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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 5, 2005
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CRYOLIFE, INC.
(Exact name of registrant as specified in its charter)
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FLORIDA 1-13165 59-2417093
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1655 ROBERTS BOULEVARD, N.W., KENNESAW, GEORGIA 30144
(Address of principal executive office) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 419-3355
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Employment Agreement with Steven G. Anderson
On September 5, 2005, CryoLife ("CryoLife" or the "Company") and Mr.
Anderson entered into an employment agreement for Mr. Anderson to serve as the
Company's President, Chief Executive Officer and Chairman of the Board of
Directors, a copy of which is attached hereto as Exhibit 10.1 and incorporated
herein by reference. This new agreement supersedes the previous agreement. The
material terms of such agreement include the following:
o Mr. Anderson's agreement has a term of two years from September 5,
2005 (the "Anderson Effective Date"). His employment agreement will
automatically extend for an additional one year each anniversary
thereafter unless either Mr. Anderson or the Company elects not to
extend the term of the agreement by notifying the other party in
writing at least 30 days prior to the first anniversary of the
Anderson Effective Date and each anniversary thereafter.
o Mr. Anderson's employment with the Company may be terminated by the
Company for Cause, Good Reason or Disability (as those terms are
defined in Mr. Anderson's employment agreement) or automatically upon
Mr. Anderson's death.
o Mr. Anderson's initial base salary will be $600,000 per year and a
bonus set by the Compensation Advisory Committee of the CryoLife Board
of Directors. The salary and bonus will be subject to a yearly review
by the Compensation Advisory Committee. Mr. Anderson is entitled to
participate in all compensation and bonus plans made available to
CryoLife's executive employees.
o Mr. Anderson is entitled to paid vacation in accordance with the
Company's standard vacation policy. Vacations not taken will be
cumulative and carried over to a subsequent year. Upon employment
termination, Mr. Anderson will be paid at the rate of $2,307 per day
for accumulated vacation days not taken.
o Mr. Anderson is entitled to receive benefits under the Company's
standard medical plan and contributory 401(k) plan and will receive
life insurance coverage of at least two times base pay.
o The Company will reimburse Mr. Anderson all reasonable expenses
incurred by him directly related to performance of his
responsibilities and duties for CryoLife. Reimbursable expenses shall
also include, with a value of up to 10% of Mr. Anderson's base salary,
monthly car payments and auto expenses and dues and business related
expenses at specified private clubs.
o The Company will pay Mr. Anderson a retention payment in addition to
other compensation due pursuant to Mr. Anderson's agreement equal to
one times the aggregate of Mr. Anderson's annual salary and bonus
compensation for the year in which a change of control occurs.
o During the term covered by Mr. Anderson's employment agreement and for
a period of two years after any termination of his employment
agreement, Mr. Anderson agrees not to accept any position as chief
executive officer, president or chief operating officer with, or
provide comparable level executive consultation to any competitors of
CryoLife.
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o Mr. Anderson is entitled to the following termination benefits:
o If the Company terminates Mr. Anderson's employment other than
for Cause, Mr. Anderson terminates his employment for Good
Reason, or Mr. Anderson's employment is terminated by reason of
his Disability then he is entitled to a severance payment in an
amount equal to two times the aggregate of Mr. Anderson's annual
salary and bonus compensations for the year in which the
termination of employment occurs except in the event of
retirement that occurs prior to the first anniversary of the
Anderson Effective Date. Such severance payment will be paid
according to a specified installment payment plan.
o If Mr. Anderson's employment is terminated by reason of his
retirement, he will be entitled to a severance payment equal to
one times Mr. Anderson's annual salary and bonus compensation for
the year in which retirement occurs but, so long as Mr. Anderson
remains employed by the Company, such payment will increase to a
maximum of two times Mr. Anderson's annual salary and bonus
compensation. Such payment will be paid according to a specified
installment payment plan. The Company will pay Mr. Anderson for
obligations accruing through the date of his termination.
o If Mr. Anderson's employment is terminated due to his death, the
Company will pay Mr. Anderson's legal representatives for
obligations accruing through the date of his termination.
o If Mr. Anderson's employment is terminated for any reason other
than Cause, the Company will continue to provide major medical
benefits to Mr. Anderson and his wife, Ann B. Anderson for the
duration of their lives subject to a limit of $25,000 per year.
o If Mr. Anderson is terminated for Cause, his employment agreement
shall terminate without further obligations to him other than for
payment obligations accruing through the date of his termination.
