EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Agreement ("the Agreement") dated as of the __________ day of [ ],
2005 (the "Effective Date"), is by and between CryoLife, Inc., a Florida
corporation ("CryoLife") and Xxxxxx X. Xxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Board of Directors of CryoLife (the "Board"), has determined
that it is in the best interests of CryoLife and its shareholders to enter into
this Employment Agreement in order to assure the Employee of CryoLife's
commitment and, in so doing, to motivate the Employee to continue in Employee's
dedicated service to CryoLife even in circumstances such as a possible future
threat or occurrence of a Change of Control (defined below) of CryoLife; and,
WHEREAS, in order to accomplish these objectives, the Board has caused
CryoLife to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, the promises hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledges, it is hereby agreed as follows:
1. Employment.
(a) CryoLife hereby employs Employee in the capacity of Senior Vice
President of Sales and Marketing and Employee hereby accepts such duties as are
customarily performed and exercised by such officer subject to the supervision
of the President of CryoLife. The duties of Employee shall include those duties
more specifically described on Exhibit A attached hereto together with such
additional duties as are assigned by the President of CryoLife.
(b) CryoLife agrees to continue the Employee in its employ, and the
Employee hereby agrees to remain in the employ of CryoLife subject to the terms
and conditions of this Agreement, for the period commencing on the Effective
Date and ending on the second anniversary of such date (the "Employment
Period"). Unless either party elects not to extend the term of this Agreement by
so notifying the other in writing at least 30 days prior to the first
anniversary of the Effective Date, the Employment Period shall automatically
extend for an additional one year.
2. Employment Duties.
(a) During the Employment Period, (A) the Employee's position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (B) the
Employee's services shall be performed at the location where the Employee was
employed immediately preceding the Effective Date.
(b) During the Employment Period, and excluding any periods of vacation and
sick leave to which the Employee is entitled, the Employee agrees to devote
reasonable attention and time to the business and affairs of CryoLife and, to
the extent necessary to discharge the responsibilities assigned to the Employee
hereunder, to use the Employee's reasonable best efforts to perform faithfully
and efficiently such responsibilities.
(c) During the Employment Period, the Employee will not, without the prior
written consent of CryoLife, directly or indirectly other than in the
performance of the duties hereunder, render services of a business, professional
or commercial nature to any other person or firm, whether for compensation or
otherwise, except with respect to any noncompetitive family businesses of the
Employee for which the rendering of such services will not have an adverse
effect upon Employee's performance of his duties and obligations hereunder.
3. Compensation, Benefits and Business Expenses.
(a) For all services which Employee renders to CryoLife or any of its
subsidiaries or affiliates during the term hereof, CryoLife agrees to pay the
Employee the salary and bonus compensation as set by the Compensation Advisory
Committee of the Board of Directors. Employee shall be entitled to participate
in all compensation and bonus plans made available to CryoLife's executive
employees. Employee's salary at the Effective Date is set forth on Exhibit A.
(b) CryoLife shall pay all reasonable expenses incurred by the Employee
directly related to performance of his responsibilities and duties for CryoLife
hereunder. Employee shall submit to CryoLife statements that justify in
reasonable detail all reasonable expenses so incurred. Subject to such audits as
CryoLife may deem necessary, CryoLife shall reimburse Employee the full amount
of any such expenses advanced by Employee.
(c) Employee shall be entitled to a vacation each year of his employment
with CryoLife, according to the standard vacation policy, as well as insurance
and other employment benefits, as more particularly described on Exhibit A.
Vacations not taken shall be cumulative and carried over to a subsequent year.
4. Change of Control.
(a) In consideration and recognition of the Employee's continued employment
and his contribution to protecting and enhancing shareholder value in any future
sale of CryoLife that may occur and to provide incentive to Employee as a senior
executive to remain with the Company through any future sale or merger of the
Company, CryoLife agrees to pay to Employee a retention payment in addition to
other compensation due pursuant to this Agreement equal to one times the
aggregate of Employee's annual salary and bonus compensation for the year in
which a Change of Control occurs (the "Retention Payment"). The Retention
Payment shall be in addition to sums otherwise payable pursuant to Section 3 and
shall be earned and become due upon the happening of a Change of Control (as
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defined below) provided Employee remains employed by the Company at such time
or, if no longer then employed by the Company, Employee's employment was
terminated by the Company without Cause within 12 months of the Change of
Control. If the Change of Control occurs before the awarding of bonuses in the
year in which the Change of Control occurs, the bonus compensation component of
the Retention Payment shall be computed based on the prior year's bonus. Bonus
compensation shall include cash bonus payments and the present value of non-cash
bonuses such as options or restricted stock. The Retention Payment shall be paid
within three (3) months after the occurrence of a Change of Control.
