SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 8, 1997
Derma Sciences, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 1-31070 23-2328753
(State or other jurisdiction (Commission (IRS employer
of incorporation) File Number) identification number)
121 West Grace Street
Old Forge, PA 18518
(717) 457-1232
(Address including zip code and telephone
number, of principal executive offices)
<PAGE>
Item 5. Other Events
The Board of Directors of Derma Sciences, Inc. (the "Registrant") has
recently authorized the hiring of Richard S. Mink and Charles F. Caudell III as
Vice President for Marketing and Vice President for Sales, respectively. The
Registrant has executed employment agreements with Messrs. Mink and Caudell,
which, inter alia, provide as follows: (1) base salary of $150,000 per year,
together with (in the case of Richard Mink only) a $25,000 sign-on bonus; (2)
incentive compensation as may be awarded upon the recommendation of the Office
of the Chief Executive and approved by the Board of Directors; provided,
however, incentive compensation, if any, shall be predicated upon the extent to
which the Registrant attains its earnings goals and the extent of the officer's
contributions thereto; and (3) 150,000 non-qualified stock options, exercisable
at the lower of $1.1875 or the per share price in the Registrant's contemplated
private offering, which options become exercisable to the extent of 50%, 75% and
100% upon completion of six, eighteen and twenty-four months of employment,
respectively.
These options become 100% exercisable if the officer becomes disabled, the
agreement is terminated by the Registrant other than "for cause," the agreement
is terminated by the officer for the Registrant's breach, upon the sale of
substantially all of the stock or assets of the Registrant, or upon the merger
or consolidation of the Registrant in which the Registrant is not the surviving
entity. Upon the sale of substantially all of the stock or assets of the
Registrant, or upon the merger or consolidation of the Registrant in which the
Registrant is not the surviving entity, the Registrant shall pay the officer a
severance payment equal to the greater of his salary for the remaining term of
the agreement or $150,000. The officer may not disclose any confidential
information of the Registrant during or after the term of the agreement, and may
not compete with the Registrant during the term of the agreement and for a
period of one year thereafter. These employment agreements are attached hereto
as Exhibits 10.01 and 10.02.
Robert P. DiGiovine has been promoted to the position of Vice President for
Scientific Affairs. His former position was Director of Regulatory Compliance
and Product Development. The Registrant has executed an amendment to Mr.
DiGiovine's employment agreement that, inter alia, provides as follows: (1) base
salary of $100,000 vice $80,000; and (2) incentive compensation as may be
awarded upon the recommendation of the Office of the Chief Executive and
approved by the Board of Directors; provided, however, incentive compensation,
if any, shall be predicated upon the extent to which the Registrant attains its
earnings goals and the extent of Mr. DiGiovine's contributions thereto.
Stock options granted in the original agreement now become 100% exercisable
if Mr. DiGiovine becomes disabled, the agreement is terminated by the Registrant
other than "for cause," the agreement is terminated by Mr. DiGiovine for the
Registrant's breach, upon the sale of substantially all of the stock or assets
of the Registrant, or upon the merger or consolidation of the Registrant in
which the Registrant is not the surviving entity. Upon the sale of substantially
all of the stock or assets of the Registrant, or upon the merger or
consolidation of the Registrant in which the Registrant is not the surviving
entity, the Registrant shall pay Mr. DiGiovine a severance payment equal to the
greater of his salary for the remaining term of the agreement or $100,000. He
may not disclose any confidential information of the Registrant during or after
the term of the agreement, and may not compete with the Registrant during the
term of the agreement and for a period of one year thereafter. This employment
agreement is attached hereto as Exhibit 10.03.
The Board of Directors has approved certain amendments to the employment
agreement of Edward J. Quilty, Chairman of the Board. The agreement has been
amended to provide: (1) base compensation of $125,000 vice $75,000; (2)
repricing of stock options granted in the original agreement to the lower of
$1.1875 or the per share price in the Registrant's contemplated private
offering; and (3) accelerated vesting relative to the aforementioned options.
This amended and restated employment agreement is attached hereto as Exhibit
10.04.
The Board of Directors has granted a total of 300,000 "non-qualified" stock
options to the following members of senior management: Edward J. Quilty, John T.
