EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT dated as of December 27, 1997 between Integra
LifeSciences Corporation, a Delaware corporation ("Company"), and Stuart M.
Essig ("Executive").
BACKGROUND
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Company wishes to employ Executive, and Executive wishes to enter into
the employ of Company, on the terms and conditions contained in this Agreement.
Executive will be substantially involved with Company's operations and
management and will learn trade secrets and other confidential information
relating to Company and its customers; accordingly, the noncompetition agreement
and other restrictive covenants contained in Section 7 of this Agreement
constitute essential elements hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
TERMS
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SECTION 1. CAPACITY AND DUTIES
1.1 Employment; Acceptance of Employment. Company hereby employs
Executive and Executive hereby accepts employment by Company for the period and
upon the terms and conditions hereinafter set forth.
1.2 Capacity and Duties.
(a) Executive shall serve as President and Chief Executive Officer
of Company. Executive shall perform such other duties and shall have such
authority consistent with his position as may from time to time be specified by
the Board of Directors of Company (the "Board"). Executive shall report directly
to the Board and shall perform his duties for Company principally at Company's
office in Princeton, New Jersey, except for travel that may be necessary or
appropriate in connection with the performance of Executive's duties hereunder.
If Richard E. Caruso ("Caruso") is no longer Chairman of the Board for any
reason and, unless Executive agrees in writing not to serve in such capacity,
Executive shall be appointed as Chairman of the Board.
(b) Executive shall devote substantially all his working time,
energy and attention (other than absences due to illness or vacation) to the
performance of his duties hereunder, in a manner that will faithfully and
diligently further the
business and interests of Company. Notwithstanding the above, Executive shall be
permitted, to the extent such activities do not impair the performance by
Executive of his duties and responsibilities hereunder or violate Sections 7.1,
7.2 and 7.3 of this Agreement, to (i) manage Executive's personal, financial and
legal affairs, and (ii) to serve on civic or charitable boards or committees (it
being expressly understood and agreed that Executive's continuing to serve on
any such board and/or committees on which Executive is serving, or with which
Executive is otherwise associated (each of which has been disclosed to the
Company prior to the execution of this Agreement or will be disclosed promptly
thereafter), as of the Commencement Date (as defined below), shall be deemed not
to interfere or conflict with the performance by Executive of his duties and
responsibilities under this Agreement). The Company acknowledges that Executive
may provide consulting services through January 31, 1998 to assist his former
employer with transitional matters in connection with Executive's former
position. Executive has been elected, effective as of the Commencement Date, to
the Board. The Company hereby agrees to add to the Board one or two chief
executive officers of other entities who are reasonably acceptable to Executive
as Board members.
SECTION 2. TERM OF EMPLOYMENT
2.1 Term. The term of Executive's employment hereunder shall commence
on December 27, 1997 (the "Commencement Date") and continue until December 31,
2001, as further extended or unless sooner terminated in accordance with the
other provisions hereof (the "Term"). Except as hereinafter provided, on
December 31, 2001 and on each subsequent one-year anniversary thereof, the Term
shall be automatically extended for one year unless either party shall have
given to the other party written notice of termination of this Agreement at
least six months prior to such anniversary. If written notice of termination is
given as provided above, Executive's employment under this Agreement shall
terminate on the last day of the then-current Term.
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SECTION 3. COMPENSATION
3.1 Basic Compensation. As compensation for Executive's services
during the period from the Commencement Date through December 31, 1998, Company
shall pay to Executive a salary at the annual rate of $300,000, payable in
periodic installments in accordance with Company's regular payroll practices in
effect from time to time. For each subsequent twelve-month period of Executive's
employment hereunder, Executive's salary shall be in the amount of his initial
annual salary with such increases, if any, as may be established by the Board,
provided that in no event shall Executive's salary in any such subsequent
twelve-month period be less than the product of Executive's initial salary
multiplied by a fraction, the numerator of which is the Consumer Price Index for
All Urban Consumers for all items for the New York metropolitan area (the "CPI")
for the last month in the preceding twelve-month period, and the denominator of
which is the CPI for the first month of Executive's employment hereunder.
Executive's annual salary, as determined in accordance with this Section 3.1, is
hereinafter referred to as his "Base Salary."
3.2 Stock Options. The Company shall grant to Executive on the
Commencement Date a non-qualified stock option (the "Company Stock Option") to
purchase One Million (1,000,000) shares of the Company's common stock, par value
$.01 per share (the "Company Stock"), at an exercise price equal to the fair
market value of the Company Stock. The Company Stock Option shall have a term
until December 26, 2007 and shall be granted on the other terms and conditions
set forth in the Stock Option Grant and Agreement attached as Exhibit A hereto.
In the event of any inconsistency between the terms of this Agreement and the
Company Stock Option Grant and Agreement, the Company Stock Option Grant and
Agreement shall govern. The Company hereby represents and warrants to Executive
that (a) the Company's Restated and Amended 1996 Incentive Stock Option and
Non-Qualified Stock Option Plan (the "Company Stock Option Plan") has and will
have sufficient shares available to effect the grant and exercise of the Company
Stock Option, and the Company Stock Option Plan has been approved by its
stockholders, (b) the Company Stock Option will be properly authorized and
approved by the Board and/or its stock options committee, (c) the issuance of
the Company Stock underlying the Company Stock Option will be registered on Form
S-8 and (d) the Company has obtained written consent from the holders of a
majority of its voting stock to permit the grant of the Company Stock Option
under the Company Stock Option Plan and neither a stockholder meeting nor
further stockholder approval is required to grant the Company Stock Option. The
Company at its expense hereby undertakes and agrees, upon the written request of
Executive, to as soon as practicable put an effective shelf-registration (the
"Registration
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Statement") in place in favor of Executive in respect of the Company Stock
underlying the Company Stock Option and the Restricted Units (as defined in
Section 3.3), subject to the terms of Exhibit B hereto.
3.3 Restricted Units Signing Award Bonus. The Company shall issue to
Executive upon the Commencement Date a fully-vested equity-based signing award
bonus in the form of 2,000,000 restricted units (the "Restricted Units")
pursuant to the terms and conditions set forth in the Restricted Units Agreement
attached as Exhibit C hereto. The shares underlying the Restricted Units (the
"Unit Shares") shall be delivered to Executive on January 1, 2002 if Executive
is still employed by the Company on December 31, 2001 unless the Unit Shares
shall have been previously delivered to Executive pursuant to a Triggering Event
under Section 5; provided, however, that Executive shall have the right, by
giving notice no less than six months prior to such delivery date, to defer such
delivery for a period of up to six years. In the event that Executive's
employment is terminated prior to December 31, 2001, the Unit Shares shall be
delivered to Executive as provided in Section 4 below unless the Unit Shares
shall have been previously delivered to Executive pursuant to a Triggering Event
under Section 5. The Company hereby represents and warrants to Executive that
the Company has obtained written consent from the holders of a majority of its
voting stock to permit the grant of the Restricted Units and the distribution of
the Unit Shares and neither a stockholder meeting nor further stockholder
approval is required to grant the Restricted Units and to distribute to
Executive the Unit Shares.
