Control during the Term of this Agreement.  For purposes of this Agreement, a Change in Control shall be deemed to have occurred if: 
 
(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Company or any employee benefit plan of the Company or any subsidiary of the Company), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities; provided, however, that an increase in the percentage of beneficial ownership in the Company’s voting securities of a “person” (as hereinabove defined) on account of acquisitions of Company securities by the Company, a subsidiary or any employee benefit plan of the Company or a subsidiary, shall be disregarded; 
 
(ii) individuals who, as of the Commencement Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute a majority of the Board; provided, however, that any individual becoming a director after the Commencement Date, shall be considered as though such individual was a member of the Incumbent Board if the individual’s election or nomination for election by the Company’s shareholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board; and provided further that any individual whose initial service as a director occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as hereinabove defined) shall not be considered a member of the Incumbent Board;
 
(iii) there is a merger or consolidation of the Company with any other company, other than (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires more than 30% of the combined voting power of the Company’s then outstanding securities; or 
 
(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets. 
 
(b) For purposes of this Agreement, a “Potential Change in Control” shall be deemed to have occurred if: 
 
(i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; 
 
            
(ii) any “person” (as hereinabove defined), other than an employee benefit plan of the Company or a subsidiary of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Company’s then outstanding securities, increases his beneficial ownership of such securities by 3 percentage points or more over the percentage so owned by such person on the date hereof; provided, however, that an increase in a person’s percentage of beneficial 

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ownership in the Company’s voting securities on account of acquisitions of Company securities by the Company, a subsidiary or any employee benefit plan of the Company or a subsidiary shall be disregarded; or 
 
(iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Company has occurred. 
 
(c) You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control, you will remain in the employ of the Company until the earliest of (i) the date which is 180 days from the occurrence of such Potential Change in Control of the Company, (ii) the termination by you of your employment by reason of a physical or mental illness or physical injury which has lasted, or can be expected to last, at least six months or (iii) the date on which your employment is terminated by the Company. 

3.    Termination Following Change in Control. 
 
(a) General.  If a Change in Control occurs during the Term of this Agreement, you shall be entitled to the benefits provided in Paragraph 4(b) upon the termination of your employment during the Term of this Agreement if termination is (i) by the Company for other than Cause on or after a Change in Control, (ii) by you for Good Reason on or after a Change in Control or (iii) by the Company for other than Cause no more than 90 days before a Change in Control and such Change in Control occurs.  You shall not be entitled to the benefits provided in Paragraph 4(b) if (i) your employment with the Company is terminated for any reason before a Change in Control other than a termination by the Company for other than Cause no more than 90 days before a Change in Control and such Change in Control occurs or (ii) your employment with the Company is terminated on or after a Change in Control on account of your death, physical or mental illness or physical injury, by the Company for Cause or by you for any reason other than for Good Reason.  
 
(b) Cause. Termination by the Company of your employment for “Cause” shall mean termination (i) upon the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or physical injury or any such actual or anticipated failure after you give a Notice of Termination (as defined in Paragraph 3(d)) for Good Reason (as defined in Paragraph 3(c)), or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this paragraph, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless (i) the Company gives you a written Notice of Termination specifying the grounds that it asserts constitute Cause, (ii) you fail to cure or remedy those grounds to the satisfaction of the Company within thirty (30) days of the Company’s notice and (iii) following the thirty (30) day period the Board adopts and delivers to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above and specifying the particulars thereof in detail and that the conduct was not cured or remedied during the thirty (30) day period.
 

(c) Good Reason.  For purposes of this Agreement, “Good Reason” shall mean, after a Change in Control, the occurrence of any of the following circumstances without your express written consent: 
 
(i) a material diminution in your authority, duties or responsibilities as compared to your authority, duties and responsibilities immediately prior to the Change in Control; provided, however, that, a material diminution of your authority, duties or responsibilities shall not be considered to occur (and therefore shall not 

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constitute “Good Reason”) if such diminution is solely attributable to the fact that the Company is no longer a public company; 
 
(ii) a material reduction in your annual base salary and/or your target bonus opportunity (including any material adverse change in the formula for such annual bonus target) as in effect immediately prior to the Change in Control, or as the same may be increased from time to time thereafter (other than a reduction in annual base salary and/or target bonus opportunity of not more than ten percent (10%) and that is applied equally to all officers of the Company and/or all officers of the surviving entity in the Change in Control); 
 
(iii) any requirement of the Company that you (A) be based more than 35 miles from the Company office at which you are principally employed immediately prior to the date of the Change in Control or (B) travel on the Company’s business to an extent substantially greater than your travel obligations immediately prior to the Change in Control; 
 
(iv) the failure by the Company to pay to you any portion of your current compensation or compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; 
 
(v) a change in your reporting relationship such that (A) if immediately before the Change in Control you report directly to the Company’s Chief Executive Officer, on or after the Change in Control you do not report directly to the Company’s Chief Executive Officer or (B) if immediately before the Change in Control you report directly to the Board, on or after the Change in Control you do not report directly to the Board;
 
(vi) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6 hereof; or 
 
(vii) any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Paragraph 3(d) below, which purported termination shall not be effective for purposes of this Agreement. 
 
