<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1999 Commission file number 0-28492
-------------
- --------------------------------------------------------------------------------
INNOVASIVE DEVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-3132641
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
734 Forest Street, Marlborough MA 01752
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code 508/460-8229
------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
(1) YES X NO_____
----
(2) YES ____ NO X
-----
The number of shares outstanding of the registrant's common stock as of August
12, 1999 was 9,261,184.
<PAGE>
INNOVASIVE DEVICES, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I: FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Unaudited Condensed Balance Sheet at June 30, 1999
and December 31, 1998 3
Unaudited Condensed Statement of Operations for the Three and Six Months
Ended June 30, 1999 and 1998 4
Unaudited Condensed Statement of Cash Flows for the
Six Months Ended June 30, 1999 and 1998 5
Notes to Unaudited Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submissions of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits 13
b) Reports on Form 8-K 13
SIGNATURES 14
</TABLE>
2
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
INNOVASIVE DEVICES, INC.
Condensed Balance Sheet
(unaudited, in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------------- --------------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,626 $ 3,724
Marketable securities 6 1,043
Accounts receivable, net of allowance for
doubtful accounts of $157 at June 30, 1999
and $140 at December 31, 1998 2,326 2,189
Inventories 5,734 5,596
Prepaid expenses 64 175
-------------------- --------------------
Total current assets 10,756 12,727
Fixed assets, net 1,912 2,212
Other assets, net 1,055 1,120
-------------------- --------------------
$ 13,723 $ 16,059
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 386 $ 682
Accounts payable to related party 17 60
Other current liabilities 1,587 2,103
-------------------- --------------------
Total current liabilities 1,990 2,845
Stockholders' equity:
Common stock 1 1
Additional paid-in capital 54,996 54,918
Accumulated deficit (43,244) (41,655)
Deferred compensation (20) (50)
-------------------- --------------------
11,733 13,214
-------------------- --------------------
$ 13,723 $ 16,059
==================== ====================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
INNOVASIVE DEVICES, INC.
Condensed Statement of Operations
(In thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------------------ ---------------------------------------
1999 1998 1999 1998
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 4,295 $ 2,955 $ 8,546 $ 5,513
Cost of sales 1,270 829 2,547 1,544
----------------- ---------------- --------------- ----------------
Gross profit 3,025 2,126 5,999 3,969
Selling, general and administrative
expenses 3,058 2,749 6,080 5,471
Research and development 809 1,165 1,683 2,261
----------------- ---------------- --------------- ----------------
Loss from operations (842) (1,788) (1,764) (3,763)
Interest income, net 36 124 83 319
Other income 92 - 92 -
----------------- ---------------- --------------- ----------------
Net loss ($ 714) ($ 1,664) ($ 1,589) ($ 3,444)
================= ================ =============== ================
Basic and diluted net loss per share ($ 0.08) ($ 0.18) ($ 0.17) ($ 0.38)
=================== ================== ================= ==================
Shares used in computing basic
and diluted net loss per share 9,207 9,175 9,207 9,171
=================== ================== ================= ==================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
INNOVASIVE DEVICES, INC.
Condensed Statement of Cash Flows
(In thousands; unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
---------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,589) $(3,444)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization 556 462
Amortization of deferred compensation 30 323
Common Stock issued for performance of services 78 -
Changes in assets and liabilities:
Accounts receivable, net (137) (264)
Inventories (138) (1,010)
Prepaid expenses 111 85
Other assets - 110
Accounts payable (296) (134)
Accounts payable to related party (43) (204)
Other current liabilities (516) 26
-------------------- --------------------
Net cash used for operating activities (1,944) (4,050)
-------------------- --------------------
Cash flows from investing activities
Purchases of fixed assets (191) (490)
Purchases of marketable securities - (5,424)
Redemption of marketable securities 1,037 12,295
-------------------- --------------------
Net cash provided by investing activities 846 6,381
-------------------- --------------------
Cash flows from financing activities
Proceeds from issuance of common stock,
net of issuance costs - 42
-------------------- --------------------
Net (decrease) increase in cash and cash equivalents (1,098) 2,373
Cash and cash equivalents at beginning of period 3,724 2,916
-------------------- --------------------
Cash and cash equivalents at end of period $ 2,626 $ 5,289
==================== ====================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
INNOVASIVE DEVICES, INC.
Notes to Unaudited Condensed Financial Statements
(In thousands, except share and per share data)
1. Basis of Presentation
The accompanying unaudited condensed financial statements of Innovasive Devices,
Inc. (the "Company") include, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the Company's financial position as of June 30, 1999 and the
results of its operations for the three and six month periods ended June 30,
1999 and 1998. Results of operations for interim periods are not necessarily
indicative of those to be achieved for the full year.
Pursuant to accounting requirements of the Securities and Exchange Commission
(the "SEC") applicable to quarterly reports on Form 10-Q, the accompanying
unaudited condensed financial statements and these notes do not include all
disclosures required by generally accepted accounting principles for complete
financial statements. Accordingly, these statements should be read in
conjunction with the financial statements and accompanying notes contained in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998
filed with the SEC on March 31, 1999.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $1,138 $1,880
Work-in-process 435 640
Finished goods 4,161 3,076
----------------- -----------------
Totals $5,734 $5,596
================= =================
</TABLE>
3. Net loss per share
Basic earnings per share is computed by dividing the income available to common
stockholders by the weighted average number of common shares outstanding for the
period. For purposes of calculating diluted earnings per share, the denominator
includes both the weighted average number of common shares outstanding and
potential dilutive common shares outstanding for the period. For each of the
periods presented, basic and diluted earnings per share are the same due to the
antidilutive effect of potential common shares outstanding. Antidilutive
potential common shares excluded from the 1999 and 1998 computation include
1,912,823 and 1,645,407 common shares, respectively issuable upon the exercise
of stock options.
6
<PAGE>
INNOVASIVE DEVICES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Since its inception in 1990, the Company has been primarily engaged in the
development, manufacture and marketing of proprietary devices and
instrumentation which facilitate the reattachment of soft tissue structures,
such as ligaments and tendons, to bones and other tissues. The Company has a
limited operating history and as of June 30, 1999 had an accumulated deficit of
$43.2 million. These losses have resulted principally from expenditures to fund
research and development, the establishment of its manufacturing capabilities
and the expansion of its marketing and sales organization. Although the
Company's sales were principally derived from the sale of its family of shoulder
related products, the Company now markets five product platforms: suture anchors
and suturing systems used primarily in shoulder repair procedures, cartilage
repair products, anterior cruciate ligament ("ACL") reconstruction products and
its newly introduced meniscal repair products used primarily in knee repair
procedures. The Company's strategy is to continue to develop innovative products
for the sports medicine/arthroscopy market and to leverage its core proprietary
technology in other markets. The Company markets its products to surgeons in the
United States through a network of clinically proficient employee sales
representatives and independent sales agents and internationally through
established distributors of orthopaedic medical devices.
The following information should be read in conjunction with the unaudited
condensed financial statements and notes thereto included in this Quarterly
Report and with the Financial Statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's 1998 Annual Report on Form 10-K filed with the SEC on March 31, 1999.
Any statements in this report expressing the beliefs and expectations of
management regarding the Company's future results and performance are forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based on current
expectations that involve a number of risks and uncertainties. The Company
wishes to caution readers not to place undue reliance on any such forward-
looking statements, which speak only as of the date made. Such forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. These risks include the receipt of regulatory
approvals, progress of product development programs, clinical efficacy of and
market demand for the products. Certain of such risks and uncertainties are
described in Exhibit 99 of the Company's 1998 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1999.
7
<PAGE>
Results of Operations
Three Months Ended June 30, 1999 compared to the Three Months Ended June 30,
1998
Net sales for the second quarter of 1999 of $4,295,000 represents an increase of
$1,340,000 or 45% from $2,955,000 for the same period in the prior year. The
increase resulted primarily from a higher level of sales of Clearfix Meniscal
repair products, ACL reconstruction products, COR System cartilage repair
products and suture systems. Sales of the Company's family of Clearfix Meniscal
repair products were fully incremental as compared to the same period last year.
In the fourth quarter of 1998, the Company commenced commercial shipments of its
Clearfix Meniscal Screw, a bioabsorbable device used to repair traumatic tears
within the meniscus of the knee through a minimally invasive arthroscopic
approach. Additionally, in the first quarter of 1999, the Company commenced
commercial shipments of its Clearfix Meniscal Dart, a bioabsorbable device also
used to repair traumatic tears within the meniscus. Sales of the Company's ACL
reconstruction products COR systems and suture systems all experienced growth
over the same quarter in 1998. Sales of the Company's family of ROC suture
anchors were consistent with the same period last year partially due to a
decrease in volume related to a significant initial stocking order of suture
anchors to the Company's distributor in Japan in the second quarter of 1998.
Gross profit increased to $3,025,000 in the second quarter of 1999 from
$2,126,000 in the second quarter of 1998. As a percentage of sales, gross profit
was 70.4% in the second quarter of 1999 as compared to 72.0% in the second
quarter of 1998. Gross profits were impacted by a higher percentage of sales to
international distributors versus the same period in the prior year. The average
selling price of products to international distributors are typically below that
of domestic average selling prices. Gross margins were also affected by the
higher mix of meniscal repair products and ACL reconstruction products versus
the same period last year. Sales of these product families in the second quarter
included a higher percentage of procedural instruments which are primarily sold
at margins below that of product implants.
Selling, general and administrative expenses increased to $3,058,000 in the
second quarter of 1999 from $2,749,000 in the second quarter of 1998. The
increase resulted primarily from higher selling commissions and royalties
resulting from the higher sales volume, increased legal costs resulting from the
Company's defense of a patent infringement claim, and increased salary and
travel costs related to the expansion of the domestic and international direct
sales force.
Research and development expenses decreased to $809,000 in the second quarter of
1999 from $1,165,000 in the second quarter of 1998. The decrease was primarily
attributable to a non-cash compensation charge recognized in the second quarter
of 1998 resulting from the vesting of options granted to non-employee
consultants. The Company also experienced a decrease in salary related costs
versus the same period last year as a result of lower employment levels.
Interest income decreased to $36,000 in the second quarter of 1999 from $124,000
in the second quarter of 1998 primarily as a result of investment returns earned
on lower average cash balances maintained during the second quarter of 1999 as
compared to the prior year.
Other income in the second quarter includes cash received from a termination
agreement in which the Company waived its exclusive right to manufacture product
for a third party. This manufacturing right was originally established from
technology developed by the Company and subsequently licensed to the third
party.
As a result of the foregoing, the net loss decreased to $714,000 in the second
quarter of 1999 from a loss of $1,664,000 in the second quarter of 1998.
8
<PAGE>
Six Months Ended June 30, 1999 compared to Six Months Ended June 30, 1998
Net sales for the first six months of 1999 of $8,546,000 increased $3,033,000 or
55% from $5,513,000 for the same period in the prior year. The increase resulted
primarily from a higher level of sales of all five of its core product families
including: Clearfix Meniscal repair products, ACL reconstruction products, ROC
suture anchors, suture systems and COR System cartilage repair products. Sales
of the Company's family of Clearfix Meniscal repair products were fully
incremental as compared to the same period last year. In the fourth quarter of
1998, the Company commenced commercial shipments of its Clearfix Meniscal Screw,
a bioabsorbable device used to repair traumatic tears within the meniscus of the
knee through a minimally invasive arthroscopic approach. Additionally, in the
first quarter of 1999, the Company commenced commercial shipments of its
Clearfix Meniscal Dart, a bioabsorbable device also used to repair traumatic
tears within the meniscus.
Gross profit increased to $5,999,000 for the first six months of 1999 from
$3,969,000 for the first six months of 1998. As a percentage of sales, gross
profit decreased to 70.2% for the first six months of 1999 from 72.0% for the
first six months of 1998. Gross profits were impacted by a higher percentage of
sales to international distributors versus the same period in the prior year.
The average selling price of products to international distributors are
typically below that of domestic average selling prices. Gross margins were also
affected by the higher mix of meniscal repair products and ACL reconstruction
products versus the same period last year. Sales of these product families in
the first half of 1999 included a higher percentage of procedural instruments
which are primarily sold at margins below that of product implants.