Employment Agreement with Mr. D. Ashley Lee
On September 5, 2005, the Company and Mr. Lee entered into an employment
agreement for Mr. Lee to serve as the Company's Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Treasurer, a copy of which is
attached hereto as Exhibit 10.2 and incorporated herein by reference. This new
agreement supersedes the previous agreement. The material terms of such
agreement include the following:
o Mr. Lee's agreement has a term of two years from September 5, 2005
(the "Lee Effective Date"). His employment agreement will
automatically extend for an additional one year unless either Mr. Lee
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or the Company elects not to extend the term of Mr. Lee's agreement by
notifying the other party in writing at least 30 days prior to the
first anniversary of the Lee Effective Date.
o Mr. Lee's employment with the Company may be terminated by the Company
for Cause, Good Reason or Disability (as those terms are defined in
Mr. Lee's employment agreement) or automatically upon Mr. Lee's death.
o Mr. Lee's initial base salary will be $340,000 per year and a bonus
set by the Compensation Advisory Committee of the CryoLife Board of
Directors. The salary and bonus will be subject to a yearly review by
the Compensation Advisory Committee. Mr. Lee is entitled to
participate in all compensation and bonus plans made available to
CryoLife's executive employees.
o Mr. Lee is entitled to paid vacation in accordance with the Company's
standard vacation policy. Vacations not taken will be cumulative and
carried over to a subsequent year.
o Mr. Lee is entitled to receive benefits under the Company's standard
medical plan and contributory 401(k) plan.
o The Company will reimburse Mr. Lee all reasonable expenses incurred by
him directly related to performance of his responsibilities and duties
for CryoLife.
o The Company will pay Mr. Lee a retention payment in addition to other
compensation due pursuant to Mr. Lee's agreement equal to one times
the aggregate of Mr. Lee's annual salary and bonus compensations for
the year in which a change of control occurs.
o Mr. Lee is entitled to the following termination benefits:
o If Mr. Lee is terminated for Good Reason then he is entitled to a
severance payment in an amount equal to one times the aggregate
of Mr. Lee's annual salary and bonus compensation for the year in
which the termination of employment occurs.
o If Mr. Lee's employment is terminated due to his death, the
Company will pay Mr. Lee's legal representatives for obligations
accruing through the date of his termination.
o If Mr. Lee's employment is terminated by reason of his
Disability, the Company will pay Mr. Lee for obligations accruing
through the date of his termination.
o If Mr. Lee is terminated for Cause or Mr. Lee terminates his
employment without Good Reason, his employment agreement shall
terminate without further obligations to him other than for
payment of his salary through the date of termination.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
Not applicable
(b) Pro Forma Financial Information.
Not applicable
(c) Exhibits.
Exhibit Number Description
10.1 Form of Employment Agreement dated as of September
5, 2005 with Steven G. Anderson
10.2 Form of Employment Agreement dated as of September
5, 2005 with D. Ashley Lee
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
CryoLife, Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRYOLIFE, INC.
Date: September 9, 2005 By: /s/ D. Ashley Lee
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Name: D. Ashley Lee
Title: Executive Vice President,
Chief Operating Officer and Chief
Financial Officer
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EXHIBIT INDEX
Exhibit Number Description
10.1 Form of Employment Agreement dated as of September
5, 2005 with Steven G. Anderson
10.2 Form of Employment Agreement dated as of September
5, 2005 with D. Ashley Lee
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Exhibit 10.1
EMPLOYMENT AGREEMENT
This Agreement ("the Agreement") dated as of the ____ day of September,
2005 (the "Effective Date"), is by and between CRYOLIFE, INC., a Florida
corporation ("CryoLife") and STEVEN G. ANDERSON (the "Employee").
W I T N E S S E T H:
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 President, Chief
Executive Officer and Chairman of the Board and Employee hereby accepts such
duties as are customarily performed and exercised by such officer subject to the
supervision of the Board. 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 Board.