3.4 Performance Bonus. Executive shall, following the completion of
each fiscal year of the Company during the Term, be entitled to receive a
performance bonus of up to 50% of Executive's Base Salary, based upon the
satisfaction of certain performance goals pertaining to the trading price of the
Company Stock, as established at the beginning of the Company's fiscal year in
the sole discretion of the compensation committee of the Board.
3.5 Employee Benefits. During the Term, Executive shall be entitled to
participate in such of Company's employee benefit plans and benefit programs,
including medical, hospitalization, dental, disability, accidental death and
dismemberment and travel accident plans and programs, as may from time to time
be provided by Company for its senior executives. In addition, during the Term
Executive shall be eligible to participate in all pension, retirement, savings
and other employee benefit plans and programs maintained from time to time by
the Company for the benefit of its senior executives but, except as provided
herein, shall have no right to participate in
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any annual incentive or long-term performance plans maintained for the benefit
of the Company's senior executives, other than as determined by the Board or the
Company's Compensation Committee.
3.6 Other Benefits. During the Term, the Company shall provide
Executive with the following benefits:
(i) the lesser of (A) a $3 million four-year minimum renewable
term life insurance policy, and (B) the four-year minimum renewable term life
policy purchasable by the Company by paying premium payments of $5,000 per year
for such policy;
(ii) a Company-provided medical examination on an annual basis at
a medical clinic selected by Executive and reasonably satisfactory to the Board;
and
(iii) use of a lap-top computer for business purposes.
3.7 Vacation. During the Term, Executive shall be entitled to the
number of weeks of vacation per year provided to senior executives of the
Company, but in no event less than three weeks per year.
3.8 Company Loan. During the Term, upon the written request of
Executive, the Company shall disburse to Executive at any time, a loan in an
amount of up to $500,000. The loan shall be subject to the following terms and
conditions:
(i) the principal amount of the loan shall be due and payable upon
the first to occur of (A) 60 days following Executive's Date of Termination and
(B) the fifth anniversary of the loan's date of disbursement;
(ii) the loan shall be subject to interest at the applicable
Federal rate under Section 1274(d) of the Internal Revenue Code of 1986, as
amended, on the date the loan is made;
(iii) interest on the loan shall be payable quarterly as set forth
in the agreement evidencing such loan;
(iv) the agreement evidencing such loan shall contain such
additional terms and conditions as are reasonably acceptable to Executive in
good faith; and
(v) Executive shall not be required to pledge or otherwise
hypothecate or encumber any of Executive's personal assets in connection with
such loan.
3.9 Expense Reimbursement. Company shall reimburse
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Executive for all reasonable expenses incurred by him in connection with the
performance of his duties hereunder in accordance with its regular reimbursement
policies as in effect from time to time. In addition, Company shall, upon
receipt of appropriate documentation, reimburse Executive for reasonable moving
expenses incurred by him in moving his and his family's residence during the
Term from Brooklyn, New York to a location more convenient to commute to
Princeton, New Jersey (including real estate brokers' fees and any costs
incurred in terminating Executive's current apartment lease) in an amount not to
exceed $50,000 in the aggregate.
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SECTION 4. TERMINATION OF EMPLOYMENT
4.1 Death of Executive. If Executive dies during the Term, Company
shall pay to Executive's estate amounts (including Base Salary, bonuses, expense
reimbursement, etc.) accrued as of the date of Executive's employment
termination (all such accrued amounts as of Executive's employment termination
shall be referred to as "Accrued Obligations") and a lump sum equal to one (1)
times Executive's annual rate of Base Salary. To the extent permitted by the
Company's benefit plans and programs in effect on the date of such termination,
Company shall also provide Executive's spouse and dependents with continued
medical, dental, hospitalization and other health care benefits ("Health
Benefits") (subject to continued contribution, if any, required by such spouse
and dependents for such Health Benefits) for a period of one (1) year from such
termination; provided, that if Executive's spouse or dependents cannot continue
to participate in the Company programs providing such benefits, the Company
shall pay or reimburse any premiums for a health care program for Executive's
spouse and dependents that is substantially equivalent to the Company's
then-current Health Benefits. Upon Executive's death, Executive's Company Stock
Option shall immediately vest and shall be exercisable until the later of (a)
one year following his death or (b) December 31, 2001, but in no event beyond
December 26, 2007. As promptly as practicable following Executive's death, but
in no event later than 90 days following such death, the Unit Shares shall be
distributed to Executive's estate.
4.2 Disability of Executive. If Executive, in the reasonable opinion
of a qualified physician jointly selected by Company and Executive (or a
representative of Executive) (a "Qualified Physician"), has been materially
unable to perform his duties hereunder for a period of 180 consecutive days by
reason of physical or mental illness or disability ("Disability"), then the
Board shall have the right to terminate Executive's employment upon 30 days'
prior written notice to Executive at any time during the continuation of such
Disability (a "Disability Termination"). Until a Disability Termination, he
shall continue to receive his full Base Salary and other payments and benefits
hereunder. In the event of a Disability Termination, Company shall not
thereafter be obligated to make any further payments to Executive hereunder
other than (a) Accrued Obligations, (b) the amount that is equal to (x) if such
payments are taxable, then-current Base Salary or, alternatively, (y) if such
payments are not taxable, the after tax equivalent of the then-current Base
Salary, in either case until December 31, 2001, and (c) Health Benefits (subject
to continued contributions required by Executive for such benefits) to the
extent permitted by the
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Company's benefit plans and programs in effect on the date of such termination
(and the life insurance set forth in Section 3.6(i)) for one (1) year following
the Date of Termination; provided, that if Executive, his spouse or his
dependents cannot continue to participate in the Company programs providing
Health Benefits, the Company shall pay or reimburse the premiums for a health
care program for Executive, his spouse and his dependents that is substantially
equivalent to the Company's then-current Health Benefits. Following December 31,
2001, Executive shall continue to be entitled to receive long-term disability
benefits under the Company's long-term disability program in effect at such time
to the extent Executive is eligible to receive such benefits. In the event of a
Disability Termination, the vested portion of Executive's Company Stock Option
shall be exercisable until the later of (a) one year following the date of
termination and (b) December 31, 2001, but in no event later than December 26,
2007, and the Unit Shares shall be distributed to Executive as promptly as
practicable (but in no event later than 90 days) following such termination.
4.3 Termination for Cause. Executive's employment hereunder shall
terminate immediately upon notice (following satisfaction of the procedures set
forth below) that the Board is terminating Executive for Cause (as defined
herein), in which event Company shall not thereafter be obligated to make any
further payments hereunder other than Accrued Obligations excluding any bonus
accruals. Upon termination for Cause in accordance with this Section 4.3 prior
to December 31, 2001, the vested portion of Executive's Company Stock Option
shall be exercisable until December 26, 2007 and the Unit Shares shall be
distributed to Executive on January 1, 2018. "Cause" shall be limited to the
following:
(i) willful and continued failure to use reasonable best
efforts to substantially perform his duties as President and Chief Executive
Officer (other than such failure resulting from Executive's physical or mental
illness, in the reasonable opinion of a Qualified Physician, or the failure of
Executive to perform such duties during the remedy period set forth in Section
4.4(b) hereof following the issuance of a Notice of Termination by Executive for
Good Reason, unless an arbitration panel finds Executive to have acted in bad
faith in issuing such Notice of Termination) after demand for substantial
performance is delivered by the Company in writing that specifically identifies
the manner in which the Company believes Executive has not used reasonable best
efforts to substantially perform his duties;
(ii) willful misconduct that is materially and demonstrably
injurious to the Company or any of its subsidiaries; or
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(iii) conviction or plea of guilty or nolo contendere to a
felony or to any other crime involving moral turpitude which conviction or plea
is materially and demonstrably injurious to the Company or any of its
subsidiaries.