Your right to terminate your employment for Good Reason shall not be affected by your incapacity due to physical or mental illness or physical injury.  A termination will not be for Good Reason unless you give the Company written Notice of Termination specifying the grounds that you assert constitute Good Reason within ninety (90) days after the initial existence of those grounds and the Company fails to cure or remedy those grounds within thirty (30) days of your notice.

(d) Notice of Termination. Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 8.  “Notice of Termination” shall mean a notice that 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 your employment under the provision so indicated. 
 
(e) Date of Termination. “Date of Termination” pursuant to Paragraph 3(b) or 3(c) shall mean, the date specified in the Notice of Termination (which, in the case of termination for Good Reason shall not be less than thirty (30) nor more than sixty (60) days from the date such Notice of Termination is given). 

4.    Compensation Upon Termination 
 

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If a Change in Control occurs during the Term of this Agreement, you shall be entitled to the following benefits upon termination of your employment, provided that such termination occurs during the Term: 
 
(a) If your employment ends for any reason, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any retirement, insurance or other compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. 
 
(b) If your employment by the Company is terminated by the Company other than for Cause, either after a Change in Control or no more than 90 days before a Change in Control and such Change in Control occurs, or if you terminate your employment for Good Reason after a Change in Control, you shall be entitled, subject to the provisions of Section 5, hereof, and your execution (and non-revocation) of a general release in favor of the Company and its subsidiaries substantially in the form attached hereto as Exhibit A no later than thirty (30) days (or such longer period of consideration as may be required by applicable law) following such termination of employment, to the benefits provided below (collectively the “Severance Benefits”): 
 
(i) the Company shall pay you a pro rata annual bonus equal to your accrued annual bonus through the Date of Termination or, if such amount is not determinable, an amount equal to a pro rata portion of your target annual bonus through the Date of Termination; 
 
(ii) in lieu of any further salary payments to you for periods after the Date of Termination, the Company shall pay you a lump sum severance payment equal to the Severance Multiplier times the sum of (1) the greater of (a) your annual rate of base salary in effect on the Date of Termination or (b) your annual rate of base salary in effect immediately prior to the Change in Control and (2) the greater of (a) your target annual bonus in effect on the Date of Termination or (b) your target annual bonus in effect immediately prior to the Change in Control;
            
(iii) the Company shall pay you an amount equal to 24 times the difference between (1) the monthly premium for continued health plan coverage under Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), i.e., “COBRA,” for the health plan coverage in effect for you and your dependents on the Date of Termination minus (2) the monthly premium for such coverage paid by active employees of the Company; and

(iv) the Company shall pay you an amount equal to 24 times the monthly premium that you would pay if you convert your Company-provided life insurance coverage to individual life insurance coverage (regardless of whether you convert to individual coverage).  

The “Severance Multiplier” shall equal two (2).  The amount payable under this Paragraph 4(b) shall be in lieu of any severance benefits payable to you by the Company under any other severance plan, policy, arrangement or agreement.

The amount payable under this Paragraph 4(b) shall be paid in a single cash payment, less applicable income and employment taxes, on the first payroll date that occurs forty-five (45) days after the Date of Termination.

(c) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise and, except as provided in Paragraph 4(b), the amount of any payment or benefit provided for in this Section 4 shall not be reduced by any compensation earned by you as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise. 
 

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5.    Restrictive Covenants.  
 
(a) When used in this Section 5, the following terms shall have the meanings specified: 
 
(i) “Confidential Information” shall mean any data or information with respect to the business conducted prior to the Change in Control by the Company, its divisions, subsidiaries and affiliates that is material to the Company’s business operations and is not generally known to the public. Without limitation and to the extent consistent with the foregoing, Confidential Information includes any information that is confidential and proprietary to the Company, including but not limited to: (A) reports, pricing, sales manuals and training manuals, selling, purchasing, and pricing procedures and financing methods of the Company, together with any specific and proprietary techniques utilized by the Company in designing, developing, testing or marketing its products, product mix and supplier information or in performing services for clients, customers and accounts of the Company; (B) the business plans and financial statements, reports and projections of the Company prior to the Change in Control; (C) research or development projects or results; (D) identities and addresses of consultants, customers or clients or any other confidential information relating to or dealing with the business operations or activities of the Company; (E) information concerning trade secrets of the Company; and (F) information concerning existing or contemplated software, products, services, technology, designs, processes and research or product developments of the Company. Confidential information includes any such information that you may prepare or create during your employment with the Company, as well as such information that has been or may be created or prepared by others. 
 
(ii) “Person” shall mean any corporation, partnership, joint venture, trust, sole proprietorship, limited liability company, unincorporated business association, natural person, and any other entity that may be treated as a person under applicable law. 
 
(iii) “Prohibited Business” shall mean any Person who competes with the Company in the business of (A) medical/surgical supply distribution and supply chain inventory management services for providers of healthcare or manufacturers/suppliers of healthcare products, (B) selling or distributing healthcare products directly to the homes of consumers, (C) manufacturing and selling surgical and infection prevention products, custom procedure trays, or minor procedure kits that are competitive with products manufactured and sold by the Company or any of its subsidiaries, or (D) other services in competition with the services sold or being definitively planned or developed by the Company at the time of the Change in Control. However, nothing in the agreement shall be construed to prohibit you from involvement with any aspect of a portion of a Prohibited Business that is not competitive to the business operations of the Company prior to or at the time of the Change in Control. 
 