(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 and each anniversary thereafter, the
Employment Period shall automatically extend for an additional one year upon
each such anniversary. The intent of this provision is to provide a two year
initial term with rolling one year extensions beginning on the first anniversary
of the Effective Date.
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. Reimbursable expenses shall also
include, with a value of up to 10% of Employee's base salary, monthly car
payments and auto expenses and dues and business related expenses at the
Georgian Club, Buckhead Club, Marietta Club and Delta Crown Room.
(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.
Upon employment termination, Employee shall be paid at the rate of $2,307 per
day for accumulated vacation days not taken. Such amount shall be deemed a
payment obligation accruing through the Date of Termination for purposes of
Section 6 of this Agreement.
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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
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,
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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.
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 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 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;
(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) Retirement. The Employee may voluntarily terminate his employment at
any time for reason of retirement ("Retirement").
(e) Notice of Termination. Any termination by CryoLife, or by the Employee
for Good Reason or Retirement, 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 not, except in the case of Retirement, be
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.
(f) Date of Termination. "Date of Termination" means if the Employee's
employment is terminated (i) by CryoLife for Cause, or by the Employee for Good
Reason or Retirement, the date of receipt of the Notice of Termination, or any
later date specified therein, as the case may be, (ii) by CryoLife other than
for Cause or Disability, the date on which the Employee receives Notice of
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Termination, (iii) by reason of death or Disability, the date of death of the
Employee or the Disability Effective Date, as the case may be, and (iv) by
reason of non-renewal of the Agreement, the last day of employment under Section
1(b). Notwithstanding the foregoing, the Date of Termination may, except in the
case of Retirement, be accelerated by the party who receives Notice of
Termination by providing to the other party written notice of acceleration,
including the accelerated Date of Termination, within 30 days of receipt of the
Notice of Termination.
(g) Non-Compete Commitment. During the term of this Agreement and for a
period of two years after any termination of this Agreement, the Employee agrees
not to accept any position as chief executive officer, president or chief
operating officer with, or provide comparable level executive consultation to,
any competitors of CryoLife in the cardiac, vascular or orthopedic tissue
processing business or biological glue business within the United States.
Payments of amounts owing under any Severance Payment (defined in Section 6(f))
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 two years 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 the Severance
Payment (defined below) and shall, subject to the limitations set forth in (g)
below, continue to provide major medical insurance benefits comparable to those
described in the schedules attached to this Agreement (collectively, " Major
Medical Benefits") for Employee and Employee's wife, Ann B. Anderson, for the
duration of their lives. 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.
(b) Retirement. If the Employee's employment is terminated by reason of the
Retirement or by reason of non-renewal, this Agreement shall terminate without
further obligation to the Employee under this Agreement, other than for (i)
payment of obligations occurring through the Date of Termination plus the
Severance Payment, and (ii) for CryoLife's agreement to continue the Major
Medical Benefits for Employee and Employee's wife, Ann B. Anderson, for the
duration of their lives.
(c) 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 obligation to the Employee's legal representatives under this
Agreement, other than for (i) payment of obligations occurring through the Date
of Termination and (ii) for CryoLife's agreement to continue the Major Medical
Benefits for Employee's wife, Ann B. Anderson, for the duration of her life.
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(d) 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 (i)
payment of obligations accruing through the Date of Termination plus the
Severance Payment, and (ii) and for Cryolife's agreement to continue the Major
Medical Benefits for Employee and Employee's wife, Ann B. Anderson, for the
duration of their lives.
(e) Cause. If the Employee's employment shall be terminated by CryoLife for
Cause, this Agreement shall terminate without further obligations to the
Employee other than for payment obligations accruing through the Date of
Termination.
(f) Severance Payment. The "Severance Payment" shall be an amount equal to
two times the aggregate of Employee's annual salary and bonus compensation for
the year in which the termination of employment occurs except in the event of
Retirement that occurs prior to the first anniversary of the Effective Date. The
Severance Payment for Retirement shall initially be an amount equal to one times
Employee's annual salary and bonus compensation for the year in which Retirement
occurs but, so long as Employee remains employed by CryoLife, shall increase to
up to two times Employee's annual salary and bonus compensation. The increase in
such Retirement Severance Payment from one times annual salary and bonus
compensation to two times annual salary and bonus compensation shall occur in 12
equal monthly installments beginning with the date one month after the Effective
Date and ending on the first anniversary of the Effective Date. The Severance
Payment shall be payable in cash by the Company in 24 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.
