EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into as of
the 1st day of June 2004, by and between Kensey Nash Corporation, a Delaware
corporation (the "Company"), and Douglas G. Evans ("Executive").
WHEREAS, the Company wishes to retain Executive as an executive employee,
and Executive wishes to be employed by the Company in such capacity, all upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants of parties
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an
executive capacity and Executive accepts such employment and agrees to act as an
employee of the Company in accordance with the terms of employment hereinafter
specified. Executive shall hold the office of Chief Operating Officer and shall,
subject to the direction and supervision of the Company's of Board of Directors,
(a) have the responsibilities and authority customarily associated with such
office, and (b) perform such other duties and responsibilities as the Company's
Board of Directors shall from time to time assign to him. Executive agrees
diligently and faithfully to serve the Company and to devote his best efforts,
his full business time and his highest talents and skills to the furtherance and
success of the Company's business.
2. COMPENSATION. As full and complete compensation to Executive for all services
to be rendered by Executive hereunder, the Company shall pay Executive as
follows:
(a) The Company shall, during the term of Executive's employment, pay or
cause to be paid to Executive a base salary at the rate of $250,000 per annum,
or Executive's most recent per annum base salary, whichever is greater. Such
base salary shall be paid in periodic installments at the discretion of the
Company (but not less frequently than monthly) in accordance with the Company's
normal mode of executive salary payment.
(b) The Company may, during the term of Executive's employment, pay or
cause to be paid to Executive an annual bonus of cash, not to exceed 100% of the
base salary. In addition, stock, stock options and or stock rights may be
awarded by the Company's Board of Directors in their sole discretion.
3. TERM OF EMPLOYMENT; SEVERANCE.
(a) The term of Executive's employment hereunder (the "Employment Term")
shall commence on the date hereof and shall expire three (3) years after such
date.
(b) Termination of Executive's employment pursuant to this Agreement or
voluntary termination of employment shall not constitute a waiver of any of
Executive's obligations hereunder which survive termination hereof, including
without limitation those arising under paragraphs 5 through 9 inclusive hereof.
(c) In the event Executive's employment is terminated by the Company
without cause (as hereinafter determined), Executive shall continue to be
entitled to receive those fringe benefits enumerated in paragraph 4 hereof until
the expiration of the original Employment Term and the Company shall pay to
Executive a severance fee equal to the greater of (i) any amount of base salary
remaining until the expiration of the original Employment Term and bonus for
each remaining year of the original Employment Term, which bonus shall be based
on an average of the bonuses earned by Executive during the last two fiscal
years prior to such termination without cause (the "Estimated Bonus"), to which
Executive would otherwise be entitled but for such termination, or (ii) twelve
(12) months of Executive's salary and Estimated Bonus; provided, however, that
Executive shall not be entitled to receive any fringe benefits or such severance
fee if Executive breaches any of his obligations arising under paragraphs 7
through 9 hereof. The continuance of Executive's fringe benefits and the payment
by the Company of any severance fee to Executive pursuant to this Agreement
shall be in complete satisfaction and settlement of, and as liquidated damages
for, any and all of Executive's claims, damages or causes of action arising
directly or indirectly from this Agreement. In addition, upon the termination of
Executive's employment by the Company without cause, all options to purchase
shares of common stock of the Company ("Options") that were granted to Executive
and have vested prior to the date of such termination without cause shall remain
exercisable for a period of one (1) year from the date of such termination
without cause.
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(d) In the event Executive's employment is terminated with cause, the
Company shall have no further obligations hereunder or otherwise with respect to
Executive's employment from and after the date of such termination, except for
the payment of Executive's base salary accrued through the date of such
termination. For purposes of this Agreement, "cause" for termination shall be
deemed to exist upon (i) a determination by the Company's Board of Directors
that Executive has committed an act of fraud, embezzlement or other act of
dishonesty which would reflect adversely on the integrity of the Company or if
Executive is convicted of any criminal statute involving breach of fiduciary
duty or moral turpitude; (ii) a reasonable determination by the Company's Board
of Directors that Executive has failed to discharge his duties in a reasonably
satisfactory manner which failure is not cured by Executive within thirty (30)
days after delivery of written notice to Executive specifying the nature of such
failure; (iii) the death of Executive; (iv) a mental or physical disability of
Executive which renders Executive, in the reasonable opinion of the Company's
Board of Directors, unable to effectively perform his duties hereunder for a
substantially continuous period of one hundred eighty (180) days; or (v) the
voluntary termination of Executive's employment hereunder other than as a result
of a breach of the Company's obligations hereunder.
