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EXHIBIT 10.22
* CONFIDENTIAL *
Employee Retention Agreement
Resulting from a Change in Control or Division Divestiture
AGREEMENT made as of December 14, 1998, by and between Smith & Nephew,
Inc. (the "Company") and Les Cross (the "Executive").
WHEREAS, the Company recognizes that the possibility of an occurrence of
a Change in Control or the Divestiture of the BASS Division of the Company can
result in significant distractions of the Company's key management personnel
because of the uncertainties inherent in such a situation; as well as
uncertainty in the business and potentially the employee's position in the
future creates uncertainty for the employee's continued employment and the
employee's position;
WHEREAS, the Executive possesses certain skills unique to the Company's
business;
WHEREAS, the Company has determined that it is in the best interest of
the Company to retain the services of the Executive and to ensure his continued
dedication and efforts without undue concern for his personal security; and
WHEREAS, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a Change in Control or Division
Divestiture, the Company desires to enter into this Agreement with the Executive
to provide the Executive with certain benefits in the event his employment is
terminated as a result of, or in connection with, a Change in Control or the
Divestment of a Division, and to provide the Executive with certain other
benefits whether or not the Executive's employment is terminated.
NOW, THEREFORE, it is agreed as follows:
1. Term. This Agreement shall commence as of December 31, 1998, and
shall continue in effect until December 31, 1999, when it shall
terminate, unless extended by written mutual agreement signed by
the Company and the Executive; provided, however, that in the
event that a Change in Control or Division Divestiture occurs on
or before December 31, 1999, the term of this Agreement shall not
expire prior to the expiration of twelve (12) months after the
occurrence of the Change in Control or the Divestiture of the BASS
Division.
2. Definitions:
2.1 Cause. For purposes of this Agreement, "Cause" shall mean the
misappropriation of corporate funds or other acts of dishonesty,
activities materially harmful to the Company's business or
reputation, willful refusal to perform or substantial disregard of
Executive's assigned duties, or any violation of any legal
obligation to the Company.
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2.2 Change in Control / Division Divestiture. For purposes of this
Agreement, "Change in Control" of BASS shall be deemed to have
occurred if as a result of a tender offer, merger consolidation,
sale of assets, acquisition of shares or contested election, or
any combination of the foregoing transactions, (i) any person
shall become the owner, beneficially or of record, of more than
30% of the aggregate voting power of the Company, other than a
member of the Smith & Nephew Group of companies, (ii)
substantially all of the assets of the Company shall be sold to
another corporation; provided that the other corporation is not a
member of the Smith & Nephew Group of companies or (iii) the
persons who were directors of the Company immediately before the
transaction shall cease to constitute a majority of the Board of
Directors of the Company or any successor to the Company.
2.3 Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental condition which impairs the Executive's
ability to substantially perform his duties under this Agreement
for a period of one hundred eighty (180) consecutive days as
determined by a company appointed health care provider.
2.4 Good Reason. For purposes of this Agreement, "Good Reason" shall
mean the occurrence after a Change in Control or a Division
Divestiture of any of the events or conditions described in
Subsections (1) through (8) hereof:
(1) a change in the Executive's title, position or
responsibilities (including reporting responsibilities)
which represents an adverse change from his present
position or responsibilities in effect immediately prior to
the Change in Control or the Divestiture of BASS; the
assignment to the Executive of any duties or
responsibilities which are inconsistent with his present
position or responsibilities in effect immediately prior to
the Change in Control or Divestiture of BASS; or
(2) a material reduction in the Executive's compensation or any
failure to pay the Executive any compensation or benefits
to which he is entitled within thirty (30) days of the date
due;
(3) the Company requiring the Executive to be based at any
place outside a 50-mile radius from his current location
except for reasonably required travel on the Company's
business which is not substantially greater than such
current travel requirements.
(4) the failure by the Company to continue in effect any
compensation or employee benefit plan in which the
Executive is participating, unless a substitute or
replacement plan has been implemented which provides
substantially identical compensation or benefits to the
Executive or unless the compensation and benefit plans are
the same as those offered by the company to those in
similar executive positions;
(5) the insolvency or the filing of a petition for bankruptcy
by the Company;
(6) any material breach by the Company of any provision of this
Agreement;
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(7) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms
of Section 2.1; or
(8) the failure of the Company to obtain an agreement from any
successor or assign of the Company to assume and agree to
perform this Agreement, as contemplated in Section 7
hereof.
3. Position and Duties. The Executive shall continue to have such
responsibilities and authority as may be given to him from time to
time by either the Chief Executive, President of the Company, or
the Company's Board of Directors. The Executive shall devote
substantially all his working time and efforts to the business of
the Company.