Borthwick, Gary L. Borthwick, Charles F. Caudell III, Robert P. DiGiovine and
Richard S. Mink. The six stock option agreements relative to the foregoing
options are identical and provide for a grant of 50,000 stock options each,
10,000 of which are immediately vested, and the remainder of which vest in
10,000 increments on April 8 each year up to April 8, 2001 at which time the
options will be fully vested. Vesting of the foregoing options may accelerate as
follows: (1) 25,000 of the options will vest if either net sales exceed
$6,000,000 in a 12 consecutive month period or the Registrant's common stock
price for 180 consecutive days exceeds $3.00 per share; and (2) all 50,000 of
the options will vest if either net sales exceed $8,000,000 in a 12 consecutive
month period or the Registrant's common stock price for 180 consecutive days
exceeds $5.00 per share. The options expire April 8, 2007. These option
agreements are attached hereto as Exhibits 10.05, 10.06, 10.07, 10.08, 10.09 and
10.10.
<PAGE>
Statements that are not historical facts, including statements about the
Registrant's confidence and strategies, expectations about new or existing
products, technologies and opportunities, and market demand or acceptance of new
or existing products are forward-looking statements that involve risks and
uncertainties. These uncertainties include, but are not limited to, product
demand and market acceptance risks, impact of competitive products and prices,
product development, commercialization or technological delay or difficulties,
and trade, legal, social and economic risks.
Item 7. Financial Statements and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits:
Number Description
10.01 Employment Agreement dated April 14, 1997 between the
Registrant and Richard S. Mink.
10.02 Employment Agreement dated April 21, 1997 between the
Registrant and Charles F. Caudell, III.
10.03 Employment Agreement - Amendment and Restatement dated
April 30, 1997 between the Registrant and Robert P.
DiGiovine.
10.04 Employment Agreement - Amendment and Restatement dated
May 2, 1997 between the Registrant and Edward J. Quilty.
10.05 Senior Management Stock Option Agreement dated April 30,
1997 between the Registrant and Edward J. Quilty.
10.06 Senior Management Stock Option Agreement dated April 30,
1997 between the Registrant and John T. Borthwick.
10.07 Senior Management Stock Option Agreement dated April 30,
1997 between the Registrant and Gary L. Borthwick.
10.08 Senior Management Stock Option Agreement dated April 21,
1997 between the Registrant and Charles F. Caudell III.
10.09 Senior Management Stock Option Agreement dated April 30,
1997 between the Registrant and Robert P. DiGiovine.
10.10 Senior Management Stock Option Agreement dated April 14,
1997 between the Registrant and Richard S. Mink.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
DERMA SCIENCES, INC.
Date: May 6, 1997 By: /s/ John T. Borthwick
---------------------
John T. Borthwick
President
EMPLOYMENT AGREEMENT
THIS AGREEMENT made this 14th day of April 1997, by and between Derma
Sciences, Inc., a Pennsylvania corporation (hereinafter referred to as
"Employer") and Richard Mink (hereinafter referred to as "Employee").
WHEREAS, Employer desires to employ Employee as the Vice President for
Marketing of Employer, and
WHEREAS, Employee desires to so act,
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained, and intending to be legally bound, hereby agree
as follows:
1. Employment. Employer employs Employee, and Employee accepts employment,
as the Vice President for Marketing of Employer with powers and duties as may be
determined, from time to time, by the Office of the Chief Executive.
2. Term. The term of this Agreement shall begin on the date hereof and
shall terminate on the second anniversary hereof unless extended or sooner
terminated pursuant to the provisions hereof or by mutual consent of the parties
hereto (the "Term"). The Term hereof shall, from time to time and without
further action of the parties hereto, extend for one additional year if, not
later than ninety days prior to each anniversary hereof, Employer has not
notified Employee of its intention to terminate this Agreement upon the next
succeeding termination date.
3. Compensation. Employer shall pay Employee compensation under this
Agreement as set forth hereunder ("Compensation"):
(a) Signing Bonus. A signing bonus of $25,000 payable upon execution
hereof.
(b) Base Compensation. Base salary of $150,000 per year, payable
weekly ("Salary"); provided, however, Employer shall review Employee's
performance not later than six months from the date hereof and shall
consider increasing Employee's Salary if, in Employer's discretion, such
increase is warranted.