(e) In the event Executive's employment is terminated by the Company
pursuant to a Change in Control (as that term is defined in that certain
Termination and Change in Control Agreement dated of even date herewith between
the Company and Executive (the "Change in Control Agreement")), the Company
shall pay to Executive a severance fee equal to the greater of (i) the amount
Executive would be entitled to receive under paragraph 3(c) of this Agreement
for a termination without cause, or (ii) the amount Executive would be entitled
to receive pursuant to a Change in Control under the Change in Control
Agreement.
(f) In the event Executive's employment is not renewed by the Company upon
the expiration of the Employment Term for a term (the "Renewal Term") of at
least two (2) years, Executive shall, upon (i) the expiration of the Renewal
Term, if any, or (ii) the Employment Term in the event there is no Renewal Term,
or (iii) upon Executive's voluntary termination within 60 days of the Company's
failure to renew his employment on substantially the same terms as set forth
herein for at least two (2) years, continue to receive those fringe benefits
enumerated in paragraph 4 hereof for a period of twelve (12) months, and the
Company shall pay to Executive a severance fee equal to twelve (12) months of
Executive's salary and the Estimated Bonus; provided, however, that Executive
shall not be entitled to receive any fringe benefits or such severance fee if
Executive breaches any of his obligations arising under paragraphs 7 through 9
hereof. In addition, all Options that were granted to Executive and have vested
prior to the expiration of the Renewal Term shall remain exercisable for a
period of one (1) year from the expiration of the Renewal Term.
(g) In the event any payments or benefits received by the Executive upon
his termination of employment (which payments shall include, without limitation,
the vesting of an option or other non-cash benefit or property), whether
pursuant to the terms of this Agreement or any other plan, arrangement, or
agreement with the Company or any affiliated company (collectively, the "Total
Payments") would be subject (in whole or in part) to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any similar tax as may hereafter be imposed (the "Excise Tax"), the following
provisions shall apply:
(i) In the event that the Total Payments cause the Executive's
"parachute payments" within the meaning of Section 280G(b)(2) of the Code
to equal or to exceed three times the Executive's "base amount" within the
meaning of Section 280G(b)(3) of the Code (the "Trebled Base Amount") by
an amount which is not greater than 10% of the Trebled Base Amount, the
Total Payments shall be reduced (or eliminated) such that no portion of
the Total Payments is subject to the Excise Tax. Reductions shall be made
first to those Total Payments arising under the terms of this Agreement.
(ii) In the event that the Total Payments cause the parachute
payments to exceed 110% of the Trebled Base Amount, the Company shall pay
to the Executive at the time specified below, an additional amount
determined as set forth below (the "Gross-up Payment"). The Gross-up
Payment shall be made with respect to the amount which equals 100% of the
Executive's "excess parachute payments" subject to the Excise Tax. The
Gross-up Payment shall be an amount such that the net amount retained by
Executive with respect to the Total Payments after reduction for any
Excise Tax on the Total Payments and any federal, state and local income
or employment tax and Excise Tax payable by the Executive on the Gross-up
Payment hereunder (provided that such amount is actually paid when due)
shall be equal to the amount of the Total Payments that the Executive
would retain if the Total Payments did not constitute parachute payments.
(iii) For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of any Excise Tax:
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(a) The Total Payments shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless, and except that to the extent that, in the written
opinion of independent legal counsel, compensation consultants or
auditors of nationally recognized standing ("Independent Advisors")
selected by the Company and reasonably acceptable to Executive, the
Total Payments (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3) of the Code
or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of (i) the
total amount of the Total Payments or (ii) the total amount of
excess parachute payments within the meaning of Section 280G(b)(1)
of the Code (after applying Section 3(g)(iii)(a) above); and
(c) The value of any non-cash benefits or any deferred payment
or benefit shall be determined by the Independent Advisors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
In the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder at the time the
Gross-up Payment is made, Executive shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not
prior to the time the amount of such reduction is refunded to
Executive or otherwise realized as a benefit by Executive) the
portion of the Gross-up Payment that would not have been paid if
such Excise Tax had been applied to initially calculating the
Gross-up Payment, plus interest on the amount of such repayment at
the rate provided in Section 1274(b)(2)(B) of the Code. In the event
that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-up Payment), the
Company shall make an additional Gross-up Payment and shall
indemnify and hold Executive harmless in respect of such excess
(plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
The Gross-up Payment provided for above shall be paid on the 30th
day (or such earlier date as the Excise Tax becomes due and payable to the
taxing authorities) after it has been determined that the Total Payments
(or any other portion thereof) are subject to the Excise Tax; provided,
however, that if the amount of such Gross-up Payment or portion thereof
cannot be finally determined on or before such day, the Company shall pay
to Executive on such day an estimate, as determined by the Independent
Advisors, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code), as soon as the amount thereof can be
determined. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to Executive, payable on the fifth day
after demand by the Company (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code). If more than one Gross-up Payment
is made, the amount of each Gross-up Payment shall be computed so as not
to duplicate any prior Gross-up Payment.
Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-up Payment. Such notification shall be given as
soon as practicable but no later than ten (10) business days after
Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company
notifies Executive in writing prior to the expiration of such period that
it desires to contest such claim, Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
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(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income or
employment tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
3(g), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and sue for a
refund, the Company shall advance the amount of such payment to Executive,
on an interest-free basis, and shall indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income or
employment (including income or employment or 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 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. If, after the receipt by Executive of an amount advanced
by the Company pursuant to this Section 3(g), Executive becomes entitled
to receive any refund with respect to such claim, Executive shall (subject
to the Company's complying with the requirements of this Section 3(g))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by Executive of an amount advanced by the Company
pursuant to this Section 3(g), a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-up Payment required to be paid.
4. FRINGE BENEFITS.
(a) During the Employment Term, Executive shall be entitled to
participate in all health insurance and retirement benefit programs
normally available to other executives of the Company holding
positions similar to that of Executive hereunder (subject to all
applicable eligibility rules thereof), as from time to time in
effect. Executive shall also receive the benefits listed on Exhibit
A hereto.
(b)Executive shall be entitled to paid vacation according to the normal
vacation schedule for other executive employees. Executive shall make good
faith efforts to schedule such vacations so as to least conflict with the
conduct of the Company's business and shall give the Company adequate
advance notice of his planned absences.
(c) The Company shall reimburse Executive for all business-related
expenses incurred by Executive at the Company's direction. Executive
shall submit to the Company expense reports in compliance with
established Company guidelines.
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5. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal
representatives, that he will promptly communicate, disclose and transfer to the
Company free of all encumbrances and restrictions (and will execute and deliver
any papers and take any action at any time deemed necessary by the Company to
further establish such transfer) all inventions and improvements relating to
Company's business originated or developed by Executive solely or jointly with
others during the term of his employment hereunder. Such inventions and
improvements shall belong to the Company whether or not they are patentable and
whether or not patent applications are filed thereon. Such transfer shall
include all patent rights (if any) to such inventions or improvements in the
United States and in all foreign countries. Executive further agrees, at the
request of Company, to execute and deliver, at any time during the term of his
employment hereunder or after termination thereof, all assignments and other
lawful papers (which will be prepared at the Company's expense) relating to any
aspect of the prosecution of such patent applications and rights in the United
States and foreign countries.
6. EXPOSURE TO PROPRIETARY INFORMATION.
(a) Executive acknowledges and agrees that during the course of his
employment by Company, he will be in continuous contact with customers,
suppliers and others doing business with the Company throughout the world.
Executive further acknowledges that the performance of his duties hereunder will
expose him to data and information concerning the business and affairs of the
Company, including but not limited to information relative to the Company's
proprietary rights and technology, patents, financial statements, sales
programs, pricing programs, profitability analyses and profit margin
information, customer buying patterns, needs and inventory levels, supplier
identities and other related matters, and that all of such data and information
(collectively "the Proprietary Information") is vital, sensitive, confidential
and proprietary to Company.
(b) In recognition of the special nature of his employment hereunder,
including but not limited to his special access to the Proprietary Information,
and in consideration of his employment, Executive agrees to the covenants and
restrictions set forth in paragraphs 7 through 9 inclusive hereof. As used in
this Agreement, the term "Company" shall include, where applicable, any parent,
subsidiary, sub-subsidiary, or affiliate of Company.
7. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary
Information constitutes a protectible business interest of Company, and
covenants and agrees that during the term of his employment hereunder and after
the termination of such employment, he shall not, directly or indirectly,
whether individually, as a director, stockholder, owner, partner, employee or
agent of any business, or in any other capacity, make known, disclose, furnish,
make available or utilize any of the Proprietary Information, other than in the
proper performance of his duties during the term of his employment hereunder.
Executive's obligations under this paragraph with respect to particular
Proprietary Information shall terminate only at such time (if any) as the
Proprietary Information in question becomes generally known to the public other
than through a breach of Executive's obligations hereunder.
8. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY
EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during
the term hereof and for the one (1) year period immediately following the
effective date of any termination of his employment hereunder (the "Termination
Date"), he shall not, directly or indirectly, whether individually, as a
director, stockholder, partner, owner, employee or agent of any business, or in
any other capacity, (i) engage in a business substantially similar to that which
is conducted by the Company in any market area in which such business is
operated; (ii) solicit any party who is or was a customer or supplier of the
Company on the Termination Date or at any time during the six month period
immediately prior thereto for the sale or purchase of any type or quantity of
products sold by or used in the business of the Company on the Termination Date
or at any time within such six month period; or (iii) solicit for employment any
person who was or is an employee of the Company on the Termination Date or at
any time during the twelve month period immediately prior thereto.
9. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all
price lists, sales manuals, catalogs, binders, customer lists and other customer
information, supplier lists, financial information, and other records or
documents containing Proprietary Information prepared by Executive or coming
into his possession by virtue of his employment by the Company is and shall
remain the property of the Company and that upon termination of his employment
hereunder, Executive shall return immediately to the Company all such items in
his possession, together with all copies thereof.
10. EQUITABLE REMEDIES.
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(a) Executive acknowledges and agrees that the covenants set forth in
paragraphs 5 through 9 inclusive hereof are reasonable and necessary for the
protection of the Company's business interests, that irreparable injury will
result to the Company if Executive breaches any of the terms of said covenants,
and that in the event of Executive's actual or threatened breach of any such
covenants, the Company will have no adequate remedy at law. Executive
accordingly agrees that in the event of any actual or threatened breach by him
of any of said covenants, the Company shall be entitled to immediate injunctive
and other equitable relief, without bond and without the necessity of showing
actual monetary damages. Nothing contained herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of any damages which it
is able to prove.
(b) Each of the covenants in paragraphs 5 through 9 inclusive hereof shall
be construed as independent of any other covenants or other provisions of this
Agreement.
(c) In the event of any judicial determination that any of the covenants
set forth in paragraphs 5 through 9 inclusive hereof is not fully enforceable,
it is the intention and desire of the parties that the court treat said
covenants as having been modified to the extent deemed necessary by the court to
render them reasonable and enforceable, and that the court enforce them to such
extent.
11. LIFE INSURANCE. The Company may at its discretion and at any time apply for
and procure as owner and for its own benefit and at its own expense, insurance
on the life of Executive in such amounts and in such form or forms as the
Company may choose. Executive shall cooperate with the Company in procuring such
insurance and shall, at the request of Company, submit to such medical
examinations, supply such information and execute such documents as may be
required by the insurance company or companies to whom the Company has applied
for such insurance. Executive shall have no interest whatsoever in any such
policy or policies, except that, upon the termination of Executive's employment
hereunder, Executive shall have the privilege of purchasing any such insurance
from the Company for an amount equal to the actual premiums thereon previously
paid by Company.
12. NOTICES. Any notice required or permitted pursuant to the provisions of this
Agreement shall be deemed to have been properly given if in writing and when
sent by United States mail, certified or registered, postage prepaid, when sent
by facsimile or when personally delivered, addressed as follows:
If to Company:
Kensey Nash Corporation
Marsh Creek Corporate Center
55 East Uwchlan Avenue
Exton, Pennsylvania 19341
Attention: Joseph Kaufmann
With a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: David R. Shevitz, Esq.
If to Executive:
Douglas G. Evans
202 Foxtail Lane
Downington, PA 19335
Each party shall be entitled to specify a different address for the
receipt of subsequent notices by giving written notice thereof to the other
party in accordance with this paragraph.
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13. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions
or conditions of this Agreement shall be construed or held to be a waiver of any
other breach, or a waiver of, acquiescence in or consent to any further or
succeeding breach thereof.
14. ASSIGNMENT. This Agreement shall not be assignable by either party without
the written consent of the other; provided, however, that this Agreement shall
be assignable to any corporation or entity which purchases the assets of or
succeeds to the business of the Company (a "Successor Employer"), and the
Company agrees to cause this Agreement to be assumed by any Successor Employer
as a condition to such purchase or succession. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with laws and judicial decisions of the State of Pennsylvania.
16. SEVERABILITY. If any term or provision of this Agreement shall be held to be
invalid or unenforceable, the remaining terms and provisions hereof shall not be
affected thereby.
17. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall
not affect the meaning or interpretation of the contents hereof. This Agreement
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between the parties and all prior obligations of the Company with respect to the
employment of Executive by the Company or the payment to Executive of
compensation of any kind whatsoever. No supplement or modification of this
Agreement shall be binding unless in writing and signed by both parties hereto.
This agreement may be executed in multiple counterparts, each of which shall be
deemed enforceable without production of the others.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first hereinabove set forth.
/s/ Douglas G. Evans, P.E
-------------------------
Douglas G. Evans, P.E
KENSEY NASH CORPORATION
By: /s/ C. McCollister Evarts, M.D.
-------------------------------
Title: Chairman of the Compensation Committee
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Exhibit A
BENEFITS
Health/prescription, dental, and vision insurance equal to that provided for all
other full-time exempt Kensey Nash Corporation employees.
Life insurance in the amount of $250,000
Short-term disability insurance equal to that provided for all other full-time
exempt Kensey Nash Corporation employees.
Long-term disability benefits at 40% of salary
Supplemental long-term disability benefits
Three weeks annual vacation: Accumulated, unused vacation time for Executives of
the Corporation is not vested and will not be paid to Executive either while
employed or upon termination of employment.
Six days annual personal leave
Eleven holidays each year
401K Plan
Employee Incentive Compensation Plan
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