(iv) “Restricted Area” shall mean the United States of America and each other country in which the Company or a subsidiary of the Company conducts business operations that generate annualized revenues for the Company equal to or greater than $250,000.00 (in U.S. Dollars). 
 
(b) In consideration of the Company’s obligation to pay the Severance Benefits in accordance with this Agreement, you agree that during your employment and for a period of twelve (12) months following your Date of Termination from the Company, you will not compete with the Company within the Restricted Area by performing for or providing to a Prohibited Business the same or similar duties or services that you performed for the Company at any time within the last twelve (12) months preceding the Change in Control. 
 
(c) In consideration of the Company’s obligation to pay the Severance Benefits in accordance with this Agreement, independent of the foregoing provisions, you agree that during your employment and for a period of twelve (12) months following your Date of Termination from the Company, you will not personally or through another under your direction, supervision or control, market, sell, attempt to sell, provide or attempt to provide any products or services that compete with those products or services sold or provided by the Company to any Person 

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who is or was a customer of the Company at any time during the twelve (12) months of employment prior to the Change in Control or a prospective customer with whom the Company has had written contact at any time within the six (6) months preceding the Change in Control. 
 
(d) In consideration of the Company’s obligation to pay the Severance Benefits in accordance with this Agreement, independent of the foregoing provision, you agree that during your employment and for a period of twelve (12) months following your Date of Termination with the Company, you will not personally or through another under your direction, supervision or control, cause or encourage any Person to terminate, reduce, alter, divert, reject or refuse business with the Company. 
 
(e) In consideration of the Company’s obligation to pay the Severance Benefits in accordance with this Agreement, independent of the foregoing provisions, you agree that during your employment and for a period of twelve (12) months following your Date of Termination from the Company, you will not, personally or through another under your direction, supervision or control, hire or attempt to hire any employee of the Company for purposes of employment or engagement by a Prohibited Business, nor will you personally or through another under your direction, supervision or control, encourage any person employed by the Company to voluntarily terminate his or her employment with the Company or to cease providing service to or on behalf of the company. 
 
(f) You acknowledge and understand that during your employment you will be making use of, acquiring or adding to the Company’s Confidential Information. In order to protect the Confidential Information, you agree that you will not in any way utilize any of the Confidential Information except in connection with your efforts for and on behalf of the Company. You agree that you will not at any time use any Confidential Information for your own benefit or the benefit of any person except the Company. Except as expressly authorized in writing by the Company, you will not at any time, copy, reproduce or remove from the Company’s premises the original or any copies of Confidential Information, and you will not at any time disclose any Confidential Information to anyone. You agree to surrender and return to the Company any and all Confidential Information in your possession or control as of your Date of Termination. 
 
(g) You acknowledge and understand that the Company has a legitimate business interest in preventing you from taking any actions in violation of this Section 5 and that this Section 5 is intended to protect the business and good will of the Company. You further acknowledge that a breach of the provisions in this Section 5 will irreparably and continually damage the Company. You therefore agree that in the event you violate any of the terms of this Section 5, the Company will be entitled to seek injunctive relief, or specific performance without posting a bond or other equitable remedies, breach of contract and such other causes of action for damages that may be available under the law. 
 
(h) This Section 5 is intended to limit your right to compete only to the extent necessary to protect the Company from unfair competition. You acknowledge that you will be reasonably able to earn a livelihood without violating the terms of this Section 5. If any of the provision of this Section 5 should be deemed to exceed the time, geographic area or activity limitations permitted by applicable law, you agree that such provision may be reformed to the maximum time, geographic area and activity limitations permitted by the applicable law, and authorize a court or other trier of fact having jurisdiction to so reform such provisions. 

(i) You acknowledge and understand that each subsection of this Section 5, and each provision and clause of each subsection, shall be regarded as separate and independent contractual provisions. The invalidity of any subsection, provision or clause shall not affect the other subsections, provisions or clauses and this Section 5 shall be construed in all respects as if such invalid or unenforceable subsection, provision or clause were omitted. If any subsection, provision or clause should be found unenforceable by a court of competent jurisdiction, it shall not impair the enforceability of the other subsections, provisions or clauses of this Section 5. 

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7.    Permitted Disclosures.

Nothing in this Agreement shall prohibit or impede you from communicating, cooperating or filing a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity (collectively, a “Governmental Entity”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise making disclosures to any Governmental Entity, in each case, that are protected under the whistleblower provisions of any such law or regulation, provided that in each case such communications and disclosures are consistent with applicable law. You understand and acknowledge that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (a) in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. You also understand and acknowledge that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order. Notwithstanding the foregoing, under no circumstance will you be authorized to disclose any information covered by attorney-client privilege or attorney work product of Company or any of its affiliates or subsidiaries without prior written consent of Company’s General Counsel or other officer designated by the Company.
 