(g) Limitations on Major Medical Benefits. The Company's obligation to
provide Major Medical Benefits to Employee and Ann B. Anderson, or either of
them, after employment termination shall not oblige the Company to expend more
than the Maximum Annual Premium Amount in any calendar year as determined by
CryoLife. For purposes of this Agreement, Maximum Annual Premium Amount shall
mean the sum of $25,000 increased by the Consumer Price Index using September 1,
2005 as the base date. If all of the Major Medical Benefits cannot be provided
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for the Maximum Annual Premium Amount, the Company shall utilize the Maximum
Annual Premium Amount to obtain such major medical insurance coverage as can
reasonably be obtained. When Employee or Employee's wife, Ann B. Anderson,
qualify for Medicare, Medicaid or other governmentally provided major medical
benefit (collectively, " Government Benefits") of the sorts otherwise included
within Major Medical Benefits, the provision of benefits under the Major Medical
Benefits may be conditioned on Employee or Employee's wife, Ann B. Anderson,
looking first to Government Benefits for coverage before drawing on the Major
Medical Benefits.
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
7
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
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.
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.
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
8
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:
Steven G. Anderson
5040 Northside Drive
Atlanta, Georgia 30327
If to CryoLife:
CryoLife, Inc.
1655 Roberts Boulevard, N.W,
Kennesaw, Georgia 30144
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) From and after the Effective Date this Agreement shall supersede any
other agreement between the parties with respect to the subject matter hereof
including the Employment Agreement between the parties dated September 3, 2002,
as amended May 1, 2003. In the event of any conflict between this Agreement and
any benefits provision of CryoLife's Employee Handbook, the provisions of this
Agreement shall prevail.
(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).
9
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.
--------------------------------------
Steven G. Anderson
CRYOLIFE, INC.
By:
-----------------------------------
Thomas F. Ackerman
Director and Chairman,
Compensation Committee
10
EXHIBIT A
Duties and Responsibilities of Steven G. Anderson:
- -------------------------------------------------
All duties of President, Chief Executive Officer and Chairman of the Board
and duties not inconsistent with such duties that are assigned by the Board
of Directors.
Compensation:
Base salary of $600,000 and bonus set by the Compensation Advisory
Committee. Salary & bonus 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.
Life Insurance:
The life insurance coverage of at least two times base pay.
11
Exhibit 10.2
EMPLOYMENT AGREEMENT
This Agreement ("the Agreement") dated as of the __________ day of
September, 2005 (the "Effective Date"), is by and between CryoLife, Inc., a
Florida corporation ("CryoLife") and D. Ashley Lee (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 Executive Vice
President, Chief Operating Officer, Chief Financial Officer and Treasurer 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
13
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
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
2
(iv) CryoLife transfers substantially all of its assets to another
corporation which is a less than 60% owned subsidiary of CryoLife.
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:
3
(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;
(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
4
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 chief operating officer to any competitor of
CryoLife in the cardiac, vascular or orthopedic tissue processing business or
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.
5
(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.
(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
6
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
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.
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
7
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
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:
David Ashley Lee
3802 Wieuca Terrace NE
Atlanta, Georgia 30342
If to CryoLife:
CryoLife, Inc.
1655 Roberts Boulevard, N.W,
Kennesaw, Georgia 30144
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) 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
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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).
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.
--------------------------------------
D. Ashley Lee
CRYOLIFE, INC.
By:
-----------------------------------
Steven G. Anderson
Chairman, President and CEO
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Exhibit A
Duties and Responsibilities of D. Ashley Lee:
- --------------------------------------------
All duties of Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Treasurer and duties not inconsistent with such
duties that are assigned by the President.
Compensation:
Salary of $340,000 and bonus set by the Compensation Advisory Committee.
Salary & Bonus 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.
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