Selling, general and administrative expenses increased to $6,080,000 for the
first six months of 1999 from $5,471,000 for the first six months of 1998. The
increase resulted primarily from higher selling commissions and royalties
resulting from the higher sales volume, increased legal costs resulting from the
Company's defense of a patent infringement claim, and increased salary and
travel costs related to the expansion of the domestic and international direct
sales force.
Research and development expenses decreased to $1,683,000 in the first half of
1999 from $2,261,000 in the first half of 1998. The decrease was primarily
attributable to a non-cash compensation charge recognized in the second quarter
of 1998 resulting from the vesting of options granted to non-employee
consultants. The Company also experienced a decrease in salary costs versus the
same period last year as a result of lower employment levels.
Interest income decreased to $83,000 in the first half of 1999 from $319,000 in
the first half of 1998 primarily as a result of investment returns earned on
lower average cash balances maintained during the first half of 1998 compared to
the prior year.
Other income in the second quarter includes cash received from a termination
agreement in which the Company waived its exclusive right to manufacture product
for a third party. This manufacturing right was originally established from
technology developed by the Company and subsequently licensed to the third
party.
As a result of the foregoing, the net loss decreased to $1,589,000 in the first
half of 1999 from a loss of $3,444,000 in the first half of 1998.
9
<PAGE>
Liquidity and Capital Resources
At June 30, 1999, the Company had cash, cash equivalents and marketable
securities of $2.6 million as compared to a balance of $4.8 million at December
31, 1998. Working capital decreased to $8.8 million at June 30, 1999 from $9.9
million at December 31, 1998.
Cash used in the Company's operations amounted to $1.9 million for the six
months ended June 30, 1999 primarily resulting from the net loss of $1.6
million. Cash used for working capital requirements of $1.0 million was
partially offset by depreciation and amortization of $586,000.
Cash provided by investing activities totaled $846,000 for the six months ended
June 30, 1999 resulting from net redemptions of marketable securities of $1.0
million offset by capital expenditures of $191,000.
On December 31, 1998, the Company entered into a working capital line of credit
with a bank that provides the Company with a maximum borrowing availability of
$2.5 million, limited by certain receivable and inventory balances. Borrowings
under this agreement bear interest at the prime rate of 8.00%. The line of
credit expires and all outstanding amounts thereunder are due December 31, 1999.
Under the line of credit, the Company is obligated to comply with certain
financial covenants. Borrowings available based on certain receivable and
inventory balances at June 30, 1999 amounted to $1.6 million. In addition, at
June 30, 1999 the Company was in compliance with all financial covenants under
the terms of the agreement. There were no borrowings outstanding under the line
of credit at June 30, 1999.
The Company expects that its balance of cash, cash equivalents and marketable
securities will be adequate to fund the next twelve months cash requirements for
operations, working capital and fixed assets. The Company's long term liquidity
and capital requirements will depend upon the progress of research and
development programs, regulatory matters and the expansion of its manufacturing
capabilities to satisfy increasing volume requirements. In addition, the
Company's capital requirements will depend upon, among other factors, the timing
of the establishment of effective sales channels in the United States and abroad
and the extent to which the Company's products gain market acceptance resulting
in increased sales sufficient to generate a profit from operations. Therefore
the Company cannot provide assurances that it will not require additional
financing in the future. If additional financing is necessary, the Company would
seek to raise these funds through bank facilities or debt or equity offerings.
There can be no assurance that such funds would be available at all or on terms
acceptable to the Company.
10
<PAGE>
Impact of the Year 2000 Issue
The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company believes that its primary business and research and development
systems are Y2K compliant based on its internal evaluations and testing of these
systems. The Company does not rely materially on IT related technology in its
manufacturing processes and thereby does not anticipate that Y2K issues will
affect its ability to manufacture finished goods. The Company is currently
communicating with third party vendors through the issuance questionnaires that
address Y2K compliance. The Company anticipates that its assessment of third
party vendors will be completed by the third quarter of 1999. The Company does
not anticipate incurring additional costs outside of the scope of its current IT
budget to complete future testing and compliance activities.
The Company relies extensively on third party suppliers. Because their systems
are not directly under the Company's control, the Company is at risk that all
required external Y2K compliance efforts will not be completed on a timely
basis. In the event that the Company's significant suppliers do not successfully
and timely achieve Y2K compliance, and the Company is unable to replace them
with alternate suppliers, the Company's operations could be adversely affected.
At this time, the Company believes that the Y2K problem will not pose
significant operational problems for the Company's computer systems. Since no
significant issues have arisen, the Company does not have a contingency plan to
address any material Y2K issues. If significant Y2K issues arise, the Company
may not be able to timely develop and implement a contingency plan and the
Company's operations could be adversely affected.
The disclosure in this Section is a Y2K Readiness Disclosure under the Year 2000
Information and Readiness Disclosure Act of 1998.
11
<PAGE>
INNOVASIVE DEVICES, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On July 13, 1999, the Company was sued for patent infringement by Arthrex, Inc.
in the United States District Court for the Middle District of Florida, Orlando
Division. Arthrex alleges that elements of two of the Companies knee systems
related to cartilage and ACL repair infringes recently issued Arthrex patents.
The Company has several issued patents and patents pending protecting these
products and is currently evaluating its position relative to this new
intellectual property.
Item 2. Changes in Securities
----------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's Annual and Special Meeting of Stockholders was held on June 9,
1999 at the Company's headquarters in Marlborough, Massachusetts. All matters
submitted to a vote of the Company's stockholders were described in the
Company's Proxy Statement dated May 11, 1999. At the meeting, the shareholders:
(1) elected the following directors for terms expiring in 2002:
<TABLE>
<CAPTION>
Term Total Vote For Total Vote Withheld
Expires Each Director From Each Director
------- -------------- -------------------
<S> <C> <C> <C>
Richard D. Randall 2002 7,382,298 11,770
Howard D. Palefsky 2002 7,345,071 48,997
</TABLE>
(2) ratified the Board of Directors' selection of PricewaterhouseCoopers LLP as
the Company's independent accountants for the fiscal year ending December
31, 1999.
For 7,391,198
Against 2,200
Abstain 670
12
<PAGE>
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
Exhibit
10.1 Income Continuation Agreement between the Registrant and Richard D.
Randall, CEO
10.2 Income Continuation Agreement between the Registrant and James V.
Barrile, CFO
10.3 Income Continuation Agreement between the Registrant and Alan
Chervitz, COO
10.4 Income Continuation Agreement between the Registrant and Ricardo J.
Simmons, Vice President - Global Sales and Marketing
10.5 Income Continuation Agreement between the Registrant and Eric L.
Bannon, Vice President Quality Assurance and Regulatory Affairs
10.6 Income Continuation Agreement between the Registrant and T. Wade
Fallin, Vice President and General Manager
10.7 Employment Agreement, dated June 27, 1997, between Registrant and Alan
Chervitz
10.8 Amendment to Employment Agreement dated June 27, 1997 between
Registrant and Alan Chervitz
10.9 Employment Agreement, dated June 27, 1997, between Registrant and T.
Wade Fallin
10.10 Amendment to Employment Agreement dated June 27, 1997 between
Registrant and T. Wade Fallin
27 Financial Data Schedule
b) Reports on Form 8-K
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INNOVASIVE DEVICES, INC,
Date: August 13, 1999 By:/s/ Richard D. Randall
---------------------------
Richard D. Randall
President, Chief Executive Officer
and Director
(Principal Executive Officer)
Date: August 13, 1999 By:/s/ James V. Barrile
------------------------
James V. Barrile
Executive Vice President of Finance,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
14
<PAGE>
Exhibit 10.1
Income Continuation Agreement between the Registrant and Richard D. Randall, CEO
INCOME CONTINUATION AGREEMENT
This Agreement is made as of the 6th day of April, 1999 by and between
Innovasive Devices, Inc. and the executive whose name is set forth on the
signature page of this Agreement (the "Executive").
I. Introduction.
------------
The Executive is President and Chief Executive Officer of the Company. The
Company wishes to provide financial transition and stability for the Executive
and to assist the Executive if the Executive is terminated without Cause by the
Company and if there is Change of Control of the Company.
II. Definitions.
-----------
As used in this Agreement, the following terms have the definitions
indicated.
2.1 "Cause" means termination
(a) for the Executive's dishonesty or willful misconduct
involving the Company;
(b) as a result of the Executive's material neglect of his
duties, if the Company has given the Executive notice specifying the
act or omission constituting such neglect and the Executive has
continued the noticed behavior after receipt of the notice; or
(c) following the Executive's conviction of a felony or any
crime involving moral turpitude.
2.2 "Change of Control" means
(a) a sale of all or substantially all of the assets of the
Company;
(b) a sale of all or substantially all of the stock of the
Company;
(c) a merger or consolidation involving the Company as a
result of which the persons entitled to elect a majority of the
directors of the Company prior to the merger or consolidation are
unable to do so following the merger or consolidation;
(d) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under The Exchange Act) directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
(e) persons who, as the date of this agreement, constituted
the Company's Board of Directors (the "Incumbent Board") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Company's Board of Directors, provided that any person
becoming a director of the Company after the date of this Agreement
whose election was approved by at least a majority of the directors
then comprising the Incumbent Board shall, for purposes of this
definition, be considered a member of the Incumbent Board; or
(f) the stockholders of the Company approve a plan of
liquidation of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Company" means Innovasive Devices, Inc. and its parents and
subsidiaries and shall also include their respective successors and
assigns.
2.5 "Continuation Period" means
<PAGE>
(a) one year following the Termination Date if the Service
Period of the Executive is less than three years as of the Termination
Date; and
(b) two years following the Termination Date if the Service
Period of the Executive is at least three years.
2.6 "Diminution of Job Responsibility" means a diminution or reduction in
the Executive's principal job responsibilities, duties, reporting
responsibilities, title or position, a reduction in the Executive's
base salary or employee fringe benefits, or any other material adverse
change in the terms and conditions of the Executive's employment.
2.7 "Executive" means the person whose name is set forth on the signature
page to this Agreement.
2.8 "Income Continuation Payments" means the payments and benefit
continuations described in Article IV of this Agreement.
2.9 "Relocation" means a requirement that the Executive regularly perform
services at a location that is more than 50 miles from the Executive's
customary place of business as of the date of this Agreement.
2.10 "Service Period" means the period of time during which the Executive
has been employed by the Company and, if applicable, by MedicineLodge,
Inc.
2.11 "Termination Date" means the effective date of the Executive's
termination as an employee of the Company.
III. Entitlement to Income Continuation.
----------------------------------
Subject to the provisions of this Agreement, the Executive shall have the
right to receive Income Continuation Payments if the Executive, as of the date
of or within 12 months following a Change of Control:
(a) is terminated by the Company or any successor to the Company
without Cause;
(b) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Diminution of Job
Responsibility; or
(c) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Relocation.
IV. Specification of Income Continuation Payments
---------------------------------------------
4.1 Elements of Income Continuation Payments. In the event that the
----------------------------------------
Executive becomes entitled to Income Continuation Payments as the result of an
action specified in Article III of this Agreement, the Executive shall be
entitled to the following, subject to the limitation set forth in Section 4.3:
(a) Base Salary. The Executive shall be entitled to receive his base
-----------
salary for the Continuation Period at the highest rate of base salary
received by the Executive during the one year period preceding the
Termination Date. Such amount shall be paid monthly in arrears, ratably
over the Continuation Period.
(b) Incentive Compensation. The Executive shall be entitled to
----------------------
receive the average of the payments made during the two full fiscal years
of the Company immediately preceding the Termination Date under any
incentive plan of which the Executive is a participant for the fiscal year
of the Company in which the Termination Date occurs. Incentive
Compensation payments shall be paid at the time that such payments are
required to be made under the applicable incentive plan.
(c) Continuation of Health Plan Contributions. During the
-----------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of health insurance paid by the
Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive (and, if they were covered
<PAGE>
prior to the Termination Date, the Executive's family) under the Company's
health insurance plans to the maximum extent the Executive was covered
thereunder during the one year period prior to the Termination Date.