(c) Incentive Compensation. Incentive Compensation as may, from time
to time, be recommended by the Office of the Chief Executive and approved
by Employer's Board of Directors. Provided, however, such Incentive
Compensation, if any, shall be based upon, inter alia, the following
factors: (1) the extent to which Employer attains its objectives relative
to net sales, income from operations and net income, (2) the extent to
which Employee, by virtue of his responsibilities, is able to, and does,
influence the foregoing results, and (3) Employee's strategic contributions
to Employer. Provided further, that any such incentive compensation shall
not exceed Employee's Base Compensation in any year.
4. Stock Options. As additional compensation for services rendered,
Employer grants to Employee on the date hereof the right and option to purchase
all or any part of an aggregate of 150,000 shares of Employer's Common Stock
(the "Option"), subject to the vesting schedule set forth in subparagraph c
hereof and the adjustments set forth in subparagraph g hereof, which Option is a
nonqualified stock option. The Option is in all respects limited and conditioned
as provided hereunder.
(a) Purchase Price. Except as otherwise provided in subparagraph g
hereof, the purchase price (the "Option Price") of the shares covered by
the Option ("Option Shares") shall be the lower of the closing price of
Employer's Common Stock on the last day on which the Common Stock has
traded on the National Association of Securities Dealers Automated
Quotation System (Nasdaq) preceding the date of execution of this Agreement
or the price per share of the Common Stock offered in Employer's
contemplated private placement.
(b) Option Term. Except as otherwise provided herein, the Option shall
expire on the first to occur of: (i) Ninety (90) days following Employee's
termination of employment with Employer, or (ii) Ten (10) years from the
date of execution hereof.
(c) Exercise of Option. (i) Except as otherwise provided herein, the
right of Employee to exercise the Option is conditioned upon Employee being
in the employ of the Employer, whether pursuant to this Agreement or
otherwise. The Option shall become exercisable to the extent of 50%, 75%
and 100% upon completion by Employee of Six (6), Eighteen (18) and
Twenty-four (24) months of employment, respectively.
(ii) The Option may be exercised, in whole or in part, at any
time or times prior to the expiration or other termination thereof.
(iii) If this Agreement, and Employee's employment with Employer,
is terminated other than For Cause (as defined in paragraph 9) prior
to the expiration date of the Option, such Option may be exercised by
Employee, to the extent the Option is exercisable on the date of such
termination, or to any greater extent permitted by the Board of
Directors, at any time prior to the earlier of: (i) Three (3) months
after the date of termination, or (ii) the expiration date of such
Option. Provided, however, if this Agreement, and Employee's
employment, was terminated For Cause, Employee shall have no right to
exercise this Option on or after the date of such termination.
(iv) The Option shall accelerate and become 100% exercisable upon
the occurrence of the following: (A) Employee's Legal Disability; (B)
Employer's termination of this Agreement other than For Cause; (C)
"Change in Control" of Employer (as hereinafter defined) or (D)
termination of this Agreement by Employee for "Good Reason" (as
hereinafter defined).
(v) For purposes of this Agreement the following definitions
apply:
(A) "Legal Disability" shall mean either Employee has been unable
to substantially perform his duties hereunder by reason of illness,
accident or other physical or mental disability for a continuous
period of 180 days or an aggregate period of 270 days during any
continuous twelve-month period, or that in the opinion of the Board of
Directors, such opinion to be derived from the reports of three (3)
physicians of its choosing, Employee will be unable to substantially
perform his duties hereunder by reason of illness, accident or other
physical or mental disability for a continuous period of 180 days or
an aggregate period of 270 days during any continuous twelve-month
period.
(B) "Good Reason" shall mean a breach by Employer of its
obligations under this Agreement.
(C) "Change in Control" shall mean: (1) the sale by Employer of
all or substantially all of its assets to any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), the consolidation of Employer with any person, or the merger of
Employer with any person as a result of which merger Employer is not
the surviving entity, or if the surviving entity, Employer is owned by
a parent company; or (2) the sale or transfer by one or more of
Employer's shareholders in one or more transactions, related or
unrelated, to one or more persons under circumstances whereby any
person and its "affiliates" (as defined herein) shall own, as a result
of such sale or transfer thereafter, at least Fifty percent (50%) of
the outstanding shares of Employer. An "affiliate" shall mean any
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, any other person.