For purposes of this Section 4.3, no act, or failure to act, by Executive shall
be considered "willful" unless committed in bad faith, giving due consideration
to Executive's duties and status as President and Chief Executive Officer of the
Company, and without a reasonable belief that the act or omission was in the
best interests of the Company or any of its subsidiaries. Cause shall not exist
under this Section 4.3 unless and until the Company has delivered to Executive a
copy of a resolution duly adopted by a majority of the Board (excluding
Executive for purposes of determining such majority) at a meeting of the Board
called and held for such purpose (after reasonable, but in no event less than
ten (10) days' notice, to Executive and an opportunity for Executive, together
with his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of the conduct set forth in this
Section 4.3 and specifying the particulars thereof in detail. This Section 4.3
shall not prevent Executive from challenging in any court of competent
jurisdiction the Board's determination that Cause exists or that Executive has
failed to cure any act (or failure to act) that purportedly formed the basis for
the Board's determination. The Company must provide notice to Executive that it
is intending to terminate his employment for Cause within one hundred and twenty
(120) days after the Company has knowledge of the occurrence of the event it
believes constitutes Cause.
If, prior to December 31, 2001, Executive voluntarily leaves his employment with
the Company (other than for Good Reason (as defined in Section 4.4(b)) or due to
Disability), such voluntary leaving shall not be treated as a breach of this
Agreement by Executive and shall not give rise to a claim by the Company for
monetary damages, but shall be treated as if it were a termination for Cause
under this Section 4.3. In such circumstance, the vested portion of Executive's
Company Stock Option on the date of Executive's departure shall be exercisable
until December 26, 2007, the non-vested portion of Executive's Company Stock
Option shall terminate on the date of Executive's departure and the Unit Shares
shall be distributed to Executive on January 1, 2018.
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4.4 Termination without Cause or by Executive for Good Reason.
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(a) If (i) Executive's employment is terminated by the Company for
any reason other than Cause or the death or Disability Termination of Executive,
or (ii) Executive's employment is terminated by Executive for Good Reason (as
defined herein), then the Company shall pay to Executive a lump sum cash payment
equal to the sum of (A) the Accrued Obligations and (B) his Base Salary
(including the minimum increases provided therein) during the remainder of the
then-current Term, the Company Stock Option granted to Executive shall become
immediately vested on the date of such termination and exercisable through
December 26, 2007, and the Unit Shares shall be delivered to Executive as soon
as practicable (but in no event later than 90 days) following such termination.
Further, the Company shall maintain in full force and effect, for the continued
benefit of Executive, his spouse and his dependents for the remaining balance of
the Term the Health Benefits and life insurance programs (including, without
limitation, the insurance set forth in Section 3.6(i)) in which Executive, his
spouse and his dependents were participating immediately prior to the date of
such termination at the level in effect and upon substantially the same terms
and conditions (including without limitation contributions required by Executive
for such benefits) as existed immediately prior to the date of termination;
provided, that if Executive, his spouse or his dependents cannot continue to
participate in the Company programs providing such benefits, the Company shall
pay or reimburse the premiums for a health care program for Executive, his
spouse and his dependents that is substantially equivalent to the then-current
Health Benefits; but further provided that such Health Benefits shall terminate
upon the date or dates Executive receives equivalent coverage and benefits that
do not include waiting period or pre-existing condition limitations, under the
plans and programs of a subsequent employer (such coverage and benefits to be
determined on a coverage-by-coverage or benefit-by-benefit basis).
(b) "Good Reason" shall mean the following, provided that
Executive shall have given written notice thereof to the Company within one
hundred and twenty (120) days after Executive has knowledge of the occurrence of
the event he believes constitutes Good Reason, and the Company shall have failed
to remedy the circumstances within 90 days after receipt of such notice (or
acknowledges in writing that Good Reason will not be remedied), except in the
case of (iv) and (x) below, in which case the remedy period shall be 15 days,
and (viii) below, in which case the remedy period shall be five days :
(i) material breach of the Company's obligations hereunder;
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(ii) any decrease in Executive's salary as increased during
the Term (except for decreases that are in conjunction with decreases in
executive salaries generally) or a failure by the Company to pay any such
amounts when due or any amounts due under Sections 3.1 and 3.4 or the assignment
to Executive of duties and/or responsibilities inconsistent with his status as
President and Chief Executive Officer of the Company, or a material diminution
in the nature of Executive's duties and/or responsibilities, reporting
obligations, titles or authority, or the removal of Executive from the Board;
(iii) the failure of Executive to be appointed to the
positions set forth in Section 1.2(a) or to be appointed as a member of the
Board;
(iv) the relocation by the Company of Executive's office
location to a location more than thirty (30) miles from Princeton, New Jersey,
or sixty (60) miles from New York, New York;
(v) the Company's failure to provide the Company Stock Option
or the Restricted Units or the Company's material breach of the Company Stock
Option Plan, the Company Stock Option Agreement or the Restricted Units
Agreement;
(vi) the Company's material failure to provide the benefits
set forth in Sections 3.5 and 3.6 or the failure of the Company to substantially
provide any material employee benefits due to be provided to Executive (other
than any such failure not inconsistent with any express provisions contained
herein which failure affects all senior executive officers);
(vii) the Company's failure to provide in all material
respects the indemnification set forth in Section 7.7 of this Agreement;
(viii) the failure of any successor in interest of the Company
to become bound by the terms of this Agreement in accordance with Section 8.4
below;
(ix) Caruso is no longer serving as the Chairman of the
Company and, unless otherwise approved in writing by Executive, Executive is not
appointed to that position; and
(x) the Company's failure after notice from Executive, to
initiate the procedures, as soon as practicable, to establish and maintain the
Registration Statement subject to the terms of Exhibit B hereto.
Executive's right to terminate his employment hereunder for Good Reason shall
not be affected by his Disability. Subject to
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compliance by Executive with the notice provisions of this Section 4.4(b),
Executive's continued employment prior to terminating employment for Good Reason
shall not constitute consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason. In the event Executive delivers to
the Company a notice of termination for Good Reason, Executive agrees to appear
before a meeting of the Board called and held for such purpose (after reasonable
notice, but no more than ten days (or four days under (viii) above) at
Executive's election) and specify to the Board the particulars as to why
Executive believes adequate grounds for termination for Good Reason exist. No
action by the Board, other than the remedy of the circumstances within the time
periods specified by the first sentence of Section 4.4(b), shall be binding on
Executive.
No termination of Executive without Cause shall be effective unless such
termination is in writing pursuant to action by a majority of the Board at a
properly constituted meeting thereof.