(b) For the purposes of this Agreement, the term "Change of Control" shall
mean a change in the beneficial ownership of CryoLife's voting stock or a change
in the composition of the Board that occurs as follows:
(i) any "person," including a "syndicate" or "group" as those terms are
used in Section 13(d)(3) of the Securities Exchange Act of 1934, is or becomes
the beneficial owner, directly or indirectly, of securities of CryoLife
representing 20% or more of the combined voting power of CryoLife's then
outstanding "Voting Securities," which is any security which ordinarily
possesses the power to vote in the election of the Board of Directors of a
corporation without the happening of any precondition or contingency;
(ii) CryoLife is merged or consolidated with another corporation and
immediately after giving effect to the merger or consolidation less than 60% of
the outstanding Voting Securities of the surviving or resulting entity are then
beneficially owned in the aggregate by (x) the shareholders of CryoLife
immediately prior to such merger or consolidation, or (y) if a record date has
been set to determine the shareholders of CryoLife entitled to vote on such
merger or consolidation, the shareholders of CryoLife as of such record date;
(iii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of CryoLife) whose appointment or election by the
Board or nomination for election by CryoLife's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or
(iv) CryoLife transfers substantially all of its assets to another
corporation which is a less than 60% owned subsidiary of CryoLife.
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5. Termination of Employment.
(a) Disability or Death. If CryoLife determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Employee's employment. In such event, the Employee's
employment with CryoLife shall terminate effective on the 30th day after receipt
of such notice by the Employee (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Employee shall not have returned to
full-time performance of the Employee's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Employee from the Employee's duties
with CryoLife on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness or determination by a physician
selected by CryoLife or its insurers and acceptable to the Employee or the
Employee's legal representative that the Employee is unable to perform the
essential functions of his position as a result of incapacity due to mental or
physical illness. The Employee's employment shall terminate automatically upon
the Employee's death during the Employment Period.
(b) Cause. CryoLife may terminate the Employee's employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Employee to perform
substantially the Employee's duties with CryoLife (other than any such failure
resulting from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to Employee by the Board or the
Chief Executive Officer of CryoLife which specifically identifies the manner in
which CryoLife believes that the Employee has not substantially performed the
Employee's duties, or
(ii) the willful engaging by the Employee in illegal conduct or gross
misconduct which is materially and demonstrably injurious to CryoLife.
For purposes of this provision, no act or failure to act, on the part of the
Employee, shall be considered "willful" unless it is done, or omitted to be
done, by the Employee in bad faith or without reasonable belief that the
Employee's action or omission was in the best interests of CryoLife. Any act, or
failure to act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Employee Officer or a senior
officer of CryoLife or based upon the advice of counsel for CryoLife shall be
conclusively presumed to be done, or omitted to be done, by the Employee in good
faith and in the best interests of CryoLife.
(c) Good Reason. The Employee's employment may be terminated by the
Employee for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Employee of any duties inconsistent in any
respect with the Employee's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 1(a) of this Agreement, or any other action by CryoLife which results
in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by CryoLife promptly after receipt of
notice thereof given by the Employee;
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(ii) any failure by CryoLife to comply with any of the provisions of
Section 3(a) or 3(b) of this Agreement, other than an isolated, insubstantial or
inadvertent failure not occurring in bad faith and which is remedied by CryoLife
promptly after receipt of notice thereof given by the Employee;
(iii) any threatened termination by CryoLife of the Employee's employment
other than for Cause, Death or Disability; or
(iv) any failure by CryoLife to comply with and satisfy Section 11(c) of
this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Employee shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Employee for any reason at least
90 but not more than 120 days following consummation of a Change of Control or
during the 30 day period immediately following the first anniversary of a Change
of Control shall be deemed to be a termination for Good Reason for all purposes
of this Agreement.
(d) Notice of Termination. Any termination by CryoLife for Cause, or by the
Employee for Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date (which date shall be not more than 30 days after the giving
of such notice). The failure by the Employee or CryoLife to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Employee or CryoLife,
respectively, hereunder or preclude the Employee or CryoLife, respectively, from
asserting such fact or circumstance in enforcing the Employee's or CryoLife's
rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Employee's
employment is terminated by CryoLife for Cause, or by the Employee for Good
Reason, the date of receipt of the Notice of Termination, or any later date
specified therein, as the case may be, (ii) if the Employee's employment is
terminated by CryoLife other than for Cause or Disability, the Date of
Termination shall be the date on which the Employee receives the Notice of
Termination, and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
(f) Non-Compete Commitment. During the term of this Agreement and for a
period of one year after any termination of this Agreement, the Employee agrees
not to accept any position as vice president of sales or marketing or similar
position such as national sales or marketing manager to any competitor of
CryoLife in the cardiac, vascular or orthopedic tissue processing business or
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biological glue business within the United States. Payments of amounts owing
under any Severance Payment (defined in Section 6(a)) obligation, shall be
conditioned upon Employee's continued compliance with this non-compete
commitment.