7.    Code Section 280G. 
 
(a) The severance pay and other payments, distributions and benefits provided by the Company to or for your benefit pursuant to this Agreement and under other plans, programs, and agreements may constitute Parachute Payments that are subject to the “golden parachute” rules of Code section 280G and the excise tax of Code section 4999. The Company and you intend to reduce any Parachute Payments (but not any payment, distribution or other benefit that is not a Parachute Payment) if, and only to the extent that, a reduction will allow you to receive a greater Net After Tax Amount than you would receive absent a reduction. The remaining provisions of this subsection describe how that intent will be effectuated. 
 
(b) The Accounting Firm will first determine the amount of any Parachute Payments that are payable to you. The Accounting Firm will also determine the Net After Tax Amount attributable to your total Parachute Payments. 
 
(c) The Accounting Firm will next determine the amount of your Capped Parachute Payments. Thereafter, the Accounting Firm will determine the Net After Tax Amount attributable to your Capped Parachute Payments. 
 
(d) You will receive the total Parachute Payments unless the Accounting Firm determines that the Capped Parachute Payments will yield you a higher Net After Tax Amount, in which case you will receive the Capped Parachute Payments. If you will receive the Capped Parachute Payments, your total Parachute Payments will be adjusted by first reducing any benefits that are not subject to Code section 409A and by next reducing any benefits that are subject to Code section 409A (in each case with the reductions first coming from cash benefits and then from noncash benefits). The Accounting Firm will notify you and the Company if it determines that the Parachute Payments must be reduced to the Capped Parachute Payments and will send you and the Company a copy of its detailed calculations supporting that determination. 
 
(e) As a result of any uncertainty in the application of Code sections 280G and 4999 at the time that the Accounting Firm makes its determinations under this Section 6, it is possible that amounts will have been paid 

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or distributed to you that should not have been paid or distributed under this Section 6 (“Overpayments”), or that additional amounts should be paid or distributed to you under this Section 6 (“Underpayments”). If the Accounting Firm determines, based on either controlling precedent, substantial authority or the assertion of a deficiency by the Internal Revenue Service against you or the Company, which assertion the Accounting Firm believes has a high probability of success, that an Overpayment has been made, then you shall have an obligation to pay the Company upon demand an amount equal to the sum of the Overpayment plus interest on such Overpayment at the prime rate provided in Code section 7872(f)(2) from the date of your receipt of such Overpayment until the date of such repayment; provided, however, that you shall be obligated to make such repayment if, and only to the extent, that the repayment would either reduce the amount on which you are subject to tax under Code section 4999 or generate a refund of tax imposed under Code section 4999. If the Accounting Firm determines, based upon controlling precedent or substantial authority, that an Underpayment has occurred, the Accounting Firm will notify you and the Company of that determination and the Company will pay the amount of that Underpayment to you promptly in a lump sum, with interest calculated on such Underpayment at the prime rate provided in Code section 7872(f)(2) from the date such Underpayment should have been paid until actual payment. 

(f) All determinations made by the Accounting Firm under this Section 6 are binding on you and the Company and must be made as soon as practicable but no later than thirty days after your Date of Termination. Within thirty days after your Date of Termination, the Company will pay to you the severance pay under Section 4 or the reduced Severance Amount as calculated by the Accounting Firm pursuant to Section 6. 
 
(g) For purposes of this Agreement, the following terms shall have the meanings indicated below: 
 
(i) “Accounting Firm” means the public accounting firm retained as the Company’s independent auditor as of the date immediately prior to the Change in Control. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, you shall be entitled to appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). If, however, such firm declines or is unable to undertake the determinations assigned to it under this Agreement, then “Accounting Firm” shall mean such other independent accounting firm mutually agreed upon by the Company and you. 
 
(ii) “Capped Parachute Payments” means the largest amount of Parachute Payments that may be paid to you without liability for any excise tax under Code section 4999. 
 
(iii) “Net After Tax Amount” means the amount of any Parachute Payments or Capped Parachute Payments, as applicable, net of taxes imposed under Code sections 1, 3101(b) and 4999 and any state or local income taxes applicable to you as in effect on the date of the payment under Section 6 of this Agreement. The determination of the Net After Tax Amount shall be made using the highest combined effective rate imposed by the foregoing taxes on income of the same character as the Parachute Payments or Capped Parachute Payments, as applicable, in effect for the year for which the determination is made. 

(iv) “Parachute Payment” means a payment that is described in Code section 280G(b)(2) (without regard to whether the aggregate present value of such payments exceeds the limit prescribed by Code section 280G(b)(2)(A)(ii)). The amount of any Parachute Payment shall be determined in accordance with Code section 280G and the regulations promulgated thereunder, or, in the absence of final regulations, the proposed regulations promulgated under Code section 280G 
 
8.    Successors: Binding Agreement. 
 

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(a) The Company will require any successor (whether direct or indirect, by purchase, merger consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly 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 assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to terminate your employment and to receive compensation from the Company in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 
 
(b) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 

     9.    Notice. 

For the 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 delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 

10.    Code Section 409A.  

This Agreement and the benefits provided under this Agreement are intended to comply with, or otherwise be exempt from, Section 409A of the Code (“Section 409A”), after giving effect to the exemptions in Treasury Regulation section 1.409A-1(b)(3) through (b)(12).  This Agreement shall be administered, interpreted and construed in a manner consistent with Section 409A.  If any provision of this Agreement is found not to comply with, or otherwise not be exempt from, the provisions of Section 409A, it shall be modified and given effect, in the sole discretion of the Board and without requiring your consent, in such manner as the Board determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A; provided, however, that in exercising its discretion under this Section 6, the Board shall modify this Agreement in the least restrictive manner necessary.  Each payment under this Agreement shall be treated as a separate identified payment for purposes of Section 409A.