4.5 Failure to Extend. A failure to extend this Agreement pursuant to
Section 2.1 by either party shall not be treated as a termination of Executive's
employment for purposes of this Agreement.
4.6 Mitigation.
(a) Executive shall not be required to mitigate amounts payable
under this Section 4 by seeking other employment or otherwise, and there shall
be no offset against amounts due Executive under this Agreement on account of
subsequent employment except as specifically provided herein; and
(b) Amounts owed to Executive under this Agreement or the
Restricted Units Agreement shall not be offset by any claims the Company may
have against Executive (other than an offset for any due and payable loan amount
under Section 3.8 and any good faith liquidated dollar claim with respect to a
breach of this Agreement) and, except with respect to such loan amount and any
good faith liquidated dollar claim as set forth above, the Company's obligation
to make the payments provided for in this Agreement, the Stock Option Agreement,
the Registration Rights Agreement, and the Restricted Units Agreement, and
otherwise to perform its obligations hereunder and under such agreements, shall
not be affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against Executive or others.
SECTION 5. ACCELERATION OF OPTION VESTING AND DELIVERY OF UNIT SHARES
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5.1 Triggering Events. Except as otherwise provided in Section 4.3
hereof, if (a) a Change in Control (as defined in Section 6.1 below) occurs or
(b) Caruso or trusts or other entities for the benefit of Caruso or his
immediate family members dispose of in the aggregate 7.5 million shares of the
Common Stock (or its equivalent) now owned by such persons or trusts or other
entities (each a "Triggering Event"), then the Company Stock Option shall vest
and be exercisable through December 26, 2007 and the Unit Shares shall be
distributed to Executive immediately prior to such transaction.
SECTION 6. CHANGE IN CONTROL
6.1 Definition of Change in Control. A "Change in Control" of the
Company shall be deemed to have occurred:
(a) if the "beneficial ownership" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of securities representing more than fifty
percent (50%) of the combined voting power of the Company Voting Securities (as
herein defined) is acquired by any individual, entity or group (a "Person"),
other than Caruso (or any entity controlled by Caruso), the Company, any trustee
or other fiduciary holding securities under any employee benefit plan of the
Company or an affiliate thereof, or any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company (for purposes of this
Agreement, "Company Voting Securities" shall mean the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors); provided, however, that any acquisition from the Company or any
acquisition pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of paragraph (c) of this Section 6.1 shall not be a Change in Control
under this paragraph (a); or
(b) if individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office 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 other than the
Board; or
(c) upon consummation by the Company of a
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reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets or
stock of another entity (a "Business Combination"), in each case, unless
immediately following such Business Combination; (i) more than 50% of the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of (x) the corporation resulting from
such Business Combination (the "Surviving Corporation"), or (y) if applicable, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries (the "Parent Corporation"), is represented, directly or indirectly,
by Company Voting Securities outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which such Company
Voting Securities were converted pursuant to such Business Combination), and
such voting power among the holders thereof is in substantially the same
proportions as their ownership, immediately prior to such Business Combination,
of the Company Voting Securities, (ii) no Person (excluding any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 50% or more of
the combined voting power of the then outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) except to the extent that such ownership
of the Company existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the Parent Corporation (or,
if there is no Parent Corporation, the Surviving Corporation) were members of
the Incumbent Board at the time of the execution of the initial agreement, or
the action of the Board, providing for such Business Combination; provided that
a Business Combination that is a tax-free stock for stock merger between the
Company and another entity shall not be treated as a Change in Control if
Executive is the chief executive officer of the surviving public entity of such
Business Combination immediately following its consummation, and such surviving
entity remains publicly traded on a national securities exchange or on the
NASDAQ; or
(d) upon approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
6.2 Gross-Up.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment, award, benefit or
distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) to or for the
benefit of Executive (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any corresponding
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provisions of state or local tax laws, or any interest or penalties are incurred
by Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. The payment of a Gross-Up Payment shall not be
conditioned upon the occurrence of a termination of employment.
(b) Subject to the provisions of Section 6.2(a), all
determinations required to be made under this Section 6.2, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's independent accounting firm as of immediately prior to the
Change in Control (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Company shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm, if reasonably acceptable to
Executive, shall then be referred to as the Accounting Firm hereunder). All fees
and expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 6.2, shall be paid by
the Company to Executive within five(5) days of receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that Executive
thereafter is required to make a payment of any Excise Tax (or any additional
Excise Tax), the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive. In the event of any claim by the
Internal Revenue Service for any Excise Tax or additional Excise Tax, the
Company shall have the right to control the defense of such claim and Executive
shall cooperate and assist the Company in connection therewith as reasonably
-15-
requested by the Company; provided that all expenses of such claim (including
any additional interest or penalties) shall be paid by the Company, and the
Company shall indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including any interests and penalties) imposed
as a result of such representation and payment of costs and expenses. In
addition, Executive will cooperate as reasonably requested by the Company with
the Company in making any refund claim for any Excise Tax already paid, and any
refunds of any such tax (or any Gross-Up Payments or other payments made by the
Company in respect thereof) obtained by the Executive shall be promptly returned
to the Company.
If the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
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SECTION 7. RESTRICTIVE COVENANTS
7.1 Confidentiality. Executive acknowledges a duty of confidentiality
owed to Company and shall not, at any time during or after his employment by
Company, retain in writing, use, divulge, furnish, or make accessible to anyone,
without the express authorization of the Board, any trade secret, private or
confidential information or knowledge of Company obtained or acquired by him
while so employed. All computer software, business cards, telephone lists,
customer lists, price lists, contract forms, catalogs, Company books, records,
files and know-how acquired while an employee of Company are acknowledged to be
the property of Company and shall not be duplicated, removed from Company's
possession or premises or made use of other than in pursuit of Company's
business or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company and,
upon termination of employment for any reason, Executive shall deliver to
Company, without further demand, all copies thereof which are then in his
possession or under his control. No information shall be treated as
"confidential information" if it is generally available public knowledge at the
time of disclosure or use by Executive.
7.2 Inventions and Improvements. Executive shall promptly communicate
to Company all ideas, discoveries and inventions which are or may be useful to
Company or its business. Executive acknowledges that all such ideas,
discoveries, inventions, and improvements which heretofore have been or are
hereafter made, conceived, or reduced to practice by him at any time during his
employment with Company heretofore or hereafter gained by him at any time during
his employment with Company are the property of Company, and Executive hereby
irrevocably assigns all such ideas, discoveries, inventions, and improvements to
Company for its sole use and benefit, without additional compensation. The
provisions of this Section 7.2 shall apply whether such ideas, discoveries,
inventions, or improvements were or are conceived, made or gained by him alone
or with others, whether during or after usual working hours, whether on or off
the job, whether applicable to matters directly or indirectly related to
Company's business interests (including potential business interests), and
whether or not within the specific realm of his duties. Executive shall, upon
request of Company, but at no expense to Executive, at any time during or after
his employment with Company, sign all instruments and documents reasonably
requested by Company and otherwise cooperate with Company to protect its right
to such ideas, discoveries, inventions, or improvements including applying for,
obtaining, and enforcing patents and copyrights thereon in such countries as
Company shall determine.