(d) Continuation of Premiums for Life Insurance. During the
-------------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of life insurance premiums paid by
the Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive under the Company's life insurance plans to
the maximum extent the Executive was covered thereunder during the one year
period prior to the Termination Date.
(e) Continuation of Premiums for Long Term Disability Insurance.
------------------------------------------------------------
During the Continuation Period, the Company will continue to contribute on
behalf of the Executive the portion of the cost of long term disability
insurance premiums paid by the Company on behalf of the Executive as of the
Termination Date and will continue to cover the Executive under the
Company's long term disability insurance plans to the maximum extent the
Executive was covered thereunder during the one year period prior to the
Termination Date.
(f) COBRA Benefits. The Executive will have the option at his or her
--------------
expense, and to the extent required by federal and state law, to be covered
by the Company's health insurance plans for an eighteen month period
following the end of the Continuation Period.
(g) Acceleration of Stock Options.
-----------------------------
(i) Any options held by the Executive as of the date of a
Change of Control which are not exercisable by their terms as of the
date of such Change of Control shall become exercisable as follows,
subject to the provisions of subsection (ii) below: 50% of such
options shall become fully exercisable immediately prior to the Change
of Control and 50% of such options shall become fully exercisable on
the first anniversary date of the Change of Control (unless by their
terms they become exercisable sooner). Such options shall remain
exercisable until the date which is ninety-one days following the
first anniversary of the Change of Control.
(ii) If as of the date of or within 12 months following a Change
of Control, the Executive is terminated without Cause or the Executive
voluntarily terminates his Employment with the Company as the result
of a Diminution of Job Responsibility or Relocation, all options held
by the Executive as of the Termination Date and not exercisable by
their terms as of such date shall become fully exercisable on the
Termination Date and shall remain exercisable for 90 days thereafter.
(iii) The Executive acknowledges that the accelerations herein
provided may have the effect of converting Incentive Stock Options
into non-qualified stock options.
4.2 Pension and Profit Sharing Contributions. The Company's obligation to
----------------------------------------
contribute to pension and/or profit sharing plans on behalf of the Executive
shall terminate on the Termination Date.
4.3 Limitation on Continuation Payments. Notwithstanding anything to the
-----------------------------------
contrary contained in this Agreement, if it is determined that any payment to
the Executive pursuant to this Article III or any other payment or benefit from
the Company
(a "Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or would constitute any excess parachute payment under Section 280G of the
Code, then the amount payable under Section 4.1(a) shall be reduced so that the
aggregate amount of Payments shall be $1.00 less than the amount which would
subject the Payment to such excise tax or treatment.
4.4 Conditions to Receipt of Income Continuation Payments. The obligation
-----------------------------------------------------
of the Company or its successor to pay Income Continuation Payments is subject
to the following conditions:
(a) Written Release. Prior to making any payment to or any
---------------
contribution on behalf of the Executive, the Company shall have received
from the Executive a written release of all claims by or through the
Executive and against the Company, its stockholders, directors, officers,
employees, representatives and successors by reason of the Executive's
termination. Such written release shall be signed and delivered by the
Executive in a form
<PAGE>
approved by the President of the Company or its successor. In addition, if
in the opinion of counsel for the Company or its successor, waiting periods
(not to exceed 21 days in the aggregate) are required under any federal or
state law in order to make such written release binding and enforceable on
the Executive, such waiting period shall have expired prior to the payment
of any Income Continuation Payment hereunder.
(b) Set Off of Debts and Claims. The Company may offset Income
---------------------------
Continuation Payments hereunder with the amount of any overdue debts or
claims owed by the Executive or any dependent of the Executive to the
Company as of the Termination Date.
(c) Taxes. All Income Continuation Payments are subject to
-----
withholding of all taxes and other amounts required by law to be withheld
or paid to others.
(d) Non-disparagement; Non-disclosure; Non-Competition. Payment of
--------------------------------------------------
Income Continuation Payments shall be conditioned on the following:
(i) The Executive shall observe a strict public non-
disparagement policy precluding the Executive during the Continuation
Period from publicly disparaging or criticizing the Company, its
business or operations, its policies, publications, practices or
personnel or those of its successor.
(ii) The Executive will not disclose to any third party any
confidential or proprietary information of the Company or its
successors.
(iii) The Executive will observe any non-competition or non-
solicitation restrictions relating to the Company and the successor
applicable to the Executive under any written agreements between the
Executive and the Company or its successors and in effect as of the
Termination Date.
(iv) The Executive will return to the Company all copies of all
confidential and proprietary information concerning the Company, in
whatever medium it may be incorporated, and any and all assets of the
Company, including without limitation, automobiles, computers, credit
cards and other tangible and intangible property in his possession or
under his control as of the Termination Date.
4.5 Death of Executive. If the Executive dies after the Termination Date
------------------
but before the end of the Continuation Period, the remaining payments due under
this Agreement will be paid to the Executive's estate, after verification of the
proper recipient, in accordance with governing law based on the advice of legal
counsel to the Company. In the event of any delay in the making of payments
resulting from such verification, no interest will be earned or payable to the
Executive's estate.
V. Miscellaneous
-------------
5.1 Disputes. In the event that any dispute concerning the interpretation
--------
or implementation of this Agreement is not resolved by the Executive and the
Company within 30 days after written notice, specifying the nature of the
dispute, is given by the Executive or the Company to the other, either party may
submit the dispute to binding arbitration. Such binding arbitration shall be
conducted in Boston, Massachusetts by a three member panel acting under the
commercial arbitration rules of the American Arbitration Association. One
member of the panel shall be selected by the Executive, one by the Company and
the third by the agreement of the other two arbitrators so selected. Costs of
the arbitration shall be shared in the manner determined by the arbitration
panel. The decision of the arbitration panel shall be final and conclusive on
the parties and not subject to separate determination or review by a third
party.
5.2 Amendments. Any amendments to this Agreement must be in writing and
----------
signed by the Company and the Executive.
5.3 No Right to Employment or Benefits. This Agreement does not
----------------------------------
constitute or imply an obligation or undertaking to employ the Executive for any
particular period of time or in any position or any limitation on the right of
the Company to terminate the employment of the Executive for any or no reason.
Payments hereunder will not create, continue or evidence any employment
relationship with the Company. All employment privileges, benefits or
perquisites not specifically continued hereunder shall cease on the Termination
Date.
<PAGE>
5.4 Governing Law. This Agreement shall be construed under and governed
-------------
by the law of The Commonwealth of Massachusetts, without regard to its conflict
of laws provisions.
5.5 Notices. All notices required or permitted hereunder shall be deemed
-------
properly sent if mailed by prepaid certified or registered mail, return receipt
requested, or delivered by hand, or sent by bona fide overnight courier with
return receipt, to the following addresses or to any other addresses properly
noticed in accordance with this Section:
If to the Company: 734 Forest Street
Marlboro, MA 01752-3032
Attention: President
If to the Executive: At the address specified on
the signature page to this Agreement
All notices shall be deemed received on the actual date of their receipt, or if
delivery is refused, on the date delivery is refused.
5.6 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors and permitted assigns.
The Executive may not assign this Agreement without the consent of the Company.
The Company may assign this Agreement without the consent of the Executive to
any entity which succeeds to all or any part of its business.
5.7 Enforceability. If any portion or provision of this Agreement shall
--------------
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of such portion
or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date and year first above written.
INNOVASIVE DEVICES, INC.
By: Joseph A. Ciffolillo
Title: Director
________________________
Signature of Executive
Richard D. Randall
81 Winslow Road
Westwood, MA 02090
________________________
Address of Executive
<PAGE>
Exhibit 10.2
Income Continuation Agreement between the Registrant and James V. Barrile, CFO
INCOME CONTINUATION AGREEMENT
This Agreement is made as of the 6th day of April, 1999 by and between
Innovasive Devices, Inc. and the executive whose name is set forth on the
signature page of this Agreement (the "Executive").
I. Introduction.
------------
The Executive is Executive Vice President, CFO of the Company. The Company
wishes to provide financial transition and stability for the Executive and to
assist the Executive if the Executive is terminated without Cause by the Company
and if there is Change of Control of the Company.
II. Definitions.
-----------
As used in this Agreement, the following terms have the definitions
indicated.
2.1 "Cause" means termination
(a) for the Executive's dishonesty or willful misconduct
involving the Company;
(b) as a result of the Executive's material neglect of his
duties, if the Company has given the Executive notice specifying the
act or omission constituting such neglect and the Executive has
continued the noticed behavior after receipt of the notice; or
(c) following the Executive's conviction of a felony or any crime
involving moral turpitude.
2.2 "Change of Control" means
(a) a sale of all or substantially all of the assets of the
Company;
(b) a sale of all or substantially all of the stock of the
Company;
(c) a merger or consolidation involving the Company as a result
of which the persons entitled to elect a majority of the directors of
the Company prior to the merger or consolidation are unable to do so
following the merger or consolidation;
(d) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under The Exchange Act) directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
(e) persons who, as the date of this agreement, constituted the
Company's Board of Directors (the "Incumbent Board") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Company's Board of Directors, provided that any person
becoming a director of the Company after the date of this Agreement
whose election was approved by at least a majority of the directors
then comprising the Incumbent Board shall, for purposes of this
definition, be considered a member of the Incumbent Board; or
(f) the stockholders of the Company approve a plan of liquidation
of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Company" means Innovasive Devices, Inc. and its parents and
subsidiaries and shall also include their respective successors and
assigns.
<PAGE>
2.5 "Continuation Period" means
(a) one year following the Termination Date if the Service Period
of the Executive is less than three years as of the Termination Date;
and
(b) two years following the Termination Date if the Service
Period of the Executive is at least three years.
2.6 "Diminution of Job Responsibility" means a diminution or reduction in
the Executive's principal job responsibilities, duties, reporting
responsibilities, title or position, a reduction in the Executive's
base salary or employee fringe benefits, or any other material adverse
change in the terms and conditions of the Executive's employment.
2.7 "Executive" means the person whose name is set forth on the signature
page to this Agreement.
2.8 "Income Continuation Payments" means the payments and benefit
continuations described in Article IV of this Agreement.
2.9 "Relocation" means a requirement that the Executive regularly perform
services at a location that is more than 50 miles from the Executive's
customary place of business as of the date of this Agreement.
2.10 "Service Period" means the period of time during which the Executive
has been employed by the Company and, if applicable, by MedicineLodge,
Inc.
2.11 "Termination Date" means the effective date of the Executive's
termination as an employee of the Company.
III. Entitlement to Income Continuation.
----------------------------------
Subject to the provisions of this Agreement, the Executive shall have the
right to receive Income Continuation Payments if the Executive, as of the date
of or within 12 months following a Change of Control:
(a) is terminated by the Company or any successor to the Company
without Cause;
(b) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Diminution of Job
Responsibility; or
(c) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Relocation.
IV. Specification of Income Continuation Payments
---------------------------------------------
4.1 Elements of Income Continuation Payments. In the event that the
----------------------------------------
Executive becomes entitled to Income Continuation Payments as the result of an
action specified in Article III of this Agreement, the Executive shall be
entitled to the following, subject to the limitation set forth in Section 4.3:
(a) Base Salary. The Executive shall be entitled to receive his base
-----------
salary for the Continuation Period at the highest rate of base salary
received by the Executive during the one year period preceding the
Termination Date. Such amount shall be paid monthly in arrears, ratably
over the Continuation Period.
(b) Incentive Compensation. The Executive shall be entitled to
----------------------
receive the average of the payments made during the two full fiscal years
of the Company immediately preceding the Termination Date under any
incentive plan of which the Executive is a participant for the fiscal year
of the Company in which the Termination Date occurs. Incentive
Compensation payments shall be paid at the time that such payments are
required to be made under the applicable incentive plan.
<PAGE>
(c) Continuation of Health Plan Contributions. During the
-----------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of health insurance paid by the
Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive (and, if they were covered prior to the
Termination Date, the Executive's family) under the Company's health
insurance plans to the maximum extent the Executive was covered thereunder
during the one year period prior to the Termination Date.