With respect to any reimbursement of expenses of, or any provision of in-kind benefits to you, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following limitations:  (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made as specified in this Agreement and in no event later than the end of the year after the year in which such expense was 

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incurred and (iii) the right to reimbursement or in-kind benefit shall not be subject to liquidation or exchange for another benefit.

If a payment obligation under this Agreement arises on account of your termination of employment and such payment obligation constitutes “deferred compensation” (as defined under Treasury Regulation section 1.409A-1(b)(1), after giving effect to the exemptions in Treasury Regulation section 1.409A-1(b)(3) through (b)(12)), it shall be payable only after your “separation from service” (as determined under Treasury Regulation section 1.409A-1(b)); provided, however, that if you are a “specified employee” (as determined under Treasury Regulation section 1.409A-1(i)), any payment that is scheduled to be paid within six months after such separation from service shall accrue without interest and shall be paid on the first day of the seventh month beginning after the date of your separation from service or, if earlier, within fifteen days after the appointment of the personal representative or executor of your estate following your death.

11.    Miscellaneous. 

No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same 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 Commonwealth of Virginia without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the initial or any extension term of this Agreement if benefits have become payable under such section before such expiration. 

12.    Validity. 

The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 
 
13.    Counterparts. 

This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 
 
14.    Arbitration. 

Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in the Commonwealth of Virginia, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid the benefits described in Paragraph 4(b) during the pendency of any dispute or controversy arising under or in connection with this Agreement. 

15.    Legal Fees. 

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In the event of a dispute between the parties hereto with respect to this Agreement, the prevailing party shall be entitled to recover such prevailing party’s reasonable attorneys’ fees and costs.
 
16.    Entire Agreement. 

This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and during the term of the Agreement supersedes the provisions of all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto with respect to the subject matter hereof. 
 
17.    Effective Date. 

This Agreement shall become effective as of the date set forth above. If this letter sets forth our agreement on the subject matter thereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. 

Sincerely,
                            
OWENS & MINOR, INC.

By: ___________________________________
                                

Agreed as of the ___ day
of ________ ___, 20__

________________________________________

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EXHIBIT A 
to
EXECUTIVE CHANGE OF CONTROL SEVERANCE AGREEMENT 

RELEASE OF CLAIMS

As used in this Release of Claims (this “Release”), the term “claims” will include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys’ fees, judgments, losses, and liabilities, of whatsoever kind or nature, in law, in equity, or otherwise.  Capitalized terms used, but not defined herein, shall have the meanings ascribed to such terms in my Executive Change of Control Severance Agreement with Owens & Minor, Inc. (the “Company” and, together with all of its subsidiaries and affiliates the “Company Group”) dated [DATE] (the “Agreement”).
For and in consideration of the Severance Benefits (as defined in my Agreement), and other good and valuable consideration, I, [EXECUTIVE] for and on behalf of myself and my heirs, administrators, executors, and assigns, effective the date on which this release becomes effective pursuant to its terms, do fully and forever release, remise, and discharge each of the Company and each of its direct and indirect subsidiaries and affiliates, together with their respective officers, directors, partners, shareholders, employees, and agents (collectively, the “Group”) from any and all claims whatsoever up to the date hereof that I had, may have had, or now have against the Group, for or by reason of any matter, cause, or thing whatsoever, including any claim arising out of or attributable to my employment or the termination of my employment with any member of the Company Group, whether for tort, breach of express or implied employment contract, intentional infliction of emotional distress, wrongful termination, unjust dismissal, defamation, libel, or slander, or under any federal, state, or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability, or sexual orientation.  This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act (“ADEA”), Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, and the Equal Pay Act, each as may be amended from time to time, and all other federal, state, and local laws, the common law, and any other purported restriction on an employer’s right to terminate the employment of employees.  The release contained herein is intended to be a general release of any and all claims to the fullest extent permissible by law.
By executing this Release, I specifically release all claims relating to my employment and its termination under the ADEA, a United States federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefit plans.
Notwithstanding any provision of this Release to the contrary, by executing this Release, I am not releasing (i) any claims relating to my rights under Section 5 of the Agreement, (ii) any claims that cannot be waived by law, (iii) my right of indemnification as provided by, and in accordance with the terms of, the Company’s by-laws or a Company insurance policy providing such coverage, as any of such may be amended from time to time, (iv) my right to communicate, cooperate or file a complaint with any U.S. federal, state or local governmental or law enforcement branch, agency or entity (collectively, a “Governmental Entity”) with respect to possible violations of any U.S. federal, state or local law or regulation, or otherwise make disclosures to any Governmental Entity, in each case, that are protected under the whistleblower provisions of any such law or regulation, provided that in each case such communications and disclosures are consistent with applicable law, or (v) my right to receive an award from a Governmental Entity for information provided under any whistleblower program.
I expressly acknowledge and agree that I – 
▪Am able to read the language, and understand the meaning and effect, of this Release;