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7.3 Noncompetition. For a period of two (2) years following the Date
of Termination of Executive's employment (other than a termination under Section
4.4(a) or the expiration of the Term), or for a period of one (1) year following
the expiration of the Term, Executive shall not directly or indirectly: (i)
engage, anywhere within the geographical areas in which the Company is
conducting business operations or providing services as of the date of
Executive's termination of employment, in the tissue engineering business (the
use of implantable absorbable materials, with or without a bioactive component,
to attempt to elicit a specific cellular response in order to regenerate tissue
or to impede the growth of tissue or migration of cells) (the "Tissue
Engineering Business") or any other business the revenues of which constituted
at least 30% of the Company's revenues during the six (6) month period prior to
the Date of Termination (together with the Tissue Engineering Business, the
"Business"); (ii) be or become a stockholder, partner, owner, officer, director
or employee or agent of, or a consultant to or give financial or other
assistance to, any person or entity engaged in the Business; (iii) seek in
competition with the business of Company to procure orders from or do business
with any customer of Company; (iv) solicit, or contact with a view to the
engagement or employment by any person or entity of any person who is an
employee of Company; (v) seek to contract with or engage (in such a way as to
adversely affect or interfere with the business of Company) any person or entity
who has been contracted with or engaged to manufacture, assemble, supply or
deliver products, goods, materials or services to Company; or (vi) engage in or
participate in any effort or act to induce any of the customers, associates,
consultants, or employees of Company to take any action which might be
disadvantageous to Company; provided, however, that nothing herein shall
prohibit Executive and his affiliates from owning, as passive investors, in the
aggregate not more than 5% of the outstanding publicly traded stock of any
corporation so engaged; and provided, further, that Executive shall not be
prohibited from (1) making any investment in, being or becoming a partner,
owner, officer, director or employee or agent of, or consultant to, or give
financial or other assistance to, any business enterprise (including, without
limitation, any investment or venture capital fund or investment bank) that
makes or has made any investment in or that provides advisory, financing or
underwriting services to any Person or entity engaged in the Business provided
that Executive does not render services (whether as an employee, consultant,
advisor or otherwise) to the division or portion of such person or entity
engaged in the Business or (2) rendering services (including under (1) above) to
an entity conducting its business operations or providing services in the
Business, if such entity is diversified and Executive does not render services,
directly or indirectly, to the division or portion of the entity which is
conducting its business operations or
-18-
providing services in the Business. Executive shall not be prevented from
engaging in the activities set forth in (i) through (vi) above if he terminates
employment in accordance with Section 4.4(a) of this Agreement.
7.4 Injunctive and Other Relief.
(a) Executive acknowledges and agrees that the covenants contained
herein are fair and reasonable in light of the consideration paid hereunder, and
that damages alone shall not be an adequate remedy for any breach by Executive
of his covenants contained herein and accordingly expressly agrees that, in
addition to any other remedies which Company may have, Company shall be entitled
to injunctive relief in any court of competent jurisdiction for any breach or
threatened breach of any such covenants by Executive. Nothing contained herein
shall prevent or delay Company from seeking, in any court of competent
jurisdiction, specific performance or other equitable remedies in the event of
any breach or intended breach by Executive of any of its obligations hereunder.
(b) Notwithstanding the equitable relief available to Company,
Executive, in the event of a breach of his covenants contained in Section 7
hereof, understands and agrees that the uncertainties and delay inherent in the
legal process would result in a continuing breach for some period of time, and
therefore, continuing injury to Company until and unless Company can obtain such
equitable relief. Therefore, in addition to such equitable relief, Company shall
be entitled to monetary damages for any such period of breach until the
termination of such breach, in an amount up to the amount of all monies received
by Executive as a result of said breach. If Executive should use or reveal to
any other person or entity any confidential information, such use or revelation
would be considered a continuing violation on a daily basis for as long as such
confidential information is made use of by Executive.
(c) If any provision of Section 7 is determined to be invalid or
unenforceable by reason of its duration or scope, such duration or scope, or
both, shall be deemed to be reduced to a duration or scope to the extent
necessary to render such provision valid and enforceable. In such event,
Executive shall negotiate in good faith to provide Company with lawful and
enforceable protection that is most nearly equivalent to that found to be
invalid or unenforceable.
7.5 Definition of "Company." "Company" as used in Section 7 includes
all majority-owned subsidiaries of Company.
7.6 Continuing Operation. Except as specifically provided in this
Section 7, the termination of Executive's
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employment or of this Agreement shall have no effect on the continuing operation
of this Section 7.
7.7 Indemnification. Executive shall be entitled to indemnification in
accordance with the Company's by-laws in effect on the date hereof and to the
fullest extent permitted under Delaware law.
SECTION 8. MISCELLANEOUS
8.1. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement, other than injunctive relief sought under
Section 7.4 above, shall be settled exclusively by arbitration in Wilmington,
Delaware, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Executive shall be entitled
to recover from the Company the amount of his legal fees (and related expenses)
in excess of $50,000 in the aggregate in connection with claims or disputes
under this Agreement, the Company Stock Option Agreement, the shelf-registration
described in Section 3.2, and the Restricted Units Agreement, unless Executive
is determined by the arbitrator or a court to have acted frivolously or in bad
faith with respect to such claim or dispute. The reimbursement shall be made as
soon as practicable following the resolution of such contest or dispute (whether
or not appealed) to the extent the Company receives reasonable written evidence
of such fees and expenses.
8.2. Prior Employment. Executive represents and warrants that his
acceptance of employment at Company and his execution of this Agreement has not
breached, and the performance of his duties hereunder will not breach, any
obligation owed by him to, or any agreement with, any prior employer or other
person.
8.3. Key Employee Insurance. Company shall have the right at its
expense to purchase insurance on the life of Executive, in such amounts as it
shall from time to time determine, of which Company shall be the beneficiary.
Executive shall submit to such physical examinations as may reasonably be
required and shall otherwise cooperate with Company in obtaining such insurance.
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8.4. Assignment; Benefit. This Agreement shall not be assignable by
Executive, other than his rights to payments or benefits hereunder, which may be
transferred only by will or the laws of descent and distribution. Upon
Executive's death, this Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's beneficiary or
beneficiaries, personal or legal representatives, or estate, to the extent any
such person succeeds to Executive's interests under this Agreement. No rights or
obligations of the Company under this Agreement may be assigned or transferred
except that 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.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets (by merger, purchase or
otherwise) which executes and delivers the agreement provided for in this
Section 8.4 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
8.5 Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram or telefax (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or to such other person and/or at
such other address as may be furnished in writing by any party hereto to the
other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefor, in all other cases. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of any party to serve process in any
other manner permitted by law.
If to Company:
Integra LifeSciences Corporation
105 Morgan Lane
Plainsboro, NJ 08536
Attention: Chairman
Facsimile: (609) 799-3297
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If to Executive:
Stuart M. Essig
113 Willow Street
Brooklyn, NY 11201
Facsimile: (718) 643-0196
8.6 Termination Procedures.
(a) Any termination of Executive's employment by the Company or by
Executive during the Term (other than termination pursuant to death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 8.5. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.