(d) Continuation of Premiums for Life Insurance. During the
-------------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of life insurance premiums paid by
the Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive under the Company's life insurance plans to
the maximum extent the Executive was covered thereunder during the one year
period prior to the Termination Date.
(e) Continuation of Premiums for Long Term Disability Insurance.
------------------------------------------------------------
During the Continuation Period, the Company will continue to contribute on
behalf of the Executive the portion of the cost of long term disability
insurance premiums paid by the Company on behalf of the Executive as of the
Termination Date and will continue to cover the Executive under the
Company's long term disability insurance plans to the maximum extent the
Executive was covered thereunder during the one year period prior to the
Termination Date.
(f) COBRA Benefits. The Executive will have the option at his or her
--------------
expense, and to the extent required by federal and state law, to be covered
by the Company's health insurance plans for an eighteen month period
following the end of the Continuation Period.
(g) Acceleration of Stock Options.
-----------------------------
(i) Any options held by the Executive as of the date of a
Change of Control which are not exercisable by their terms as of the
date of such Change of Control shall become exercisable as follows,
subject to the provisions of subsection (ii) below: 50% of such
options shall become fully exercisable immediately prior to the Change
of Control and 50% of such options shall become fully exercisable on
the first anniversary date of the Change of Control (unless by their
terms they become exercisable sooner). Such options shall remain
exercisable until the date which is ninety-one days following the
first anniversary of the Change of Control.
(ii) If as of the date of or within 12 months following a Change
of Control, the Executive is terminated without Cause or the Executive
voluntarily terminates his Employment with the Company as the result
of a Diminution of Job Responsibility or Relocation, all options held
by the Executive as of the Termination Date and not exercisable by
their terms as of such date shall become fully exercisable on the
Termination Date and shall remain exercisable for 90 days thereafter.
(iii) The Executive acknowledges that the accelerations herein
provided may have the effect of converting Incentive Stock Options
into non-qualified stock options.
4.2 Pension and Profit Sharing Contributions. The Company's obligation to
----------------------------------------
contribute to pension and/or profit sharing plans on behalf of the Executive
shall terminate on the Termination Date.
4.3 Limitation on Continuation Payments. Notwithstanding anything to the
-----------------------------------
contrary contained in this Agreement, if it is determined that any payment to
the Executive pursuant to this Article III or any other payment or benefit from
the Company
(a "Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or would constitute any excess parachute payment under Section 280G of the
Code, then the amount payable under Section 4.1(a) shall be reduced so that the
aggregate amount of Payments shall be $1.00 less than the amount which would
subject the Payment to such excise tax or treatment.
4.4 Conditions to Receipt of Income Continuation Payments. The obligation
-----------------------------------------------------
of the Company or its successor to pay Income Continuation Payments is subject
to the following conditions:
<PAGE>
(a) Written Release. Prior to making any payment to or any
---------------
contribution on behalf of the Executive, the Company shall have received
from the Executive a written release of all claims by or through the
Executive and against the Company, its stockholders, directors, officers,
employees, representatives and successors by reason of the Executive's
termination. Such written release shall be signed and delivered by the
Executive in a form approved by the President of the Company or its
successor. In addition, if in the opinion of counsel for the Company or
its successor, waiting periods (not to exceed 21 days in the aggregate) are
required under any federal or state law in order to make such written
release binding and enforceable on the Executive, such waiting period shall
have expired prior to the payment of any Income Continuation Payment
hereunder.
(b) Set Off of Debts and Claims. The Company may offset Income
---------------------------
Continuation Payments hereunder with the amount of any overdue debts or
claims owed by the Executive or any dependent of the Executive to the
Company as of the Termination Date.
(c) Taxes. All Income Continuation Payments are subject to
-----
withholding of all taxes and other amounts required by law to be withheld
or paid to others.
(d) Non-disparagement; Non-disclosure; Non-Competition. Payment of
--------------------------------------------------
Income Continuation Payments shall be conditioned on the following:
(i) The Executive shall observe a strict public non-
disparagement policy precluding the Executive during the Continuation
Period from publicly disparaging or criticizing the Company, its
business or operations, its policies, publications, practices or
personnel or those of its successor.
(ii) The Executive will not disclose to any third party any
confidential or proprietary information of the Company or its
successors.
(iii) The Executive will observe any non-competition or non-
solicitation restrictions relating to the Company and the successor
applicable to the Executive under any written agreements between the
Executive and the Company or its successors and in effect as of the
Termination Date.
(iv) The Executive will return to the Company all copies of all
confidential and proprietary information concerning the Company, in
whatever medium it may be incorporated, and any and all assets of the
Company, including without limitation, automobiles, computers, credit
cards and other tangible and intangible property in his possession or
under his control as of the Termination Date.
4.5 Death of Executive. If the Executive dies after the Termination Date
------------------
but before the end of the Continuation Period, the remaining payments due under
this Agreement will be paid to the Executive's estate, after verification of the
proper recipient, in accordance with governing law based on the advice of legal
counsel to the Company. In the event of any delay in the making of payments
resulting from such verification, no interest will be earned or payable to the
Executive's estate.
V. Miscellaneous
-------------
5.1 Disputes. In the event that any dispute concerning the interpretation
--------
or implementation of this Agreement is not resolved by the Executive and the
Company within 30 days after written notice, specifying the nature of the
dispute, is given by the Executive or the Company to the other, either party may
submit the dispute to binding arbitration. Such binding arbitration shall be
conducted in Boston, Massachusetts by a three member panel acting under the
commercial arbitration rules of the American Arbitration Association. One
member of the panel shall be selected by the Executive, one by the Company and
the third by the agreement of the other two arbitrators so selected. Costs of
the arbitration shall be shared in the manner determined by the arbitration
panel. The decision of the arbitration panel shall be final and conclusive on
the parties and not subject to separate determination or review by a third
party.
5.2 Amendments. Any amendments to this Agreement must be in writing and
----------
signed by the Company and the Executive.
5.3 No Right to Employment or Benefits. This Agreement does not
----------------------------------
constitute or imply an obligation or undertaking to employ the Executive for any
particular period of time or in any position or any limitation on the right of
the Company to
<PAGE>
terminate the employment of the Executive for any or no reason. Payments
hereunder will not create, continue or evidence any employment relationship with
the Company. All employment privileges, benefits or perquisites not specifically
continued hereunder shall cease on the Termination Date.
5.4 Governing Law. This Agreement shall be construed under and governed
-------------
by the law of The Commonwealth of Massachusetts, without regard to its conflict
of laws provisions.
5.5 Notices. All notices required or permitted hereunder shall be deemed
-------
properly sent if mailed by prepaid certified or registered mail, return receipt
requested, or delivered by hand, or sent by bona fide overnight courier with
return receipt, to the following addresses or to any other addresses properly
noticed in accordance with this Section:
If to the Company: 734 Forest Street
Marlboro, MA 01752-3032
Attention: President
If to the Executive: At the address specified on
the signature page to this Agreement
All notices shall be deemed received on the actual date of their receipt, or if
delivery is refused, on the date delivery is refused.
5.6 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors and permitted assigns.
The Executive may not assign this Agreement without the consent of the Company.
The Company may assign this Agreement without the consent of the Executive to
any entity which succeeds to all or any part of its business.
5.7 Enforceability. If any portion or provision of this Agreement shall
--------------
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of such portion
or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date and year first above written.
INNOVASIVE DEVICES, INC.
By: Richard Randall
Title: President
________________________
Signature of Executive
James V. Barrile
- -----------------
Typed or Printed Name of Executive
56 Jackson Circle
Marlborough, MA
- ---------------
Address of Executive
<PAGE>
Exhibit 10.3
Income Continuation Agreement between the Registrant and Alan Chervitz, COO
INCOME CONTINUATION AGREEMENT
This Agreement is made as of the 6th day of April, 1999 by and between
Innovasive Devices, Inc. and the executive whose name is set forth on the
signature page of this Agreement (the "Executive").
I. Introduction.
------------
The Executive is Executive Vice President, COO of the Company. The Company
wishes to provide financial transition and stability for the Executive and to
assist the Executive if the Executive is terminated without Cause by the Company
and if there is Change of Control of the Company.
II. Definitions.
-----------
As used in this Agreement, the following terms have the definitions
indicated.
2.1 "Cause" means termination
(a) for the Executive's dishonesty or willful misconduct
involving the Company;
(b) as a result of the Executive's material neglect of his
duties, if the Company has given the Executive notice specifying the
act or omission constituting such neglect and the Executive has
continued the noticed behavior after receipt of the notice; or
(c) following the Executive's conviction of a felony or any crime
involving moral turpitude.
2.2 "Change of Control" means
(a) a sale of all or substantially all of the assets of the
Company;
(b) a sale of all or substantially all of the stock of the
Company;
(c) a merger or consolidation involving the Company as a result
of which the persons entitled to elect a majority of the directors of
the Company prior to the merger or consolidation are unable to do so
following the merger or consolidation;
(d) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under The Exchange Act) directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
(e) persons who, as the date of this agreement, constituted the
Company's Board of Directors (the "Incumbent Board") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Company's Board of Directors, provided that any person
becoming a director of the Company after the date of this Agreement
whose election was approved by at least a majority of the directors
then comprising the Incumbent Board shall, for purposes of this
definition, be considered a member of the Incumbent Board; or
(f) the stockholders of the Company approve a plan of liquidation
of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Company" means Innovasive Devices, Inc. and its parents and
subsidiaries and shall also include their respective successors and
assigns.
<PAGE>
2.5 "Continuation Period" means
(a) one year following the Termination Date if the Service Period
of the Executive is less than three years as of the Termination Date;
and
(b) two years following the Termination Date if the Service
Period of the Executive is at least three years.
2.6 "Diminution of Job Responsibility" means a diminution or reduction in
the Executive's principal job responsibilities, duties, reporting
responsibilities, title or position, a reduction in the Executive's
base salary or employee fringe benefits, or any other material adverse
change in the terms and conditions of the Executive's employment.
2.7 "Executive" means the person whose name is set forth on the signature
page to this Agreement.
2.8 "Income Continuation Payments" means the payments and benefit
continuations described in Article IV of this Agreement.
2.9 "Relocation" means a requirement that the Executive regularly perform
services at a location that is more than 50 miles from the Executive's
customary place of business as of the date of this Agreement.
2.10 "Service Period" means the period of time during which the Executive
has been employed by the Company and, if applicable, by MedicineLodge,
Inc.
2.11 "Termination Date" means the effective date of the Executive's
termination as an employee of the Company.
III. Entitlement to Income Continuation.
----------------------------------
Subject to the provisions of this Agreement, the Executive shall have the
right to receive Income Continuation Payments if the Executive, as of the date
of or within 12 months following a Change of Control:
(a) is terminated by the Company or any successor to the Company
without Cause;
(b) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Diminution of Job
Responsibility; or
(c) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Relocation.
IV. Specification of Income Continuation Payments
---------------------------------------------
4.1 Elements of Income Continuation Payments. In the event that the
----------------------------------------
Executive becomes entitled to Income Continuation Payments as the result of an
action specified in Article III of this Agreement, the Executive shall be
entitled to the following, subject to the limitation set forth in Section 4.3:
(a) Base Salary. The Executive shall be entitled to receive his base
-----------
salary for the Continuation Period at the highest rate of base salary
received by the Executive during the one year period preceding the
Termination Date. Such amount shall be paid monthly in arrears, ratably
over the Continuation Period.
(b) Incentive Compensation. The Executive shall be entitled to
----------------------
receive the average of the payments made during the two full fiscal years
of the Company immediately preceding the Termination Date under any
incentive plan of which the Executive is a participant for the fiscal year
of the Company in which the Termination Date occurs. Incentive
Compensation payments shall be paid at the time that such payments are
required to be made under the applicable incentive plan.
<PAGE>
(c) Continuation of Health Plan Contributions. During the
-----------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of health insurance paid by the
Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive (and, if they were covered prior to the
Termination Date, the Executive's family) under the Company's health
insurance plans to the maximum extent the Executive was covered thereunder
during the one year period prior to the Termination Date.
(d) Continuation of Premiums for Life Insurance. During the
-------------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of life insurance premiums paid by
the Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive under the Company's life insurance plans to
the maximum extent the Executive was covered thereunder during the one year
period prior to the Termination Date.