(g) Agreement Not to Solicit. During the term of this Agreement and for a
period of one year after any termination of this Agreement, the Employee agrees
he will not, without the prior written consent of the Company, either directly
or indirectly, on his own behalf or in the service or on behalf of others,
solicit or attempt to solicit, divert or hire away any person employed by the
Company.
6. Obligations of CryoLife upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during the
Employment Period, (i) CryoLife shall terminate the Employee's employment other
than for Cause, Death or Disability or (ii) the Employee shall terminate
employment for Good Reason, then CryoLife shall pay to Employee as severance
compensation an amount equal to one times the aggregate of Employee's annual
salary and bonus compensation for the year in which the termination of
employment occurs (the "Severance Payment"). Such payment shall be in addition
to sums due to Employee through the Date of Termination and shall be subject to
normal withholding requirements of CryoLife. The Severance Payment shall be
payable in cash by the Company in 12 equal monthly installments commencing on
the date thirty (30) days after Employee's Date of Termination (the "Severance
Period"); provided, however, that, to the extent required under Section 409A of
the Code to avoid the imposition of additional tax to Employee under that
Section, any payment of the Severance Payment shall commence on the six-month
anniversary of Employee's separation from service with the Company (or, if
earlier, the date of Employee's death) and continue in equal monthly
installments over the remainder of the Severance Period; provided further, that,
to the extent permitted under Section 409A of the Code without the imposition of
additional tax to Employee under that Section, the Severance Payment shall be
paid (i) in an immediate lump-sum in the event the Employee's separation from
service occurs on or after a Change of Control or (ii) in an immediate lump sum
at the time of a Change of Control (less amounts previously paid to Employee) in
the event the separation from service occurs within six months prior to a Change
of Control. Payment of any Severance Payment will be subject to normal
withholding. If the employment termination occurs before the awarding of bonuses
in the year in which the employment termination occurs, the bonus compensation
component of the Severance Payment shall be computed based on the prior year's
bonus. Bonus compensation shall include cash bonus payments and the present
value of non-cash bonuses such as options or restricted stock.
(b) Death. If the Employee's employment is terminated by reason of the
Employee's death during the Employment Period, this Agreement shall terminate
without further obligations to the Employee's legal representatives under this
Agreement, other than for payment of obligations accruing through the Date of
Termination.
(c) Disability. If the Employee's employment is terminated by reason of the
Employee's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Employee, other than for payment
obligations accruing through the Date of Termination.
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(d) Cause; Other than for Good Reason. If the Employee's employment shall
be terminated by CryoLife for Cause or by the Employee without Good Reason
during the Employment Period, this Agreement shall terminate without further
obligations to the Employee other than the obligation to pay to the Employee his
or her salary through the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any plan, program,
policy or practice provided by CryoLife or any of its affiliated companies and
for which the Employee may qualify, nor shall anything herein limit or otherwise
affect such rights as the Employee may have under any contract or agreement with
CryoLife or any of its affiliated companies. Amounts which are vested benefits
or which the Employee is otherwise entitled to receive under any plan, practice
or program of or any contract or agreement with CryoLife or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. In no event shall the Employee be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Employee under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Employee obtains other
employment. CryoLife agrees to pay as incurred, to the full extent permitted by
law, all legal fees and expenses which the Employee may reasonably incur as a
result of any contest (regardless of the outcome thereof) by CryoLife, the
Employee or others of the validity or enforceability of, or liability under, any
provision of this Agreement.