(b) "Date of Termination" shall mean (i) if Executive's employment
is terminated by his death, the date of death, (ii) if Executive's employment is
terminated pursuant to Section 4.2, thirty (30) days after Notice of Termination
(provided that Executive shall not have returned to the substantial performance
of his duties on a full-time basis during such thirty (30) day period), or (iii)
if Executive's employment is terminated for any other reason, the date on which
a Notice of Termination is given or any later date (within thirty (30) days
after the giving of such notice) set forth in such Notice of Termination;
provided that in the event of a termination for Good Reason, the Date of
Termination shall not be prior to the expiration of any remedy period with
respect to Good Reason in Section 4.4(b).
8.7 Entire Agreement and Modification. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements and understandings with
respect thereto. No amendment, modification, or waiver of this Agreement shall
be effective unless in writing. Neither the failure nor any delay on the part of
any party to exercise any right, remedy, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power, or privilege with respect to such
occurrence or with respect to any other occurrence.
8.8 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the State of Delaware and
the federal laws of the United
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States of America, to the extent applicable, without giving effect to otherwise
applicable principles of conflicts of law.
8.9 Withholding. All payments hereunder shall be subject to any
required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.
8.10 Headings; Counterparts. The headings of paragraphs in this
Agreement are for convenience only and shall not affect its interpretation. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which, when taken together, shall be deemed
to constitute the same Agreement.
8.11 Further Assurances. Each of the parties hereto shall execute such
further instruments and take such other actions as the other party shall
reasonably request in order to effectuate the purposes of this Agreement.
8.12 Shareholder Approval. The Company represents and warrants to
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Sections 3.2 and 3.3, or that such shareholder approval
has been obtained.
8.13 Noncontravention. The Company represents that the Company is not
prevented from entering into or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's abilities to enter into or perform this
Agreement.
8.14 Below Market Issuances. The Company hereby agrees that, without
the written consent of Executive, so long as Executive holds Restricted Units or
Company Stock Options and so long as Caruso and trusts or other entities for the
benefit of Caruso or his immediate family hold in the aggregate more than 45% of
the Common Stock, neither the Company nor any subsidiary of the Company shall,
directly or indirectly, issue or sell Common Stock (or any security, warrant or
option convertible into or exercisable for Common Stock) at a price below fair
market value, directly or indirectly, to (a) any entities or individuals (or
immediate family members of any such individuals) which, directly or indirectly,
own 45% or more of the Common Stock (an "Affiliate") or any entity, directly or
indirectly, controlled by an Affiliate or any trusts or other entities
established for the direct or indirect benefit of an Affiliate or (b) any
entities under 45% or more common control with the Company.
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8.15 Survivorship. The respective rights and obligations of the
Company and Executive hereunder shall survive any termination of this Agreement
or Executive's employment to the extent necessary for the intended preservation
of such rights and obligations.
8.16 Validity. The invalidity or enforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INTEGRA LIFESCIENCES CORPORATION
By: /s/ Richard E. Caruso
---------------------------------
Richard E. Caruso, Chairman
/s/ Stuart M. Essig
---------------------------------
STUART M. ESSIG
Exhibit B
---------
REGISTRATION UNDER THE SECURITIES ACT.
-------------------------------------
1. Registration for Registrable Securities Underlying Options or Units. The
Company agrees to file a "shelf" registration statement, providing for
the registration of, and the sale on a continuous or delayed basis by the
Executive in accordance with the methods of distribution specified by the
Executive and consistent with the terms and provisions hereof, of
Registrable Securities pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), and/or any similar rule that may
be adopted by the Securities and Exchange Commission (the "Commission")
as soon as practicable following the request of the Executive, and to use
its commercially reasonable best efforts to cause such registration
statement to be declared effective by the Commission under the Securities
Act as soon as practicable following such filing. The Company further
agrees to use its commercially reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements
until the securities registered thereunder cease to be Registrable
Securities.
2. Registration Procedures. In connection with any shelf registration
statement contemplated hereby, the following provisions shall apply:
(a) The Company shall furnish to the Executive, prior to the filing
thereof with the Commission, a copy of such shelf registration statement,
and each amendment thereto and each amendment or supplement, if any, to
the prospectus included therein and, subject to Paragraph 1 above, shall
use its best efforts to reflect in each such document, when so filed with
the Commission, such comments as the Executive reasonably may propose;
provided, however, that the Company shall not be obligated to include in
any such shelf registration statement, prospectus, prospectus supplement
or amendment to such shelf registration statement any requested
information that is unreasonable in scope taking into account the
Company's most recent prospectus or prospectus supplement used in
connection with a primary or secondary offering of equity securities by
the Company and the Company's periodic reports under the Exchange Act (as
defined below).
(b) The Company shall take such action as may be necessary so that
(i) such shelf registration statement and any amendment thereto and any
prospectus forming part thereof and any amendment or supplement thereto
(and each report or other document incorporated therein by reference in
each case) complies in all material respects with the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the respective rules and regulations thereunder, (ii) such shelf
registration statement and any amendment thereto does not, when it
becomes effective, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) such prospectus
forming part of any shelf registration statement, and any amendment or
supplement to such prospectus, does not include an untrue statement of a
material fact or
omit to state a material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading.
(c) (1) The Company shall advise the Executive:
(i) when such shelf registration statement and any amendment
thereto has been filed with the Commission and when such shelf
registration statement or any post-effective amendment thereto has
become effective;
(ii) of any request by the Commission for amendments or
supplements to such shelf registration statement or the prospectus
included therein or for additional information.
(iii) of the issuance by the Commission of any stop order
suspending effectiveness of such shelf registration statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities
included in such shelf registration statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose;
and
(v) upon the receipt of a Request for Sale under paragraph
2(f), of the existence of any circumstances or the happening of any
events that would require the making of any changes in such shelf
registration statement or the prospectus so that, as of such date,
such shelf registration statement and the prospectus would not
contain an untrue statement of a material fact and would not omit to
state a material fact required to be stated therein or necessary to
make the statements therein (in the case of the prospectus, in light
of the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to suspend the
use of the prospectus until the requisite changes have been made).
(d) The Company shall use its commercially reasonable best efforts
to prevent the issuance, and if issued to obtain the withdrawal, of any
order suspending the effectiveness of such shelf registration statement
at the earliest possible time.
(e) The Company shall furnish to the Executive, without charge, as
many copies of the prospectus (including each preliminary prospectus)
included in such shelf registration statement and any amendment or
supplement thereto as the Executive may reasonably request; and the
Company consents (except during the continuance of any event described in
Paragraph 2(c)(iii), (iv) (limited to the jurisdiction of such
suspension) or (v) above) to the use of the prospectus and any amendment
or supplement thereto by the Executive in connection with the offering
and sale of the Registrable Securities covered by the prospectus and any
amendment or supplement thereto until such time as the Securities so
covered cease be Registrable Securities.
-2-
(f) The Executive shall notify the Company in writing of his
intention to sell securities registered pursuant to any registration
statement filed pursuant to Paragraph 1 above (any such notice, a
"Request for Sale") not less than 10 days prior to the proposed Trade
Date of any such sale, which Request for Sale shall include a request
from the Executive or (if applicable) a managing underwriter to prepare
and file an amendment or supplement to such shelf registration statement
or the prospectus contained therein. "Trade Date" shall mean the date the
Executive enters into any underwriting, agency or other purchase
agreement or understanding for the sale of, or otherwise agrees to sell,
securities registered pursuant to such registration statement. No such
notification shall obligate the Executive to consummate any such sale.