(d) Method of Exercising Option. (i) The Option may be exercised by
giving written notice, in form substantially as set forth in Exhibit 1
hereof, to Employer at its principal office, specifying the number of
Option Shares to be purchased and accompanied by payment in full of the
aggregate purchase price for the Shares. Only full Shares shall be
delivered and any fractional share which might otherwise be deliverable
upon exercise of an Option granted hereunder shall be forfeited.
(ii) The purchase price shall be payable in cash or its
equivalent.
(iii) Upon receipt of such notice and payment, Employer, within
three (3) business days after Exercise, shall deliver or cause to be
delivered a certificate or certificates representing the Shares with
respect to which the Option is exercised. The certificate or
certificates for such Shares shall be registered in the name of the
person exercising the Option (or, if Employee shall so request in the
notice exercising the Option, in the name of Employee and his spouse,
jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person exercising
the Option. In the event the Option is exercised by any person after
the death or Legal Disability of Employee, such notice shall be
accompanied by appropriate proof of the right of such person to
exercise the Option. All shares purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable by
Employer.
(e) Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by Employee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of Employee,
the Option shall be exercisable only by Employee or, in the event of his
Legal Disability, by his legal representative.
(f) Withholding of Taxes. The obligation of Employer to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
(g) Adjustments. The number of Option Shares and the Option Price
shall be adjusted as set forth herein:
(i) In the event that a stock dividend shall be declared on the
Common Stock payable in shares of the Common Stock, the Option Shares
shall be adjusted by adding to each Option Share the number of shares
which would be distributable thereon if such Option Share had been
outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend.
(ii) In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of Employer whether through
recapitalization, stock split, combination of shares, or otherwise,
then there shall be substituted for each Option Share the number and
kind of shares of stock or the securities into which each outstanding
share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
(iii) In the event that the outstanding shares of the Common
Stock shall be changed into or exchanged for shares of stock or other
securities of another corporation, whether through reorganization,
sale of assets, merger or consolidation in which Employer is the
surviving corporation, then there shall be substituted for each Option
Share the number and kind of shares of stock or the securities into
which each outstanding share of the Common Stock shall be so changed
or for which each such share shall be exchanged.
(h) Share Ownership. Neither Employee nor Employee's legal
representatives nor the executors or administrators of his estate shall be
or be deemed to be the holder of any share of Common Stock covered by an
Option unless and until a certificate for such share shall have been
issued.
5. Time and Efforts. Employee shall devote all of his business time and
efforts to the affairs of Employer save as specifically otherwise authorized by
the Board of Directors.
6. Disclosure of Information. Employee recognizes and acknowledges that he
will have access to certain confidential information of Employer and that such
information constitutes valuable, special and unique property of Employer.
Employee will not, during or after the term of his employment, disclose any of
such confidential information to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever unless ordered to do so by a
court or other tribunal or government agency with jurisdiction over the subject
matter and Employee. In the event of a breach or threatened breach by Employee
of the provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee from disclosing, in whole or in part, confidential
information of Employer, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such confidential information,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein shall be construed as prohibiting Employer from pursuing any
other remedies available to Employer for such breach or threatened breach,
including the recovery of damages from Employee.
7. Expenses. Employee may incur reasonable expenses for promoting
Employer's business, including expenses for entertainment, travel, and similar
items. Employer will reimburse Employee for all such expenses in accordance with
Employer's applicable policies, rules and regulations as from time to time
issued and amended.
8. Insurance. During the term of this Agreement, Employee will be covered
under Employer's Directors' and Officers' liability insurance to the same extent
Employer's directors and officers are covered.
9. Termination of Agreement.
(a) This Agreement may be terminated by Employer "For Cause". "For
Cause" has the following meaning: If Employee willfully breaches or
habitually neglects or fails to perform the duties which he is required to
perform under the terms of this Agreement, materially fails to follow the
reasonable directives or policies established by or at the direction of the
Board of Directors, or conducts himself in a manner materially detrimental
to the interests of Employer and such breach or failure of performance is
not cured within Thirty (30) days of the delivery to Employee of written
notice thereof, which notice shall have been approved by a majority of
Employer's Board of Directors, Employer may terminate this Agreement and
Employee's employment For Cause.