4. Compensation and Benefits.
a. Salary. During the period of the Executive's employment
hereunder, the Company shall pay to the Executive his
current salary with the same frequency and on the same
basis that the Company normally makes salary payments to
other Executive personnel. This salary may be increased
from time to time in accordance with normal business
practices of the Company. If such increases take place, the
Company shall not thereafter decrease the Executive's
salary without the Executive's consent during the term of
this Agreement.
b. Benefits. The Executive shall participate in all other
compensation and benefit plans which are offered by the
Company to employees in similar executive positions, in
accordance with the terms of the plans.
c. Retention Bonus. Promptly following the Divestiture of the
BASS Division or a Change in Control, the Executive shall
receive a special retention taxable bonus equal to twelve
months base salary for full on-going commitment of the
Executive during the divestiture process and if he remains
in his position through the completion of the Divestiture
or Change in Control as determined by the Company.
If the Division is not sold by December 31, 1999, and the
Divestiture process has ceased, the Executive will be
eligible to receive a taxable Retention Bonus equal to 50%
of the Retention Bonus, as outlined in paragraph one of
Section 4c.
d. Special Sale Bonus. The Executive will be eligible to
receive an additional taxable bonus payment of 150% of his
base salary if the BASS Division is sold during the
Executive's employment for an amount equal to or greater
than $350 million ("Special Sale Bonus"). If the BASS
Division is sold for an amount between $225 million and
$350 million, then the Executive shall receive a pro rata
share of the Special Sale Bonus. (Accordingly, if the sale
price were $225 million, $250 million, $300 million, or
$350 million, the Special Sale Bonus would be,
respectively, 25%, 50%, 100%, or 150% of the Executive's
base salary).
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5. Severance and Benefits.
5.1 If within one year of a Change in Control or a Divestiture of
BASS, the Executive is terminated by the purchasers for reasons
other than Cause or if the executive resigns for Good Reason, then
the Executive will be entitled to one year's base salary plus one
year's taxable bonus (calculated as maximum normal bonus,
excluding retention bonus), payable by the purchaser. "Severance
Payments."
5.2 The Severance Payments provided for in 5.1 shall be reduced by 50%
if, upon termination of his employment, the Executive does not
accept within ten (10) days a written offer of employment by an
affiliate of the Company, if such offer provides for a similar
position of employment, base salary equal to or greater than 90%
of Executive's salary at the time of termination, relocation
costs, temporary living expenses, and guaranteed employment for
eighteen (18) months unless employment is terminated for Cause,
Disability or as a result of death.
6. Termination Date. "Termination Date" shall mean in the case of the
Executive's death, his date of death, and in all other cases, the
date specified in the Notice of Termination subject to the
following:
a. If the Executive's employment is terminated by the Company
for Cause, the date specified in the notice of Termination
shall be the date of the action.
b. If the Executive's employment is terminated for Good
Reason, the date specified in the Notice of Termination
shall be at least thirty (30) days, except by mutual
agreement.
c. If the Executive Voluntarily terminates the employment
following the payment of the Retention Bonus and/or
Severance Payments without Good Reason, he agrees to
provide thirty (30) calendar days notice.
7. Successors; Binding Agreement.
a. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns, and the
Company shall require any successor or assign 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 or assignment
had taken place.
b. Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Executive, his
beneficiaries or legal representatives, except for
compensation due the Executive as a result of his death
which may pass by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal personal
representative (executors, administrators, heirs, devisees,
and/or legatees).
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8. Notice. For purposes of this Agreement, notices and other
communications provided for in the Agreement (including the Notice
of Termination) shall be in writing and shall be deemed to have
been duly given when personally delivered or sent by certified
mail, return receipt requested, addressed to the respective
addresses last given by each party to the other. All notices and
communications shall be deemed to have been received on the date
of personal delivery thereof or on the third business day after
the mailing thereof, except that notice of change of address shall
be effective only upon receipt by a designated representative of
Smith & Nephew, Inc.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the
Company and for which the Executive may qualify, nor shall
anything herein limit or reduce such rights as the Executive may
have under any other agreements with the Company. Provided,
however, that to the extent that the Executive receives benefits
under this Agreement because of a Division Divestiture, he or she
is not entitled to severance pay under any other severance plan,
policy or arrangement of the Company. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive
under any plan or program of the Company shall be payable in
accordance with such plan or program, except as explicitly
modified by this Agreement.
10. 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 the Executive and the
Company. 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 time or at any prior or
subsequent time. No agreement 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.
11. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of
California without giving effect to the conflicts of law
principles thereof.
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12. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision
shall not effect the validity or enforceability of the other
provisions hereof.
13. Reduction of Payments by the Company. If any payment or benefit
received by or in respect of the Executive under this Agreement or
any other plan, arrangement or agreement with the Company or any
other member of the Smith & Nephew Group of companies, (determined
without regard to any additional payments required under this
Section 13) (a "Payment") would be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (or any similar tax that may hereafter be
imposed), the Company shall pay to the Executive with respect to
such Payment an additional amount (the "Gross-up Payment") such
that the net amount retained by the Executive from the Payment and
the Gross-up Payment, after reduction for any Excise Tax upon the
Payment and any federal, state and local income tax and Excise Tax
upon the Gross-up Payment, shall be equal to the Payment.
SMITH & NEPHEW, INC.
By: /s/ Clifford Lomax
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Clifford Lomax
Director
/s/ Leslie Cross
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Leslie Cross
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