(g) Prior to any offering of Registrable Securities pursuant to
such shelf registration statement, the Company shall register or qualify
or cooperate with the Executive in connection with the registration or
qualification of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions as the Executive
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the offer and sale in such jurisdictions
of the Registrable Securities covered by such shelf registration
statement; provided, however, that in no event shall the Company be
obligated to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required
to so qualify but for this Paragraph 2(g) or (ii) file any general
consent to service of process in any jurisdiction where it is not as of
the date hereof so subject.
(h) The Company shall cooperate with the Executive to facilitate
the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to such shelf registration
statement free of any restrictive legends and in such permitted
denominations and registered in such names the Executive may request in
connection with the sale of Registrable Securities pursuant to such shelf
registration statement.
(i) Subject to Paragraph 8 below, upon the occurrence of any event
contemplated by Paragraph 2(c)(v) above, the Company shall promptly
prepare a post-effective amendment to such shelf registration statement
or an amendment or supplement to the related prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Registrable Securities included therein, the prospectus will not include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If the Company
notifies the Executive of the occurrence of any event contemplated by
Paragraph 2(c)(iii), (iv) (limited to the jurisdiction of such
suspension) or (v) above or of a delay pursuant to Paragraph 8 below, the
Executive shall suspend the use of the prospectus and any proposed sales
of securities registered pursuant to such registration statement until
the requisite changes to the prospectus have been made or the Company has
notified the Executive that the reason for such delay no longer exists,
as the case may be and the Executive has received copies of a
supplemented or amended prospectus which is no longer defective.
-3-
(j) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders or otherwise provide in
accordance with Section 11(a) of the Securities Act as soon as
practicable after the effective date of such shelf registration statement
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act.
(k) The Company may require the Executive to furnish to the Company
such information regarding the Executive and the distribution of such
Registrable Securities as may be required by applicable law or regulation
for inclusion in such shelf registration statement.
(l) The Company shall, if requested, promptly include or
incorporate in a prospectus supplement or post-effective amendment to
such shelf registration statement, such information as the managing
underwriters reasonably agree should be included therein and to which the
Company does not reasonably object and shall make all required filings of
such prospectus supplement or post-effective amendment as soon as
practicable after they are notified of the matters to be included or
incorporated in such prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be obligated to include in
any such prospectus supplement or post-effective amendment to such shelf
registration statement any requested information that is unreasonable in
scope taking into account the Company's most recent prospectus or
prospectus supplement used in connection with a primary or secondary
offering of equity securities by the Company and the Company's periodic
reports under the Exchange Act.
(m) The Company shall enter into such customary agreements
(including an underwriting agreement in customary form in the event of an
underwritten offering as set forth in Paragraph 7 below) to take all
other appropriate actions in order to expedite or facilitate the
registration and the disposition of the Registrable Securities, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures
substantially identical to those set forth in Paragraph 5 below with
respect to the underwriters and controlling persons of the underwriters.
(n) The Company shall:
(i) make reasonably available for inspection by the Executive,
any underwriter participating in any disposition pursuant to such
shelf registration statement, and any attorney, accountant or other
agent retained by the Executive or any such underwriter all
relevant financial and other records, pertinent corporate documents
and properties of the Company and its subsidiaries;
(ii) cause the Company's officers, directors and employees to
make reasonably available for inspection all relevant information
reasonably requested by the Executive or any such underwriter,
attorney, accountant or agent in connection with any shelf
registration statement, in each case, as is customary for similar
due diligence examinations; provided, however, that any information
that
-4-
is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall be
kept confidential by the Executive or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Executive
and the managing underwriters, if any, in form, substance and scope
as are customarily made by the Company to underwriters in primary
underwritten offerings and covering matters including, but not
limited to, those set forth in Paragraph 4 below;
(iv) obtain opinions of counsel to the Company (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any) addressed to the
Executive and underwriters, if any, covering such matters as are
customarily covered in opinions requested in underwritten
offerings; provided, however, that the Company shall not be
obligated to obtain such opinions in connection with any sale
(other than in an underwritten offering) of securities by the
Executive more than twice during any 12 consecutive month period;
(v) obtain "cold comfort" letters from the independent public
accountants of the Company addressed to the Executive and the
underwriters, if any, in customary form and covering matters of the
type customarily covered in "cold comfort" letters in connection
with primary underwritten offerings; provided, however, that the
Company shall not be obligated to obtain such letters in connection
with any sale (other than in an underwritten offering) of
securities by the Executive more than twice during any 12
consecutive month period or, if applicable accounting procedures
and practices do not permit the rendering of such "cold comfort"
letter in an offering of the type being effected;
(vi) deliver such documents and certificates as may be
reasonably requested by managing underwriters, if any, and in
accordance with customary conditions contained in the underwriting
agreement or other agreement entered into by the Company.
(o) The Company shall use its commercially reasonable best efforts
to take all other steps necessary to effect the registration, offering
and sale of the Registrable Securities covered by such shelf registration
statement contemplated hereby.
(p) Executive shall not, during any period in which of any his
Registrable Securities are included in any effective registration
statement: effect any stabilization or other transactions or engage in
any stabilization or other activity in connection with equity securities
of the Company in contravention of Rule 10b-7, Regulation M, or Rule
10b-2 under the Exchange Act.
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Executive shall furnish each broker through whom Executive
offers Registrable Securities such number of copies of the prospectus as the
broker may require and otherwise comply with the prospectus delivery
requirements under the Securities Act.
3. Expenses. The Company agrees to pay all Registration Expenses in
connection with any registration pursuant to Paragraph 1 above.
4. Representations. The Company represents and warrants to, and agrees with,
the Executive that:
a. Any registration statement and each prospectus contained therein
filed pursuant to Paragraph 1 above and any further amendments or
supplements to any such registration statement or prospectus, when it
becomes effective or is filed with the Commission and, in the case of an
underwritten offering of Registrable Securities, at the time of the
closing under the underwriting agreement relating thereto, will conform
in all material respects to the requirements of the Securities Act and
will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information set
forth in a questionnaire (or any other written information) furnished to
the Company by the Executive.
b. Any documents incorporated by reference in any Prospectus
referred to in Paragraph 3(a) above, when they become or became effective
or are or were filed with the Commission, as the case may be, will
conform or conformed in all material respects to the requirements of the
Securities Act or the Exchange Act, as applicable, and none of such
documents will contain or contained an untrue statement of a material
fact or will omit or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
c. No person has been or shall be granted registration rights
inconsistent with this Agreement; provided, however, that the Company may
permit any registration statement filed pursuant hereto to include
securities of securityholders other than the Executive. Notwithstanding
the foregoing, the Company agrees that no other securityholder of the
Company shall be granted any "piggyback" rights with respect to any
underwritten offering of securities being made by the Executive in
accordance with the terms hereof.