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§    Have no physical or mental impairment of any kind that has interfered with my ability to read and understand the meaning of this Release or its terms, and that I am not acting under the influence of any medication, drug, or chemical of any type in entering into this Release;
§    Am specifically agreeing to the terms of the release contained in this Release because the Company has agreed to pay me the Severance Benefits in consideration for my agreement to accept it in full settlement of all possible claims I might have or ever had, and because of my execution of this Release; 
§    Acknowledge that, but for my execution of this Release, I would not be entitled to the Severance Benefits;
§    Understand that, by entering into this Release, I do not waive rights or claims under the ADEA that may arise after the date I execute this Release;
§    Had or could have [twenty-one (21)][forty-five (45)] days from the date of my termination of employment (the “Release Review Period”) in which to review and consider this Release, and that if I execute this Release prior to the expiration of the Release Review Period, I have voluntarily and knowingly waived the remainder of the review period;
§    Have not relied upon any representation or statement not set forth in this Release or my Agreement made by the Company or any of its representatives; 
§    Was advised to consult with my attorney regarding the terms and effect of this Release; and
§    Have signed this Release knowingly and voluntarily.
I represent and warrant that I have not previously filed, and to the maximum extent permitted by law agree that I will not file, a complaint, charge, or lawsuit against any member of the Group regarding any of the claims released herein.  If, notwithstanding this representation and warranty, I have filed or file such a complaint, charge, or lawsuit, I agree that I shall cause such complaint, charge, or lawsuit to be dismissed with prejudice and shall pay any and all costs required in obtaining dismissal of such complaint, charge, or lawsuit, including without limitation the attorneys’ fees of any member of the Group against whom I have filed such a complaint, charge, or lawsuit.  This paragraph shall not apply, however, to (i) a claim of age discrimination under ADEA, (ii) to any non-waivable right to file a charge with the United States Equal Employment Opportunity Commission (the “EEOC”) or other governmental agency, or (iii) to complaints or disclosures to any Governmental Entity relating to possible violations of any U.S. federal, state or local law or regulation, in each case, that are protected under the whistleblower provisions of any such law or regulation, provided that in each case such communications and disclosures are consistent with applicable law; provided, however, I agree that I shall not be entitled to recover any monetary damages or any other remedies or benefits from the Company as a result and that this Release and the Severance Benefits will control as the exclusive remedy and full settlement of all such claims by me.
I hereby agree to waive any and all claims to re-employment with the Company or any other member of the Company Group and affirmatively agree not to seek further employment with the Company or any other member of the Company Group.
Notwithstanding anything contained herein to the contrary, this Release will not become effective or enforceable prior to the expiration of the period of seven (7) calendar days following the date of its execution by me (the “Revocation Period”), during which time I may revoke my acceptance of this Release by notifying the Company and the Board of Directors of the Company, in writing, delivered to the Company at its principal executive 

14

office, marked for the attention of its General Counsel.  To be effective, such revocation must be received by the Company no later than 11:59:59 p.m. on the seventh (7th) calendar day following the execution of this Release.  Provided that the Release is executed and I do not revoke it during the Revocation Period, the eighth (8th) day following the date on which this Release is executed shall be its effective date.  I acknowledge and agree that if I revoke this Release during the Revocation Period, this Release will be null and void and of no effect, and neither the Company nor any other member of the Company Group will have any obligations to pay me the Severance Benefits.
The provisions of this Release shall be binding upon my heirs, executors, administrators, legal personal representatives, and assigns.  If any provision of this Release shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, such provision shall be of no force or effect.  The illegality or unenforceability of such provision, however, shall have no effect upon and shall not impair the enforceability of any other provision of this Release.
THIS RELEASE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE COMMONWEALTH OF VIRGINIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT COMMONWEALTH WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS.  I HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION, OR PROCEEDING UNDER OR IN CONNECTION WITH THIS RELEASE.

____________________________ 
[EXECUTIVE] 

Date:

 

15ex_136785.htm

Exhibit 10.36

 

AVINGER, INC.

 

CHANGE OF CONTROL AND SEVERANCE AGREEMENT

 

This Change of Control and Severance Agreement (the “Agreement”) is entered into as of October 10, 2013 (the “Effective Date”) by and between Avinger, Inc. (the “Company”), and Himanshu Patel (“Executive”).

 

1.     Severance.

 

(a)     Termination for other than Cause, Death or Disability or Good Reason in the Event of a Change of Control. If upon or within eighteen (18) months following a Change of Control (i) the Company (or any parent or subsidiary or successor of the Company) terminates Executive’s employment with the Company other than for Cause, death or disability, or (ii) the Executive resigns from such employment for Good Reason, then, subject to Section 2, Executive will be entitled to: (A) receive continuing payments of severance pay at a rate equal to Executive’s base salary and target bonus, as then in effect, for twelve (12) months from the date of such termination, which will be paid in accordance with the Company’s regular payroll procedures; (B) if Executive timely elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for Executive and Executive’s dependents, within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage for Executive and his covered dependents for twelve (12) months from the date of Executive’s termination of employment or such earlier date if Executive no longer constitutes a “Qualified Beneficiary” (as such term is defined in Section 4980B(g) of the Code); (C) accelerated vesting as to 100% of Executive’s outstanding unvested stock options and/or restricted stock; and (D) the extension of the post-termination exercise period for any options held by Executive for a period of one (1) year.