9. Limitation or Expansion of Benefits.
(a) In the event it shall be determined that any benefit, payment or
distribution by CryoLife to or for the benefit of the Employee (whether payable
or distributable pursuant to the terms of this Agreement or otherwise) would, if
paid, be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"; such excise tax, the "Excise
Tax"), then CryoLife shall pay to Employee an additional amount of cash (a
"Gross-Up Payment") equal to the amount necessary to cause the amount of the
aggregate after-tax compensation and benefits received by the Employee hereunder
(after payment of the excise tax under Section 4999 of the Code with respect to
any excess parachute payment, and any state and federal income and employment
taxes with respect to the Gross-Up Payment) to equal the aggregate after-tax
compensation and benefits the Employee would have received if Sections 280G and
4999 of the Code had not been enacted. A nationally recognized public accounting
firm selected by CryoLife shall initially determine, at CryoLife's expense,
whether an "excess parachute payment" will be made to Employee, and if so, the
amount of the Gross-Up Payment. In the event of a subsequent claim by the
Internal Revenue Service that, if successful, would result in Employee's
liability for an Excise Tax under Section 4999 of the Code in excess of the
amount covered by any previous Gross-Up Payment, the Employee shall promptly
notify CryoLife in writing of such claim. If CryoLife elects to contest such
claim, it shall so notify the Employee and shall bear and pay directly or
indirectly all costs and expenses of contesting the claim (including additional
interest and penalties incurred in connection with such action), and shall
indemnify and hold Employee harmless, on an after-tax basis, for any excise,
income, or employment tax, including interest and penalties with respect
thereto, imposed as a result of CryoLife's payment of costs of the contest.
Employee shall cooperate fully with CryoLife in the defense of any such IRS
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claim. If, as a result of CryoLife's action with respect to a claim, Employee
receives a refund of any amount paid by CryoLife with respect to such claim,
Employee shall promptly pay such refund to CryoLife. In the event the IRS claim
is finally determined to result in the imposition of additional excise tax under
Section 280G of the Code on Employee, CryoLife shall make an additional Gross-Up
Payment with respect to any such additional excise tax.
(b) Anything in this Agreement to the contrary notwithstanding, severance,
separation and/or similar payments made to the Employee shall be limited to the
equivalent of three years salary, including bonuses and guaranteed benefits. If
necessary, any Gross-Up Payment will be reduced in order to comply with this
provision.
10. Confidential Information. The Employee and CryoLife are parties to one
or more separate agreements respecting confidential information, trade secrets,
inventions and non-competition (collectively, the "IP Agreements"). The parties
agree that the IP Agreements shall not be superceded or terminated by this
Agreement and shall survive any termination of this Agreement, except to the
extent, if any, those IP Agreements conflict with Section 5(f). In the event of
any such conflict, the provisions of this Agreement shall prevail.
11. Successors.
(a) This Agreement is personal to the Employee and without the prior
written consent of CryoLife shall not be assignable by the Employee otherwise
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
CryoLife and its successors and assigns.
(c) CryoLife 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 CryoLife to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that CryoLife would be
required to perform it if no such succession had taken place. As used in this
Agreement, "CryoLife" shall mean CryoLife as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
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12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Georgia, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and
shall have no force and effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
Xxxxxx X. Xxxxx
[ ]
If to CryoLife:
CryoLife, Inc.
0000 Xxxxxxx Xxxxxxxxx, X.X,
Xxxxxxxx, Xxxxxxx 00000
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability or any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) CryoLife may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) Except as provided in Section 10, from and after the Effective Date,
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.
(f) The provisions of this Agreement are intended to satisfy the applicable
requirements of Section 409A of the Code and shall be performed and interpreted
consistent with such intent. If any provision of this Agreement does not satisfy
such requirements or could otherwise cause Employee to be subject to the
interest and penalties under Section 409A of the Code, Employee and the Company
agree to negotiate in good faith on appropriate modification to maintain, to the
maximum extent practicable, the original intent of the applicable provision
without violating the requirements of Section 409A of the Code (or causing the
imposition of additional tax to Employee under Section 409A of the Code).
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IN WITNESS WHEREOF, the Employee has hereunder set the Employee's hand and,
pursuant to the authorization from its Board, CryoLife has caused these presents
to be executed in its name on its behalf, all as of the day and year first above
written.
CRYOLIFE, INC.
By:
--------------------------------------
Xxxxxx X. Xxxxxxxx
Chairman, President and CEO
-----------------------------------------
Xxxxxx X. Xxxxx
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Exhibit A
Duties and Responsibilities of Xxxxxx X. Xxxxx:
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All duties of Senior Vice President of Sales and Marketing and duties not
inconsistent with such duties that are assigned by the President.
Compensation:
Salary of $250,000 plus for Company Q4 Xx. Xxxxx will receive 2.25% of the
net increase in Company Q4, 2005 revenues over Company Q4, 2004 revenues.
Xx. Xxxxx will also be eligible for bonuses as set by the Compensation
Advisory Committee. Salary & Bonus subject are subject to yearly review by
the Compensation Advisory Committee of the Board of Directors.
Vacation and Employee Benefits:
See attached Company vacation plan, standard Company medical plan and
contributory 401K plan.
Company Business:
The development, marketing, sale and distribution of tissue preservation
services and biomedical and medical products including cardiac, vascular or
orthopedic tissue processing business and biological glues.