(e) Continuation of Premiums for Long Term Disability Insurance.
------------------------------------------------------------
During the Continuation Period, the Company will continue to contribute on
behalf of the Executive the portion of the cost of long term disability
insurance premiums paid by the Company on behalf of the Executive as of the
Termination Date and will continue to cover the Executive under the
Company's long term disability insurance plans to the maximum extent the
Executive was covered thereunder during the one year period prior to the
Termination Date.
(f) COBRA Benefits. The Executive will have the option at his or her
--------------
expense, and to the extent required by federal and state law, to be covered
by the Company's health insurance plans for an eighteen month period
following the end of the Continuation Period.
(g) Acceleration of Stock Options.
-----------------------------
(i) Any options held by the Executive as of the date of a
Change of Control which are not exercisable by their terms as of the
date of such Change of Control shall become exercisable as follows,
subject to the provisions of subsection (ii) below: 50% of such
options shall become fully exercisable immediately prior to the Change
of Control and 50% of such options shall become fully exercisable on
the first anniversary date of the Change of Control (unless by their
terms they become exercisable sooner). Such options shall remain
exercisable until the date which is ninety-one days following the
first anniversary of the Change of Control.
(ii) If as of the date of or within 12 months following a
Change of Control, the Executive is terminated without Cause or the
Executive voluntarily terminates his Employment with the Company as
the result of a Diminution of Job Responsibility or Relocation, all
options held by the Executive as of the Termination Date and not
exercisable by their terms as of such date shall become fully
exercisable on the Termination Date and shall remain exercisable for
90 days thereafter.
(iii) The Executive acknowledges that the accelerations herein
provided may have the effect of converting Incentive Stock Options
into non-qualified stock options.
4.2 Pension and Profit Sharing Contributions. The Company's obligation to
----------------------------------------
contribute to pension and/or profit sharing plans on behalf of the Executive
shall terminate on the Termination Date.
4.3 Limitation on Continuation Payments. Notwithstanding anything to the
-----------------------------------
contrary contained in this Agreement, if it is determined that any payment to
the Executive pursuant to this Article III or any other payment or benefit from
the Company
(a "Payment") would be subject to the excise tax imposed by Section 4999 of the
Code or would constitute any excess parachute payment under Section 280G of the
Code, then the amount payable under Section 4.1(a) shall be reduced so that the
aggregate amount of Payments shall be $1.00 less than the amount which would
subject the Payment to such excise tax or treatment.
4.4 Conditions to Receipt of Income Continuation Payments. The obligation
-----------------------------------------------------
of the Company or its successor to pay Income Continuation Payments is subject
to the following conditions:
<PAGE>
(a) Written Release. Prior to making any payment to or any
---------------
contribution on behalf of the Executive, the Company shall have received
from the Executive a written release of all claims by or through the
Executive and against the Company, its stockholders, directors, officers,
employees, representatives and successors by reason of the Executive's
termination. Such written release shall be signed and delivered by the
Executive in a form approved by the President of the Company or its
successor. In addition, if in the opinion of counsel for the Company or
its successor, waiting periods (not to exceed 21 days in the aggregate) are
required under any federal or state law in order to make such written
release binding and enforceable on the Executive, such waiting period shall
have expired prior to the payment of any Income Continuation Payment
hereunder.
(b) Set Off of Debts and Claims. The Company may offset Income
---------------------------
Continuation Payments hereunder with the amount of any overdue debts or
claims owed by the Executive or any dependent of the Executive to the
Company as of the Termination Date.
(c) Taxes. All Income Continuation Payments are subject to
-----
withholding of all taxes and other amounts required by law to be withheld
or paid to others.
(d) Non-disparagement; Non-disclosure; Non-Competition. Payment of
--------------------------------------------------
Income Continuation Payments shall be conditioned on the following:
(i) The Executive shall observe a strict public non-
disparagement policy precluding the Executive during the Continuation
Period from publicly disparaging or criticizing the Company, its
business or operations, its policies, publications, practices or
personnel or those of its successor.
(ii) The Executive will not disclose to any third party any
confidential or proprietary information of the Company or its
successors.
(iii) The Executive will observe any non-competition or non-
solicitation restrictions relating to the Company and the successor
applicable to the Executive under any written agreements between the
Executive and the Company or its successors and in effect as of the
Termination Date.
(iv) The Executive will return to the Company all copies of all
confidential and proprietary information concerning the Company, in
whatever medium it may be incorporated, and any and all assets of the
Company, including without limitation, automobiles, computers, credit
cards and other tangible and intangible property in his possession or
under his control as of the Termination Date.
4.5 Death of Executive. If the Executive dies after the Termination Date
------------------
but before the end of the Continuation Period, the remaining payments due under
this Agreement will be paid to the Executive's estate, after verification of the
proper recipient, in accordance with governing law based on the advice of legal
counsel to the Company. In the event of any delay in the making of payments
resulting from such verification, no interest will be earned or payable to the
Executive's estate.
V. Miscellaneous
-------------
5.1 Disputes. In the event that any dispute concerning the interpretation
--------
or implementation of this Agreement is not resolved by the Executive and the
Company within 30 days after written notice, specifying the nature of the
dispute, is given by the Executive or the Company to the other, either party may
submit the dispute to binding arbitration. Such binding arbitration shall be
conducted in Boston, Massachusetts by a three member panel acting under the
commercial arbitration rules of the American Arbitration Association. One
member of the panel shall be selected by the Executive, one by the Company and
the third by the agreement of the other two arbitrators so selected. Costs of
the arbitration shall be shared in the manner determined by the arbitration
panel. The decision of the arbitration panel shall be final and conclusive on
the parties and not subject to separate determination or review by a third
party.
5.2 Amendments. Any amendments to this Agreement must be in writing and
----------
signed by the Company and the Executive.
5.3 No Right to Employment or Benefits. This Agreement does not
----------------------------------
constitute or imply an obligation or undertaking to employ the Executive for any
particular period of time or in any position or any limitation on the right of
the Company to
<PAGE>
terminate the employment of the Executive for any or no reason. Payments
hereunder will not create, continue or evidence any employment relationship with
the Company. All employment privileges, benefits or perquisites not specifically
continued hereunder shall cease on the Termination Date.
5.4 Governing Law. This Agreement shall be construed under and governed
-------------
by the law of The Commonwealth of Massachusetts, without regard to its conflict
of laws provisions.
5.5 Notices. All notices required or permitted hereunder shall be deemed
-------
properly sent if mailed by prepaid certified or registered mail, return receipt
requested, or delivered by hand, or sent by bona fide overnight courier with
return receipt, to the following addresses or to any other addresses properly
noticed in accordance with this Section:
If to the Company: 734 Forest Street
Marlboro, MA 01752-3032
Attention: President
If to the Executive: At the address specified on
the signature page to this Agreement
All notices shall be deemed received on the actual date of their receipt, or if
delivery is refused, on the date delivery is refused.
5.6 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors and permitted assigns.
The Executive may not assign this Agreement without the consent of the Company.
The Company may assign this Agreement without the consent of the Executive to
any entity which succeeds to all or any part of its business.
5.7 Enforceability. If any portion or provision of this Agreement shall
--------------
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of such portion
or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date and year first above written.
INNOVASIVE DEVICES, INC.
By: Richard Randall
Title: President
_______________________
Signature of Executive
Alan Chervitz
- -------------
Typed or Printed Name of Executive
10 Stoney Brook Road
Hopkinton, MA
- --------------
Address of Executive
<PAGE>
Exhibit 10.4
Income Continuation Agreement between the Registrant and Ricardo J. Simmons,
Vice President, Sales and Marketing
INCOME CONTINUATION AGREEMENT
This Agreement is made as of the 6th day of April, 1999 by and between
Innovasive Devices, Inc. and the executive whose name is set forth on the
signature page of this Agreement (the "Executive").
I. Introduction.
------------
The Executive is Executive Vice President, Sales and Marketing of the
Company. The Company wishes to provide financial transition and stability for
the Executive and to assist the Executive if the Executive is terminated without
Cause by the Company and if there is Change of Control of the Company.
II. Definitions.
-----------
As used in this Agreement, the following terms have the definitions
indicated.
2.1 "Cause" means termination
(a) for the Executive's dishonesty or willful misconduct
involving the Company;
(b) as a result of the Executive's material neglect of his
duties, if the Company has given the Executive notice specifying the
act or omission constituting such neglect and the Executive has
continued the noticed behavior after receipt of the notice; or
(c) following the Executive's conviction of a felony or any crime
involving moral turpitude.
2.2 "Change of Control" means
(a) a sale of all or substantially all of the assets of the
Company;
(b) a sale of all or substantially all of the stock of the
Company;
(c) a merger or consolidation involving the Company as a result
of which the persons entitled to elect a majority of the directors of
the Company prior to the merger or consolidation are unable to do so
following the merger or consolidation;
(d) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under The Exchange Act) directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
(e) persons who, as the date of this agreement, constituted the
Company's Board of Directors (the "Incumbent Board") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least
a majority of the Company's Board of Directors, provided that any
person becoming a director of the Company after the date of this
Agreement whose election was approved by at least a majority of the
directors then comprising the Incumbent Board shall, for purposes of
this definition, be considered a member of the Incumbent Board; or
(f) the stockholders of the Company approve a plan of liquidation
of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
2.4 "Company" means Innovasive Devices, Inc. and its parents and
subsidiaries and shall also include their respective successors and
assigns.
2.5 "Continuation Period" means
(a) one year following the Termination Date if the Service Period
of the Executive is less than three years as of the Termination Date;
and
(b) two years following the Termination Date if the Service
Period of the Executive is at least three years.
2.6 "Diminution of Job Responsibility" means a diminution or reduction in
the Executive's principal job responsibilities, duties, reporting
responsibilities, title or position, a reduction in the Executive's
base salary or employee fringe benefits, or any other material
adverse change in the terms and conditions of the Executive's
employment.
2.7 "Executive" means the person whose name is set forth on the signature
page to this Agreement.
2.8 "Income Continuation Payments" means the payments and benefit
continuations described in Article IV of this Agreement.
2.9 "Relocation" means a requirement that the Executive regularly perform
services at a location that is more than 50 miles from the
Executive's customary place of business as of the date of this
Agreement.
2.10 "Service Period" means the period of time during which the Executive
has been employed by the Company and, if applicable, by
MedicineLodge, Inc.
2.11 "Termination Date" means the effective date of the Executive's
termination as an employee of the Company.
III. Entitlement to Income Continuation.
----------------------------------
Subject to the provisions of this Agreement, the Executive shall have the
right to receive Income Continuation Payments if the Executive, as of the date
of or within 12 months following a Change of Control:
(a) is terminated by the Company or any successor to the Company
without Cause;
(b) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Diminution of Job
Responsibility; or
(c) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Relocation.
IV. Specification of Income Continuation Payments
---------------------------------------------
4.1 Elements of Income Continuation Payments. In the event that the
----------------------------------------
Executive becomes entitled to Income Continuation Payments as the result of an
action specified in Article III of this Agreement, the Executive shall be
entitled to the following, subject to the limitation set forth in Section 4.3:
(a) Base Salary. The Executive shall be entitled to receive his base
-----------
salary for the Continuation Period at the highest rate of base salary
received by the Executive during the one year period preceding the
Termination Date. Such amount shall be paid monthly in arrears, ratably
over the Continuation Period.
(b) Incentive Compensation. The Executive shall be entitled to
----------------------
receive the average of the payments made during the two full fiscal years
of the Company immediately preceding the Termination Date under any
incentive plan of which the Executive is a participant for the fiscal year
of the Company in which the Termination
<PAGE>
Date occurs. Incentive Compensation payments shall be paid at the time that
such payments are required to be made under the applicable incentive plan.
(c) Continuation of Health Plan Contributions. During the
-----------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of health insurance paid by the
Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive (and, if they were covered prior to the
Termination Date, the Executive's family) under the Company's health
insurance plans to the maximum extent the Executive was covered thereunder
during the one year period prior to the Termination Date.