 

(b)     Termination for Cause, Death or Disability; Resignation without Good Reason. If Executive’s employment with the Company (or any parent or subsidiary or successor of the Company) terminates voluntarily by Executive (except upon resignation for Good Reason upon or within eighteen (18) months following a Change of Control), for Cause by the Company or due to Executive’s death or disability, then (i) all vesting will terminate immediately with respect to Executive’s outstanding equity awards, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (iii) Executive will only be eligible for severance benefits in accordance with the Company’s established policies, if any, as then in effect.

 

(c)     Option/Stock Acceleration in the Event of a Change of Control. Upon a Change of Control of the Company, Executive will be entitled to accelerated vesting as to 50% of Executive’s outstanding unvested stock options and/or restricted stock, provided that any remaining shares shall continue to vest per the schedules previously implemented by the Company.

 

(d)     Exclusive Remedy. In the event of a termination of Executive’s employment with the Company (or any parent or subsidiary or successor of the Company), the provisions of this Section 1 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no severance or other benefits upon termination of employment with respect to acceleration of award vesting or severance pay other than those benefits expressly set forth in this Section 1.

 

 

 

 

2.     Conditions to Receipt of Severance; No Duty to Mitigate.

 

(a)     Separation Agreement and Release of Claims. The receipt of any severance pursuant to Section 1(a) will be subject to Executive signing and not revoking a standard separation agreement and release of claims with the Company (the “Release”) and provided that such Release becomes effective and irrevocable no later than sixty (60) days following the termination date (such deadline, the “Release Deadline”). If the Release does not become effective and irrevocable by the Release Deadline, Executive will forfeit any rights to severance or benefits under this Agreement. In no event will severance payments or benefits be paid or provided until the Release becomes effective and irrevocable.

 

(b)     Nonsolicitation. The receipt of any severance benefits pursuant to Section 1(a) will be subject to Executive not violating the provisions of Section 4. In the event Executive breaches the provisions of Section 4, all continuing payments and benefits to which Executive may otherwise be entitled pursuant to Section 1(a) will immediately cease.

 

(c)     Section 409A.

 

(i)     Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Code Section 409A, and the final regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. Similarly, no severance payable to Executive, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has a “separation from service” within the meaning of Section 409A.

 

(ii)     Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Executive’s separation from service, or, if later, such time as required by Section 2(c)(iii). Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s separation from service but for the preceding sentence will be paid to Executive on the sixtieth (60th) day following Executive’s separation from service and the remaining payments shall be made as provided in this Agreement.

 

(iii)     Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Payments that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

 

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(iv)     Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Payments for purposes of clause (i) above.

 

(v)     Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) will not constitute Deferred Payments for purposes of clause (i) above.

 

(vi)     The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

 

(d)     No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive from any other source reduce any such payment.

 

3.     Definitions.

 

(a)     Cause. For purposes of this Agreement, “Cause” is defined as (i) an act of dishonesty made by Executive in connection with Executive’s responsibilities as an employee, (ii) Executive’s conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude, causing material harm to the standing and reputation of the Company, in each case as determined in good faith by the board of directors of the Company (the “Board”); (iii) Executive’s gross misconduct, (iv) Executive’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom Executive owes an obligation of nondisclosure as a result of Executive’s relationship with the Company; (v) Executive’s willful breach of any obligations under any written agreement or covenant with the Company; (vi) Executive’s continued failure to perform his employment duties after Executive has received a written demand of performance from the Company which specifically sets forth the factual basis for the Company’s belief that Executive has not substantially performed his duties and has failed to cure such non-performance to the Company’s satisfaction within 10 business days after receiving such notice provided that such nonperformance has resulted or is likely to result in substantial and material damage to the Company or its subsidiaries; or (vii) Executive’s repeated unexplained or unjustified absence from the Company.

 

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(b)     Change of Control. For purposes of this Agreement, “Change of Control” of the Company is defined as:

 

(i)     any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company’s then outstanding voting securities; or

 

(ii)     the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation;

 

(iii)     the date of the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets; or

 

(iv)     the date that a majority of members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (iv), if any person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same person will not be considered a Change of Control.

 

Notwithstanding the foregoing provisions of this definition, a transaction will not be deemed a Change of Control unless the transaction qualifies as a “change in control event” within the meaning of Section 409A.

 

Further, notwithstanding the foregoing provisions of this definition, the following shall not constitute a Change of Control:

 

(w) any transfer by Dr. John B. Simpson or affiliated entities (“Simpson”) of shares held by Simpson;

 

(x) any bona fide equity financing for capital raising purposes;

 

(y) any merger or acquisition done exclusively to effect a change of domicile of the Company; and

 

(z) any transfer of assets by the Company to a new company for tax planning purposes.

 

(c)     Code. For purposes of this Agreement, “Code” means the Internal Revenue Code of 1986, as amended.