5. Indemnification
a. Upon the registration of the Registrable Securities pursuant to
a registration statement filed as contemplated by Paragraph 1 hereof (a
"Registration Statement"), the Company shall, and it hereby agrees to,
indemnify and hold harmless the Executive against any losses, claims,
damages or liabilities to which the Executive may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions (pending or threatened) in respect thereof)
arise out of or
are based upon an untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement under which
such Registrable Securities were registered under the Securities Act, or
any prospectus contained therein or furnished by the Company to the
Executive, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company shall, and it hereby agrees to,
reimburse the Executive for any legal or other expenses reasonably
incurred by him in connection with investigating or defending any such
action or claim; provided, however, that the Company shall not be liable
to the Executive in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement or prospectus, or amendment or
supplement, in reliance upon and in conformity with any written
information (including without limitation, any questionnaire) furnished
to the Company by the Executive expressly for use therein or from the
failure of the Executive to comply with the prospectus delivery
requirements or other applicable provisions of the securities laws.
b. The Company may require, as a condition to filing any
Registration Statement, that the Company shall have received an
undertaking reasonably satisfactory to it from the Executive to (i)
indemnify and hold harmless the Company, its directors, officers who sign
any Registration Statement, each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, and any other holder of Common Stock that are
included in such Registration Statement against any losses, claims,
damages or liabilities to which the Company or such other persons may
become subject, under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement, or
any prospectus contained therein or furnished by the Company to any such
holder or underwriter, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished in writing to the
Company by the Executive expressly for use therein (including, without
limitation, any questionnaire), and (ii) reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim;
c. Promptly after receipt by an indemnified party under Paragraph
5(a) or (b) above of written notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party pursuant to the indemnification provisions
of or contemplated by this Paragraph 5, notify such indemnifying party in
writing of the commencement of such action; but the omission to so notify
the indemnifying party shall not relieve it from any liability which it
may have
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to any indemnified party other than under the indemnification provisions
of or contemplated by Paragraph 5(a) or (b) above, and then only to the
extent that the indemnifying party is actually prejudiced thereby. In
case any such action shall be brought against any indemnified party and
it shall notify an indemnifying party of the commencement thereof, such
indemnifying party shall be entitled to participate therein and (unless
the indemnified party reasonably concludes that such representation would
involve a conflict of interest), to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, such indemnifying party shall not be liable to such
indemnified party for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless
such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party. An indemnifying party will not be liable for any
settlement of any action or claim effected without its written consent
(which shall not be unreasonably withheld).
d. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Paragraph 5(a) or (b) are
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in
connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or by such indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Paragraph 5(d) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in this Paragraph 5(d). The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages
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or liabilities (or actions in respect thereof) referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred
by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
6. Definitions.
a. "Registrable Securities" shall mean (i) the 1,000,000 shares of
common stock, par value $0.01 per share, of the Company and any
securities into which such shares are exchanged or reclassified ("Common
Stock") issuable upon exercise of the Company Options to be granted by
the Company to the Executive pursuant to Section 3.2 of the Agreement and
(ii) the 2,000,000 shares of Common Stock issuable upon payment of the
Restricted Units to be granted to the Executive pursuant to Section 3.3
of the Agreement, and in each case, any securities issued as a
distribution on or acquired upon exercise of rights distributed with
respect to such shares of Common Stock (collectively with the Common
Stock, the "Securities"); provided that such Securities shall cease to be
Registrable Securities when such Securities (i) have been sold or
otherwise transferred by the Executive, whether pursuant to an effective
registration statement or otherwise or (ii) have become eligible for sale
pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act.
b. "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with its obligations hereunder,
including without limitation, (a) all Commission and any NASD
registration and filing fees and expenses, (b) all fees and expenses in
connection with the qualification of the Registrable Securities for
offering and sale under the State securities and blue sky laws of such
States as may be reasonably requested by the Executive (provided,
however, that nothing herein shall require the Company to qualify as a
foreign corporation in any jurisdiction where it would not otherwise be
required to qualify but for such qualification, to consent to general
service of process or taxation in any such jurisdiction or to make any
changes to the Company's certificate of incorporation or bylaws, (c) all
expenses relating to the preparation, printing, distribution and
reproduction of any registration statement required to be filed as
contemplated herein, each prospectus included therein or prepared for
distribution, each amendment or supplement to the foregoing, the
certificates representing the Securities and all other documents relating
there, (d) messenger and delivery expenses, (e) internal expenses
(including, without limitation, all salaries and expenses of the Company
officers and employees performing legal or accounting duties), (f) fees,
disbursements and expenses of counsel and independent certified public
accountants of the Company and (g) reasonable fees, disbursements and
expenses of one counsel for the Executive retained in connection with
such registration and reasonable fees and disbursements of underwriters
and distribution participants customarily paid by the issuer. To the
extent that any Registration Expenses are incurred, assumed or paid by
the Executive, the Company shall reimburse the Executive for the full
amount of the
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Registration Expenses so incurred, assumed or paid promptly after receipt
of a request therefor. Notwithstanding the foregoing, the Executive shall
pay all agency fees and commissions and underwriting discounts and
commissions and the legal and other fees of underwriters, if any,
resulting from any failure by Executive to consummate an underwritten
offering or not covered by clause (g), if any, attributable to the sale
of such Registrable Securities and the fees and disbursements of any
counsel or other advisors or experts retained by the Executive or
underwriters, other than those specifically referred to above.
7. Underwritten Offering. The Executive, if he so desires, may sell
Registrable Securities in an underwritten offering. In any such
underwritten offering, the investment banker or bankers and manager or
managers that will administer the offering will be selected by, and the
underwriting arrangements with respect thereto will be approved by the
Executive; provided, however, that (i) such investment bankers and
managers and underwriting arrangements must be reasonably satisfactory to
the Company, such satisfaction not to be unreasonably withheld, (ii) the
Company, shall not be obligated to arrange for more than one underwritten
offering during any consecutive twelve month period or more than a total
of 5 underwritten offerings and (iii) each underwritten offering shall
include at least the lesser of (x) $5 million in value of Registrable
Securities, or (y) 1,500,000 shares of Common Stock (or the equivalent
thereof), or (z) the balance of the Executive's Registrable Securities,
are included in such underwritten offering. In connection with any such
underwritten offering of securities, the Company will agree, to customary
restrictions on the ability of the Company to sell securities
substantially similar to the Registrable Securities for a period not to
exceed 90 days from the date of the related prospectus supplement.
8. Suspension. Notwithstanding anything contained herein, upon receipt of a
Request for Sale or for registration from the Executive or a managing
underwriter, the Company may delay the filing of any such registration
statement or amendment or supplement if the Company in good faith has a
valid business reason for such delay, including without limitation, (i)
that the filing of such amendment or supplement would require the Company
to include therein material information that has not theretofore been
made public and which the Company is not then prepared to disclose or
(ii) that the offering and sale of Registrable Securities by the
Executive at such time will adversely affect any offering by the Company
as the case may be, of its securities or any material acquisition or
financing transaction then contemplated or pending. In connection with
any public offering of its securities by the Company, Executive shall
enter into such "Lock up" or other agreements restricting his sales of
securities of the Company for such reasonable periods not to exceed 180
days as the lead underwriters may require.
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