(d) Continuation of Premiums for Life Insurance. During the
-------------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of life insurance premiums paid by
the Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive under the Company's life insurance plans to
the maximum extent the Executive was covered thereunder during the one year
period prior to the Termination Date.
(e) Continuation of Premiums for Long Term Disability Insurance.
-----------------------------------------------------------
During the Continuation Period, the Company will continue to contribute on
behalf of the Executive the portion of the cost of long term disability
insurance premiums paid by the Company on behalf of the Executive as of the
Termination Date and will continue to cover the Executive under the
Company's long term disability insurance plans to the maximum extent the
Executive was covered thereunder during the one year period prior to the
Termination Date.
(f) COBRA Benefits. The Executive will have the option at his or her
--------------
expense, and to the extent required by federal and state law, to be covered
by the Company's health insurance plans for an eighteen month period
following the end of the Continuation Period.
(g) Acceleration of Stock Options.
-----------------------------
(i) Any options held by the Executive as of the date of a
Change of Control which are not exercisable by their terms as of the
date of such Change of Control shall become exercisable as follows,
subject to the provisions of subsection (ii) below: 50% of such
options shall become fully exercisable immediately prior to the
Change of Control and 50% of such options shall become fully
exercisable on the first anniversary date of the Change of Control
(unless by their terms they become exercisable sooner). Such options
shall remain exercisable until the date which is ninety-one days
following the first anniversary of the Change of Control.
(ii) If as of the date of or within 12 months following a Change
of Control, the Executive is terminated without Cause or the
Executive voluntarily terminates his Employment with the Company as
the result of a Diminution of Job Responsibility or Relocation, all
options held by the Executive as of the Termination Date and not
exercisable by their terms as of such date shall become fully
exercisable on the Termination Date and shall remain exercisable for
90 days thereafter.
(iii) The Executive acknowledges that the accelerations herein
provided may have the effect of converting Incentive Stock Options
into non-qualified stock options.
4.2 Pension and Profit Sharing Contributions. The Company's obligation to
----------------------------------------
contribute to pension and/or profit sharing plans on behalf of the Executive
shall terminate on the Termination Date.
4.3 Limitation on Continuation Payments. Notwithstanding anything to the
-----------------------------------
contrary contained in this Agreement, if it is determined that any payment to
the Executive pursuant to this Article III or any other payment or benefit from
the Company (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or would constitute any excess parachute payment under Section
280G of the Code, then the amount payable under Section 4.1(a) shall be reduced
so that the aggregate amount of Payments shall be $1.00 less than the amount
which would subject the Payment to such excise tax or treatment.
<PAGE>
4.4 Conditions to Receipt of Income Continuation Payments. The obligation
-----------------------------------------------------
of the Company or its successor to pay Income Continuation Payments is subject
to the following conditions:
(a) Written Release. Prior to making any payment to or any
---------------
contribution on behalf of the Executive, the Company shall have received
from the Executive a written release of all claims by or through the
Executive and against the Company, its stockholders, directors, officers,
employees, representatives and successors by reason of the Executive's
termination. Such written release shall be signed and delivered by the
Executive in a form approved by the President of the Company or its
successor. In addition, if in the opinion of counsel for the Company or
its successor, waiting periods (not to exceed 21 days in the aggregate) are
required under any federal or state law in order to make such written
release binding and enforceable on the Executive, such waiting period shall
have expired prior to the payment of any Income Continuation Payment
hereunder.
(b) Set Off of Debts and Claims. The Company may offset Income
---------------------------
Continuation Payments hereunder with the amount of any overdue debts or
claims owed by the Executive or any dependent of the Executive to the
Company as of the Termination Date.
(c) Taxes. All Income Continuation Payments are subject to
-----
withholding of all taxes and other amounts required by law to be withheld
or paid to others.
(d) Non-disparagement; Non-disclosure; Non-Competition. Payment
--------------------------------------------------
of Income Continuation Payments shall be conditioned on the following:
(i) The Executive shall observe a strict public non-
disparagement policy precluding the Executive during the
Continuation Period from publicly disparaging or criticizing the
Company, its business or operations, its policies, publications,
practices or personnel or those of its successor.
(ii) The Executive will not disclose to any third party any
confidential or proprietary information of the Company or its
successors.
(iii) The Executive will observe any non-competition or non-
solicitation restrictions relating to the Company and the
successor applicable to the Executive under any written
agreements between the Executive and the Company or its
successors and in effect as of the Termination Date.
(iv) The Executive will return to the Company all copies of
all confidential and proprietary information concerning the
Company, in whatever medium it may be incorporated, and any and
all assets of the Company, including without limitation,
automobiles, computers, credit cards and other tangible and
intangible property in his possession or under his control as of
the Termination Date.
4.5 Death of Executive. If the Executive dies after the Termination Date
------------------
but before the end of the Continuation Period, the remaining payments due under
this Agreement will be paid to the Executive's estate, after verification of the
proper recipient, in accordance with governing law based on the advice of legal
counsel to the Company. In the event of any delay in the making of payments
resulting from such verification, no interest will be earned or payable to the
Executive's estate.
V. Miscellaneous
-------------
5.1 Disputes. In the event that any dispute concerning the interpretation
--------
or implementation of this Agreement is not resolved by the Executive and the
Company within 30 days after written notice, specifying the nature of the
dispute, is given by the Executive or the Company to the other, either party may
submit the dispute to binding arbitration. Such binding arbitration shall be
conducted in Boston, Massachusetts by a three member panel acting under the
commercial arbitration rules of the American Arbitration Association. One member
of the panel shall be selected by the Executive, one by the Company and the
third by the agreement of the other two arbitrators so selected. Costs of the
arbitration shall be shared in the manner determined by the arbitration panel.
The decision of the arbitration panel shall be final and conclusive on the
parties and not subject to separate determination or review by a third party.
5.2 Amendments. Any amendments to this Agreement must be in writing and
----------
signed by the Company and the Executive.
<PAGE>
5.3 No Right to Employment or Benefits. This Agreement does not constitute
----------------------------------
or imply an obligation or undertaking to employ the Executive for any particular
period of time or in any position or any limitation on the right of the Company
to terminate the employment of the Executive for any or no reason. Payments
hereunder will not create, continue or evidence any employment relationship with
the Company. All employment privileges, benefits or perquisites not specifically
continued hereunder shall cease on the Termination Date.
5.4 Governing Law. This Agreement shall be construed under and governed by
-------------
the law of The Commonwealth of Massachusetts, without regard to its conflict of
laws provisions.
5.5 Notices. All notices required or permitted hereunder shall be deemed
-------
properly sent if mailed by prepaid certified or registered mail, return receipt
requested, or delivered by hand, or sent by bona fide overnight courier with
return receipt, to the following addresses or to any other addresses properly
noticed in accordance with this Section:
If to the Company: 734 Forest Street
Marlboro, MA 01752-3032
Attention: President
If to the Executive: At the address specified on
the signature page to this Agreement
All notices shall be deemed received on the actual date of their receipt, or if
delivery is refused, on the date delivery is refused.
5.6 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors and permitted assigns.
The Executive may not assign this Agreement without the consent of the Company.
The Company may assign this Agreement without the consent of the Executive to
any entity which succeeds to all or any part of its business.
5.7 Enforceability. If any portion or provision of this Agreement shall
--------------
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of such portion
or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date and year first above written.
INNOVASIVE DEVICES, INC.
By: Richard Randall
Title: President
______________________
Signature of Executive
Ricardo J. Simmons
- ------------------
Typed or Printed Name of Executive
107 Jefferson Road
Franklin, MA 02038
- -------------------
Address of Executive
<PAGE>
Exhibit 10.5
Income Continuation Agreement between the Registrant and Eric Bannon,
Vice President, Regulatory and QA
INCOME CONTINUATION AGREEMENT
This Agreement is made as of the 6th day of April, 1999 by and between
Innovasive Devices, Inc. and the executive whose name is set forth on the
signature page of this Agreement (the "Executive").
I. Introduction.
------------
The Executive is Executive Vice President, Regulatory and QA of the
Company. The Company wishes to provide financial transition and stability for
the Executive and to assist the Executive if the Executive is terminated without
Cause by the Company and if there is Change of Control of the Company.
II. Definitions.
-----------
As used in this Agreement, the following terms have the definitions
indicated.
2.1 "Cause" means termination
(a) for the Executive's dishonesty or willful misconduct
involving the Company;
(b) as a result of the Executive's material neglect of his
duties, if the Company has given the Executive notice specifying the
act or omission constituting such neglect and the Executive has
continued the noticed behavior after receipt of the notice; or
(c) following the Executive's conviction of a felony or any crime
involving moral turpitude.
2.2 "Change of Control" means
(a) a sale of all or substantially all of the assets of the
Company;
(b) a sale of all or substantially all of the stock of the
Company;
(c) a merger or consolidation involving the Company as a result
of which the persons entitled to elect a majority of the directors of
the Company prior to the merger or consolidation are unable to do so
following the merger or consolidation;
(d) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under The Exchange Act) directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
(e) persons who, as the date of this agreement, constituted the
Company's Board of Directors (the "Incumbent Board") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least
a majority of the Company's Board of Directors, provided that any
person becoming a director of the Company after the date of this
Agreement whose election was approved by at least a majority of the
directors then comprising the Incumbent Board shall, for purposes of
this definition, be considered a member of the Incumbent Board; or
(f) the stockholders of the Company approve a plan of liquidation
of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
2.4 "Company" means Innovasive Devices, Inc. and its parents and
subsidiaries and shall also include their respective successors and
assigns.
2.5 "Continuation Period" means
(a) one year following the Termination Date if the Service Period
of the Executive is less than three years as of the Termination Date;
and
(b) two years following the Termination Date if the Service
Period of the Executive is at least three years.
2.6 "Diminution of Job Responsibility" means a diminution or reduction in
the Executive's principal job responsibilities, duties, reporting
responsibilities, title or position, a reduction in the Executive's
base salary or employee fringe benefits, or any other material
adverse change in the terms and conditions of the Executive's
employment.
2.7 "Executive" means the person whose name is set forth on the signature
page to this Agreement.
2.8 "Income Continuation Payments" means the payments and benefit
continuations described in Article IV of this Agreement.
2.9 "Relocation" means a requirement that the Executive regularly perform
services at a location that is more than 50 miles from the
Executive's customary place of business as of the date of this
Agreement.
2.10 "Service Period" means the period of time during which the Executive
has been employed by the Company and, if applicable, by
MedicineLodge, Inc.
2.11 "Termination Date" means the effective date of the Executive's
termination as an employee of the Company.
III. Entitlement to Income Continuation.
----------------------------------
Subject to the provisions of this Agreement, the Executive shall have the
right to receive Income Continuation Payments if the Executive, as of the date
of or within 12 months following a Change of Control:
(a) is terminated by the Company or any successor to the Company
without Cause;
(b) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Diminution of Job
Responsibility; or
(c) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Relocation.
IV. Specification of Income Continuation Payments
---------------------------------------------
4.1 Elements of Income Continuation Payments. In the event that the
----------------------------------------
Executive becomes entitled to Income Continuation Payments as the result of an
action specified in Article III of this Agreement, the Executive shall be
entitled to the following, subject to the limitation set forth in Section 4.3:
(a) Base Salary. The Executive shall be entitled to receive his base
-----------
salary for the Continuation Period at the highest rate of base salary
received by the Executive during the one year period preceding the
Termination Date. Such amount shall be paid monthly in arrears, ratably
over the Continuation Period.
(b) Incentive Compensation. The Executive shall be entitled to
----------------------
receive the average of the payments made during the two full fiscal years
of the Company immediately preceding the Termination Date under any
incentive plan of which the Executive is a participant for the fiscal year
of the Company in which the Termination
<PAGE>
Date occurs. Incentive Compensation payments shall be paid at the time
that such payments are required to be made under the applicable incentive
plan.
(c) Continuation of Health Plan Contributions. During the
-----------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of health insurance paid by the
Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive (and, if they were covered prior to the
Termination Date, the Executive's family) under the Company's health
insurance plans to the maximum extent the Executive was covered thereunder
during the one year period prior to the Termination Date.