 

-4-

 

 

(d)     Good Reason. For the purposes of this Agreement, “Good Reason” means Executive’s resignation within ninety (90) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Executive’s express written consent: (i) a material reduction of Executive’s duties, position or responsibilities, or the removal of Executive from such position and responsibilities, either of which results in a material diminution of Executive’s authority, duties or responsibilities, unless Executive is provided with a comparable position (i.e., a position of equal or greater organizational level, duties, authority, compensation and status); provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control but is not made the Chief Executive Officer of the acquiring corporation) will not constitute “Good Reason”; (ii) a material reduction in Executive’s base salary (in other words, a reduction of more than ten percent (10%) of Executive’s base salary in any one year); (iii) a material change in the geographic location of Executive’s primary work facility or location; provided, that a relocation of less than fifty (50) miles from Executive’s then present location will not be considered a material change in geographic location; or (iv) a material breach of this Agreement by the Company. Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date of such notice.

 

(e)     Section 409A Limit. For purposes of this Agreement, “Section 409A Limit” will mean the lesser of two (2) times: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding the Executive’s taxable year of his or her termination of employment as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Internal Revenue Code for the year in which Executive’s employment is terminated.

 

4.     Non-Solicitation. Until the date one (1) year after the termination of Executive’s employment with the Company for any reason, Executive agrees not, either directly or indirectly, to solicit, induce, attempt to solicit, recruit, or encourage any employee of the Company (or any parent or subsidiary of the Company) to leave his or her employment either for Executive or for any other entity or person. Executive represents that he (i) is familiar with the foregoing covenant not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants. This Section 4 supersedes all prior or contemporaneous agreements whether written or oral as to the subject matter herein.

 

5.     Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.

 

-5-

 

 

6.     Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

 

If to the Company:

 

Avinger, Inc.

Attn: Chief Financial Officer at the time

 

400 Chesapeake Drive

Redwood City, CA 94063

 

If to Executive:

 

at the last residential address known by the Company.

 

7.     Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

 

8.     Arbitration.

 

(a)     Arbitration. In consideration of Executive’s employment with the Company, its promise to arbitrate all employment-related disputes, and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s employment with the Company or termination thereof, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1281.8 (the “Act”), and pursuant to California law. The Federal Arbitration Act shall also apply with full force and effect, notwithstanding the application of procedural rules set forth under the Act.

 

(b)     Dispute Resolution. Disputes that Executive agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

 

-6-

 

 

(c)     Procedure. Executive agrees that any arbitration will be administered by the Judicial Arbitration & Mediation Services, Inc. (“JAMS”), pursuant to its Employment Arbitration Rules & Procedures (the “JAMS Rules”). The arbitrator shall have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The arbitrator shall have the power to award any remedies available under applicable law, and the arbitrator shall award attorneys’ fees and costs to the prevailing party, except as prohibited by law. The Company will pay for any administrative or hearing fees charged by the administrator or JAMS, and all arbitrator’s fees, except that Executive shall pay any filing fees associated with any arbitration that Executive initiates, but only so much of the filing fee as Executive would have instead paid had Executive filed a complaint in a court of law. Executive agrees that the arbitrator shall administer and conduct any arbitration in accordance with California law, including the California Code of Civil Procedure and the California Evidence Code, and that the arbitrator shall apply substantive and procedural California law to any dispute or claim, without reference to the rules of conflict of law. To the extent that the JAMS Rules conflict with California law, California law shall take precedence. The decision of the arbitrator shall be in writing. Any arbitration under this Agreement shall be conducted in Santa Clara County, California.

 

(d)     Remedy. Except as provided by the Act, arbitration shall be the sole, exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided by the Act and this Agreement, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law which the Company has not adopted.

 

(e)     Administrative Relief. Executive is not prohibited from pursuing an administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to employment, including, but not limited to, the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers’ Compensation Board. However, Executive may not pursue court action regarding any such claim, except as permitted by law.

 

(f)     Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understands it, including that EXECUTIVE IS WAIVING EXECUTIVE’S RIGHT TO A JURY TRIAL. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

 

9.     Integration. This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. With respect to stock options granted on or after the date of this Agreement, the acceleration of vesting provisions provided herein will apply to such stock options except to the extent otherwise explicitly provided in the applicable stock option agreement. This Agreement may be modified only by agreement of the parties by a written instrument executed by the parties that is designated as an amendment to this Agreement.

 

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10.     Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement. Notwithstanding anything to the contrary in this Agreement, the failure of the Company to obtain the assumption of this Agreement by a successor and/or acquirer shall be a material breach of this Agreement.

 

11.     Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

 

12.     Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.

 

13.     Governing Law. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

 

14.     Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

 

15.     Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.

 

COMPANY:

 

AVINGER, INC.

 

	By:	/s/ John B. Simpson	 	Date:	October 11, 2013
	 	 	 	 	 
	Title:	Founder & Chief Executive Officer 	 	 	 

 

 

EXECUTIVE:

 

	/s/ Himanshu Patel 	 	Date:	October 11, 2013

Himanshu Patel

 

 

 

[SIGNATURE PAGE TO AVINGER, INC. CHANGE OF CONTROL AND SEVERANCE AGREEMENT]

 

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