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EXHIBIT 10.26
* 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 Peter Bray (the "Executive").
WHEREAS, the Company recognizes that the possibility of an occurrence of
a Change in Control or the Divestiture of a 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 mutual written 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 a Change in Control or a Division Divestiture.
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.
2.2 Change in Control / Division Divestiture. For purposes of this
Agreement, a "Change in Control" shall be deemed to have occurred
if the Company shall become a subsidiary of another corporation,
shall be merged or consolidated into another corporation, if
substantially all of the assets of the Company shall be sold to
another corporation, or if another corporation shall acquire 30%
or more of the outstanding shares of the Company; provided in each
case that the other corporation is not a member of the
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Smith & Nephew Group of companies. A Division Divestiture is the
sale of a Division by the Company to another corporation.
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 title, position
or responsibilities in effect immediately prior to a Change
in Control or Division Divestiture; the assignment to the
Executive of any duties or responsibilities which are
inconsistent with his status, title, position or
responsibilities in effect immediately prior to a Change in
Control or Division Divestiture; or any removal of the
Executive from or failure to reappoint or re-elect him to
any of such offices or positions, except in connection with
the termination of his employment for Disability, Cause, or
as a result of his death; or
(2) a 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 (without a
material reduction in benefit level, and/or reward
opportunities) 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;
(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,
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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. In the event of a Division Divestiture,
the Executive shall receive a special retention taxable
bonus equal to six 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 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. Executive Benefits. For purposes of this Agreement,
incentive bonuses, stock options, car, club dues,
memberships, and financial planning/tax preparation are
considered to be a part of compensation.
d(1) In the event of a Change in Control or Division
Divestiture occurring on or before December 31,
1999, the Executive will earn a pro rata bonus based
on results up to and including the date on which the
Change in Control or Division Divestiture takes
place.
d(2) The Company's customary accounting policies shall be
used for determination of financial results.
5. Severance and Benefits.
5.1 If, on or before December 31, 1999, the Company successfully
divests the Division and the Executive's employment with the
Company shall be terminated by the purchasers for reasons other
than Cause, Disability or Death within one year of the completion
of the divestiture, then the Executive will be entitled to one
year's base salary plus one year's taxable bonus (calculated as
maximum normal bonus achievable in 1999), payable by the
purchaser.
5.2 The Severance payments 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
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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.
5.3 In the event the Executive's employment is terminated by Death,
his estate shall receive a pro rata share of any severance or
benefits provided for under Sections 4 and 5 of this Agreement up
to the date of the Executive's 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 Agreement
without Good Reason, he agrees to do so under the following
terms:
(1) Provide thirty (30) calendar days notice.
(2) Agree not to compete with the Company or any
affiliate for a period of six (6) months.
(3) Agree not to solicit the Company's employees for
hire for a period of six (6) months.
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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 resulot 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).
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.
SMITH & NEPHEW, INC.
By: /s/ Clifford Lomax
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Clifford Lomax
Director
/s/ Peter Bray
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Peter Bray
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