(d) Continuation of Premiums for Life Insurance. During the
-------------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of life insurance premiums paid by
the Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive under the Company's life insurance plans
to the maximum extent the Executive was covered thereunder during the one
year period prior to the Termination Date.
(e) Continuation of Premiums for Long Term Disability Insurance.
-----------------------------------------------------------
During the Continuation Period, the Company will continue to contribute on
behalf of the Executive the portion of the cost of long term disability
insurance premiums paid by the Company on behalf of the Executive as of
the Termination Date and will continue to cover the Executive under the
Company's long term disability insurance plans to the maximum extent the
Executive was covered thereunder during the one year period prior to the
Termination Date.
(f) COBRA Benefits. The Executive will have the option at his or her
--------------
expense, and to the extent required by federal and state law, to be
covered by the Company's health insurance plans for an eighteen month
period following the end of the Continuation Period.
(g) Acceleration of Stock Options.
-----------------------------
(i) Any options held by the Executive as of the date of a
Change of Control which are not exercisable by their terms as of the
date of such Change of Control shall become exercisable as follows,
subject to the provisions of subsection (ii) below: 50% of such
options shall become fully exercisable immediately prior to the
Change of Control and 50% of such options shall become fully
exercisable on the first anniversary date of the Change of Control
(unless by their terms they become exercisable sooner). Such options
shall remain exercisable until the date which is ninety-one days
following the first anniversary of the Change of Control.
(ii) If as of the date of or within 12 months following a Change
of Control, the Executive is terminated without Cause or the
Executive voluntarily terminates his Employment with the Company as
the result of a Diminution of Job Responsibility or Relocation, all
options held by the Executive as of the Termination Date and not
exercisable by their terms as of such date shall become fully
exercisable on the Termination Date and shall remain exercisable for
90 days thereafter.
(iii) The Executive acknowledges that the accelerations herein
provided may have the effect of converting Incentive Stock Options
into non-qualified stock options.
4.2 Pension and Profit Sharing Contributions. The Company's obligation to
----------------------------------------
contribute to pension and/or profit sharing plans on behalf of the Executive
shall terminate on the Termination Date.
4.3 Limitation on Continuation Payments. Notwithstanding anything to the
-----------------------------------
contrary contained in this Agreement, if it is determined that any payment to
the Executive pursuant to this Article III or any other payment or benefit from
the Company (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or would constitute any excess parachute payment under Section
280G of the Code, then the amount payable under Section 4.1(a) shall be reduced
so that the aggregate amount of Payments shall be $1.00 less than the amount
which would subject the Payment to such excise tax or treatment.
<PAGE>
4.4 Conditions to Receipt of Income Continuation Payments. The obligation
-----------------------------------------------------
of the Company or its successor to pay Income Continuation Payments is subject
to the following conditions:
(a) Written Release. Prior to making any payment to or any
---------------
contribution on behalf of the Executive, the Company shall have received
from the Executive a written release of all claims by or through the
Executive and against the Company, its stockholders, directors, officers,
employees, representatives and successors by reason of the Executive's
termination. Such written release shall be signed and delivered by the
Executive in a form approved by the President of the Company or its
successor. In addition, if in the opinion of counsel for the Company or
its successor, waiting periods (not to exceed 21 days in the aggregate)
are required under any federal or state law in order to make such written
release binding and enforceable on the Executive, such waiting period
shall have expired prior to the payment of any Income Continuation Payment
hereunder.
(b) Set Off of Debts and Claims. The Company may offset Income
---------------------------
Continuation Payments hereunder with the amount of any overdue debts or
claims owed by the Executive or any dependent of the Executive to the
Company as of the Termination Date.
(c) Taxes. All Income Continuation Payments are subject to
-----
withholding of all taxes and other amounts required by law to be withheld
or paid to others.
(d) Non-disparagement; Non-disclosure; Non-Competition. Payment
--------------------------------------------------
of Income Continuation Payments shall be conditioned on the following:
(i) The Executive shall observe a strict public non-
disparagement policy precluding the Executive during the
Continuation Period from publicly disparaging or criticizing the
Company, its business or operations, its policies, publications,
practices or personnel or those of its successor.
(ii) The Executive will not disclose to any third party any
confidential or proprietary information of the Company or its
successors.
(iii) The Executive will observe any non-competition or non-
solicitation restrictions relating to the Company and the
successor applicable to the Executive under any written
agreements between the Executive and the Company or its
successors and in effect as of the Termination Date.
(iv) The Executive will return to the Company all copies of
all confidential and proprietary information concerning the
Company, in whatever medium it may be incorporated, and any and
all assets of the Company, including without limitation,
automobiles, computers, credit cards and other tangible and
intangible property in his possession or under his control as of
the Termination Date.
4.5 Death of Executive. If the Executive dies after the Termination Date
------------------
but before the end of the Continuation Period, the remaining payments due under
this Agreement will be paid to the Executive's estate, after verification of the
proper recipient, in accordance with governing law based on the advice of legal
counsel to the Company. In the event of any delay in the making of payments
resulting from such verification, no interest will be earned or payable to the
Executive's estate.
V. Miscellaneous
-------------
5.1 Disputes. In the event that any dispute concerning the interpretation
--------
or implementation of this Agreement is not resolved by the Executive and the
Company within 30 days after written notice, specifying the nature of the
dispute, is given by the Executive or the Company to the other, either party may
submit the dispute to binding arbitration. Such binding arbitration shall be
conducted in Boston, Massachusetts by a three member panel acting under the
commercial arbitration rules of the American Arbitration Association. One member
of the panel shall be selected by the Executive, one by the Company and the
third by the agreement of the other two arbitrators so selected. Costs of the
arbitration shall be shared in the manner determined by the arbitration panel.
The decision of the arbitration panel shall be final and conclusive on the
parties and not subject to separate determination or review by a third party.
5.2 Amendments. Any amendments to this Agreement must be in writing and
----------
signed by the Company and the Executive.
<PAGE>
5.3 No Right to Employment or Benefits. This Agreement does not
----------------------------------
constitute or imply an obligation or undertaking to employ the Executive for any
particular period of time or in any position or any limitation on the right of
the Company to terminate the employment of the Executive for any or no reason.
Payments hereunder will not create, continue or evidence any employment
relationship with the Company. All employment privileges, benefits or
perquisites not specifically continued hereunder shall cease on the Termination
Date.
5.4 Governing Law. This Agreement shall be construed under and governed
-------------
by the law of The Commonwealth of Massachusetts, without regard to its conflict
of laws provisions.
5.5 Notices. All notices required or permitted hereunder shall be deemed
-------
properly sent if mailed by prepaid certified or registered mail, return receipt
requested, or delivered by hand, or sent by bona fide overnight courier with
return receipt, to the following addresses or to any other addresses properly
noticed in accordance with this Section:
If to the Company: 734 Forest Street
Marlboro, MA 01752-3032
Attention: President
If to the Executive: At the address specified on
the signature page to this Agreement
All notices shall be deemed received on the actual date of their receipt, or if
delivery is refused, on the date delivery is refused.
5.6 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors and permitted assigns.
The Executive may not assign this Agreement without the consent of the Company.
The Company may assign this Agreement without the consent of the Executive to
any entity which succeeds to all or any part of its business.
5.7 Enforceability. If any portion or provision of this Agreement shall
--------------
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of such portion
or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date and year first above written.
INNOVASIVE DEVICES, INC.
By: Richard Randall
Title: President
______________________
Signature of Executive
Eric Bannon
- -----------
Typed or Printed Name of Executive
66 Barnett Road
Sutton, MA 01590
- ------------------
Address of Executive
<PAGE>
Exhibit 10.6
Income Continuation Agreement between the Registrant and T. Wade Fallin,
Vice President, Innovasive West
INCOME CONTINUATION AGREEMENT
This Agreement is made as of the 6th day of April, 1999 by and between
Innovasive Devices, Inc. and the executive whose name is set forth on the
signature page of this Agreement (the "Executive").
I. Introduction.
------------
The Executive is Vice President, Innovasive West of the Company. The
Company wishes to provide financial transition and stability for the Executive
and to assist the Executive if the Executive is terminated without Cause by the
Company and if there is Change of Control of the Company.
II. Definitions.
-----------
As used in this Agreement, the following terms have the definitions
indicated.
2.1 "Cause" means termination
(a) for the Executive's dishonesty or willful misconduct
involving the Company;
(b) as a result of the Executive's material neglect of his
duties, if the Company has given the Executive notice specifying the
act or omission constituting such neglect and the Executive has
continued the noticed behavior after receipt of the notice; or
(c) following the Executive's conviction of a felony or any crime
involving moral turpitude.
2.2 "Change of Control" means
(a) a sale of all or substantially all of the assets of the
Company;
(b) a sale of all or substantially all of the stock of the
Company;
(c) a merger or consolidation involving the Company as a result
of which the persons entitled to elect a majority of the directors of
the Company prior to the merger or consolidation are unable to do so
following the merger or consolidation;
(d) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") becomes a "beneficial owner" (as such term is defined
in Rule 13d-3 promulgated under The Exchange Act) directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
(e) persons who, as the date of this agreement, constituted the
Company's Board of Directors (the "Incumbent Board") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least
a majority of the Company's Board of Directors, provided that any
person becoming a director of the Company after the date of this
Agreement whose election was approved by at least a majority of the
directors then comprising the Incumbent Board shall, for purposes of
this definition, be considered a member of the Incumbent Board; or
(f) the stockholders of the Company approve a plan of liquidation
of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
2.4 "Company" means Innovasive Devices, Inc. and its parents and
subsidiaries and shall also include their respective successors and
assigns.
2.5 "Continuation Period" means
(a) one year following the Termination Date if the Service Period
of the Executive is less than three years as of the Termination Date;
and
(b) two years following the Termination Date if the Service
Period of the Executive is at least three years.
2.6 "Diminution of Job Responsibility" means a diminution or reduction in
the Executive's principal job responsibilities, duties, reporting
responsibilities, title or position, a reduction in the Executive's
base salary or employee fringe benefits, or any other material
adverse change in the terms and conditions of the Executive's
employment.
2.7 "Executive" means the person whose name is set forth on the signature
page to this Agreement.
2.8 "Income Continuation Payments" means the payments and benefit
continuations described in Article IV of this Agreement.
2.9 "Relocation" means a requirement that the Executive regularly perform
services at a location that is more than 50 miles from the
Executive's customary place of business as of the date of this
Agreement.
2.10 "Service Period" means the period of time during which the Executive
has been employed by the Company and, if applicable, by
MedicineLodge, Inc.
2.11 "Termination Date" means the effective date of the Executive's
termination as an employee of the Company.
III. Entitlement to Income Continuation.
----------------------------------
Subject to the provisions of this Agreement, the Executive shall have the
right to receive Income Continuation Payments if the Executive, as of the date
of or within 12 months following a Change of Control:
(a) is terminated by the Company or any successor to the Company
without Cause;
(b) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Diminution of Job
Responsibility; or
(c) voluntarily terminates his employment with the Company or any
successor to the Company as the result of a Relocation.
IV. Specification of Income Continuation Payments
---------------------------------------------
4.1 Elements of Income Continuation Payments. In the event that the
----------------------------------------
Executive becomes entitled to Income Continuation Payments as the result of an
action specified in Article III of this Agreement, the Executive shall be
entitled to the following, subject to the limitation set forth in Section 4.3:
(a) Base Salary. The Executive shall be entitled to receive his
-----------
base salary for the Continuation Period at the highest rate of base salary
received by the Executive during the one year period preceding the
Termination Date. Such amount shall be paid monthly in arrears, ratably
over the Continuation Period.
(b) Incentive Compensation. The Executive shall be entitled to
----------------------
receive the average of the payments made during the two full fiscal years
of the Company immediately preceding the Termination Date under any
incentive plan of which the Executive is a participant for the fiscal year
of the Company in which the Termination
<PAGE>
Date occurs. Incentive Compensation payments shall be paid at the time that
such payments are required to be made under the applicable incentive plan.
(c) Continuation of Health Plan Contributions. During the
-----------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of health insurance paid by the
Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive (and, if they were covered prior to the
Termination Date, the Executive's family) under the Company's health
insurance plans to the maximum extent the Executive was covered thereunder
during the one year period prior to the Termination Date.
(d) Continuation of Premiums for Life Insurance. During the
-------------------------------------------
Continuation Period, the Company will continue to contribute on behalf of
the Executive the portion of the cost of life insurance premiums paid by
the Company on behalf of the Executive as of the Termination Date and will
continue to cover the Executive under the Company's life insurance plans to
the maximum extent the Executive was covered thereunder during the one year
period prior to the Termination Date.
(e) Continuation of Premiums for Long Term Disability Insurance.
-----------------------------------------------------------
During the Continuation Period, the Company will continue to contribute on
behalf of the Executive the portion of the cost of long term disability
insurance premiums paid by the Company on behalf of the Executive as of the
Termination Date and will continue to cover the Executive under the
Company's long term disability insurance plans to the maximum extent the
Executive was covered thereunder during the one year period prior to the
Termination Date.
(f) COBRA Benefits. The Executive will have the option at his or her
--------------
expense, and to the extent required by federal and state law, to be covered
by the Company's health insurance plans for an eighteen month period
following the end of the Continuation Period.
(g) Acceleration of Stock Options.
-----------------------------
(i) Any options held by the Executive as of the date of a
Change of Control which are not exercisable by their terms as of the
date of such Change of Control shall become exercisable as follows,
subject to the provisions of subsection (ii) below: 50% of such
options shall become fully exercisable immediately prior to the Change
of Control and 50% of such options shall become fully exercisable on
the first anniversary date of the Change of Control (unless by their
terms they become exercisable sooner). Such options shall remain
exercisable until the date which is ninety-one days following the
first anniversary of the Change of Control.
(ii) If as of the date of or within 12 months following a
Change of Control, the Executive is terminated without Cause or the
Executive voluntarily terminates his Employment with the Company as
the result of a Diminution of Job Responsibility or Relocation, all
options held by the Executive as of the Termination Date and not
exercisable by their terms as of such date shall become fully
exercisable on the Termination Date and shall remain exercisable for
90 days thereafter.
(iii) The Executive acknowledges that the accelerations herein
provided may have the effect of converting Incentive Stock Options
into non-qualified stock options.
4.2 Pension and Profit Sharing Contributions. The Company's obligation to
----------------------------------------
contribute to pension and/or profit sharing plans on behalf of the Executive
shall terminate on the Termination Date.
4.3 Limitation on Continuation Payments. Notwithstanding anything to the
-----------------------------------
contrary contained in this Agreement, if it is determined that any payment to
the Executive pursuant to this Article III or any other payment or benefit from
the Company (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or would constitute any excess parachute payment under Section
280G of the Code, then the amount payable under Section 4.1(a) shall be reduced
so that the aggregate amount of Payments shall be $1.00 less than the amount
which would subject the Payment to such excise tax or treatment.
<PAGE>
4.4 Conditions to Receipt of Income Continuation Payments. The obligation
-----------------------------------------------------
of the Company or its successor to pay Income Continuation Payments is subject
to the following conditions:
(a) Written Release. Prior to making any payment to or any
---------------
contribution on behalf of the Executive, the Company shall have received
from the Executive a written release of all claims by or through the
Executive and against the Company, its stockholders, directors, officers,
employees, representatives and successors by reason of the Executive's
termination. Such written release shall be signed and delivered by the
Executive in a form approved by the President of the Company or its
successor. In addition, if in the opinion of counsel for the Company or its
successor, waiting periods (not to exceed 21 days in the aggregate) are
required under any federal or state law in order to make such written
release binding and enforceable on the Executive, such waiting period shall
have expired prior to the payment of any Income Continuation Payment
hereunder.
(b) Set Off of Debts and Claims. The Company may offset Income
---------------------------
Continuation Payments hereunder with the amount of any overdue debts or
claims owed by the Executive or any dependent of the Executive to the
Company as of the Termination Date.
(c) Taxes. All Income Continuation Payments are subject to
-----
withholding of all taxes and other amounts required by law to be withheld
or paid to others.
(d) Non-disparagement; Non-disclosure; Non-Competition. Payment
--------------------------------------------------
of Income Continuation Payments shall be conditioned on the following:
(i) The Executive shall observe a strict public non-
disparagement policy precluding the Executive during the
Continuation Period from publicly disparaging or criticizing the
Company, its business or operations, its policies, publications,
practices or personnel or those of its successor.
(ii) The Executive will not disclose to any third party any
confidential or proprietary information of the Company or its
successors.
(iii) The Executive will observe any non-competition or non-
solicitation restrictions relating to the Company and the
successor applicable to the Executive under any written
agreements between the Executive and the Company or its
successors and in effect as of the Termination Date.
(iv) The Executive will return to the Company all copies of
all confidential and proprietary information concerning the
Company, in whatever medium it may be incorporated, and any and
all assets of the Company, including without limitation,
automobiles, computers, credit cards and other tangible and
intangible property in his possession or under his control as of
the Termination Date.
4.5 Death of Executive. If the Executive dies after the Termination Date
------------------
but before the end of the Continuation Period, the remaining payments due under
this Agreement will be paid to the Executive's estate, after verification of the
proper recipient, in accordance with governing law based on the advice of legal
counsel to the Company. In the event of any delay in the making of payments
resulting from such verification, no interest will be earned or payable to the
Executive's estate.
V. Miscellaneous
-------------
5.1 Disputes. In the event that any dispute concerning the interpretation
--------
or implementation of this Agreement is not resolved by the Executive and the
Company within 30 days after written notice, specifying the nature of the
dispute, is given by the Executive or the Company to the other, either party may
submit the dispute to binding arbitration. Such binding arbitration shall be
conducted in Boston, Massachusetts by a three member panel acting under the
commercial arbitration rules of the American Arbitration Association. One member
of the panel shall be selected by the Executive, one by the Company and the
third by the agreement of the other two arbitrators so selected. Costs of the
arbitration shall be shared in the manner determined by the arbitration panel.
The decision of the arbitration panel shall be final and conclusive on the
parties and not subject to separate determination or review by a third party.
5.2 Amendments. Any amendments to this Agreement must be in writing and
----------
signed by the Company and the Executive.
<PAGE>
5.3 No Right to Employment or Benefits. This Agreement does not
----------------------------------
constitute or imply an obligation or undertaking to employ the Executive for any
particular period of time or in any position or any limitation on the right of
the Company to terminate the employment of the Executive for any or no reason.
Payments hereunder will not create, continue or evidence any employment
relationship with the Company. All employment privileges, benefits or
perquisites not specifically continued hereunder shall cease on the Termination
Date.
5.4 Governing Law. This Agreement shall be construed under and governed
-------------
by the law of The Commonwealth of Massachusetts, without regard to its conflict
of laws provisions.
5.5 Notices. All notices required or permitted hereunder shall be deemed
-------
properly sent if mailed by prepaid certified or registered mail, return receipt
requested, or delivered by hand, or sent by bona fide overnight courier with
return receipt, to the following addresses or to any other addresses properly
noticed in accordance with this Section:
If to the Company: 734 Forest Street
Marlboro, MA 01752-3032
Attention: President
If to the Executive: At the address specified on
the signature page to this Agreement
All notices shall be deemed received on the actual date of their receipt, or if
delivery is refused, on the date delivery is refused.
5.6 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties and their respective successors and permitted assigns.
The Executive may not assign this Agreement without the consent of the Company.
The Company may assign this Agreement without the consent of the Executive to
any entity which succeeds to all or any part of its business.
5.7 Enforceability. If any portion or provision of this Agreement shall
--------------
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement or the application of such portion
or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the date and year first above written.
INNOVASIVE DEVICES, INC.
By: Richard Randall
Title: President
______________________
Signature of Executive
T. Wade Fallin
- --------------
Typed or Printed Name of Executive
210 East 200 South
Hyde Park, UT 84318
- ---------------------
Address of Executive
<PAGE>
Exhibit 10.7
Employment Agreement, dated June 27, 1997, between Registrant and Alan Chervitz
Incorporated by reference to the Company's Form 10-Q for the Quarter ended June
30, 1997.
<PAGE>
Exhibit 10.8
Amendment to Employment Agreement, dated June 27, 1997, between Registrant and
Alan Chervitz
This Amendment to Employment Agreement is made as of the 20th day of May,
1999, by and between Alan Chervitz (the "Employee") and Innovasive Devices,
Inc., a Massachusetts corporation (the "Company").
1. The Employee and the Company are parties to an Employment Agreement dated as
of June 27, 1997 (the "Employment Agreement"). The Employee and the Company
are also parties to an Income Continuation Agreement date as of April 6th,
1999 (the "Income Continuation Agreement"). The Employee and the Company
wish to amend the Employment Agreement and the Income Continuation Agreement
to avoid certain inconsistencies in the Employment Agreement and the Income
Continuation Agreement.
2. The Employee and the Company agree that if the Employee becomes entitled to
receive Income Continuance Payments (as defined in the Income Continuation
Agreement) in the circumstances described in Article III of the Income
Continuation Agreement, the provisions of the Income Continuation Agreement
shall govern and the employee and the Company will not be subject to the
provisions of Section 4(a) and 5 of the Employment Agreement. In such an
event, the payment by the Company of Income Continuation Payments shall be
deemed to be payments required under Section 5 (I) of the Employment
Agreement for the purpose of Section 6(a) of the Employment Agreement.
3. In all other circumstances, the Employment Agreement shall remain in full
force and effect as written.
IN WITNESS WHEREOF, the parties have caused this amendment to Employment
Agreement to be executed and delivered as of the day and year first above
written.
_______________ INNOVASIVE DEVICES, INC.
Alan Chervitz
By:
Name: Richard D. Randall
Title: President and CEO
<PAGE>
Exhibit 10.9
Employment Agreement, dated June 27, 1997, between Registrant and T. Wade Fallin
Incorporated by reference to the Company's Form 10-Q for the Quarter ended June
30, 1997.
<PAGE>
Exhibit 10.10
Amendment to Employment Agreement, dated June 27, 1997, between Registrant and
T. Wade Fallin
This Amendment to Employment Agreement is made as of the 20th day of May,
1999, by and between Alan Chervitz (the "Employee") and Innovasive Devices,
Inc., a Massachusetts corporation (the "Company").
1. The Employee and the Company are parties to an Employment Agreement dated as
of June 27, 1997 (the "Employment Agreement"). The Employee and the Company are
also parties to an Income Continuation Agreement date as of April 6th, 1999 (the
"Income Continuation Agreement"). The Employee and the Company wish to amend the
Employment Agreement and the Income Continuation Agreement to avoid certain
inconsistencies in the Employment Agreement and the Income Continuation
Agreement.
2. The Employee and the Company agree that if the Employee becomes entitled to
receive Income Continuance Payments (as defined in the Income Continuation
Agreement) in the circumstances described in Article III of the Income
Continuation Agreement, the provisions of the Income Continuation Agreement
shall govern and the employee and the Company will not be subject to the
provisions of Section 4(a) and 5 of the Employment Agreement. In such an event,
the payment by the Company of Income Continuation Payments shall be deemed to be
payments required under Section 5 (I) of the Employment Agreement for the
purpose of Section 6(a) of the Employment Agreement.
3. In all other circumstances, the Employment Agreement shall remain in full
force and effect as written.
IN WITNESS WHEREOF, the parties have caused this amendment to Employment
Agreement to be executed and delivered as of the day and year first above
written.
_______________
T. Wade Fallin INNOVASIVE DEVICES, INC.
By:
Name: Richard D. Randall
Title: President and CEO
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,626
<SECURITIES> 6
<RECEIVABLES> 2,483
<ALLOWANCES> 157
<INVENTORY> 5,734
<CURRENT-ASSETS> 10,756
<PP&E> 4,402
<DEPRECIATION> 2,490
<TOTAL-ASSETS> 13,723
<CURRENT-LIABILITIES> 1,990
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 11,733
<TOTAL-LIABILITY-AND-EQUITY> 13,723
<SALES> 8,546
<TOTAL-REVENUES> 8,546
<CGS> 2,547
<TOTAL-COSTS> 2,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,589
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,589
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,589
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
</TABLE>