(b) This Agreement may be terminated by Employee for: (i) Good Reason
(as defined in paragraph 4(c)(v)(B)) if Employer fails to cure its breach
of obligation within Thirty (30) days of the delivery to Employer of
written notice of such breach, or (ii) upon a Change in Control of
Employer.
(c) This Agreement, and therefore Employee's employment with Employer,
shall terminate automatically upon Employee's death. If Employee has been
unable to substantially perform his duties hereunder by virtue of his Legal
Disability (as defined in paragraph 4(c)(vi)(A)), and Employee has not
resumed his duties to the satisfaction of the Board of Directors within
Thirty (30) days of the delivery to Employee of written notice thereof,
which notice shall have been approved by a majority of Employer's Board of
Directors, Employer may terminate this Agreement and Employee's employment.
10. Payments on Termination.
(a) If, prior to the expiration of this Agreement, Employee's
employment is terminated by Employee by reason of a Change in Control of
Employer, or by Employer other than For Cause, Employer shall pay to
Employee: (i) Employee's full Salary through the date of his termination,
and (ii) an amount equal to the greater of the aggregate Salary payments
which Employee would have received during the balance of the Term if such
termination had not occurred, or $150,000. All such Salary payments shall
be made not later than the fifth business day following the date of his
termination.
(b) During the Term, if Employee's employment is terminated For Cause,
Employee shall receive, on the next normal pay date following the date of
his termination, the Salary to which he is entitled through the date of his
termination. Provided, however, Employee shall not be denied the benefits
of paragraph 10.(a) and those set forth in paragraph 4.(c)(iv) unless the
cause for termination is one of willful breach rather than neglect of
duties as set forth in this Agreement.
(c) Employee shall not be required to mitigate the amount of any
payment provided for herein by seeking other employment or otherwise, nor
shall the amount of any payment provided for herein be reduced by any
compensation or retirement benefits heretofore or hereafter earned by
Employee as the result of employment by any other person, firm or
corporation.
<PAGE>
11. Restrictive Covenant. For a period of One (1) year after the
termination by Employer For Cause or by Employee other than for Good Reason or
pursuant to a Change in Control or expiration of this Agreement, Employee will
not, within the greater of the currently existing marketing area of Employer or
any future marketing area of Employer established during Employee's employment
under the terms of this Agreement, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of any business related to wound
care therapeutics or otherwise similar to the type of business conducted by
Employer at the time of the termination or expiration of this Agreement.
Provided, however, the aforementioned restrictions shall not be applicable to
activities in which Employee was, and continued to be, engaged in on the date of
this Agreement. In the event of Employee's actual or threatened breach of the
provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee therefrom. Nothing herein shall be construed as prohibiting
Employer from pursuing any other available remedies for such breach or
threatened breach, including the recovery of damages from Employee.
12. Outplacement Assistance. In the event this Agreement is terminated or
not renewed by Employer other than For Cause, Employer shall render to Employee
reasonable and appropriate outplacement assistance.
13. Waiver of Breach. The waiver by Employer of a breach of any provision
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in a writing
signed by an authorized officer of Employer and approved by an absolute majority
of Employer's board of directors.
14. Assignment. Employee acknowledges that the services to be rendered by
him are unique and personal. Accordingly, Employee may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Employer under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Employer.
15. Entire Agreement. This Agreement contains this entire understanding of
the parties. It may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
or discharge is sought to be charged.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
EMPLOYER
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty, Chairman
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick, President
EMPLOYEE
By: /s/ Richard Mink
----------------
Richard Mink
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise the nonqualified stock options granted to me as of
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased: ________________
Option price per Share: ________________
Total option price: ________________
Enclosed is my check in the amount of $_________. Please have the
certificate or certificates representing the purchased Shares registered in the
following name(s)1 ______________________________________and sent to
_________________________________.
DATED: ______________, ____.
OPTIONEE
__________________________________
- --------------------------
1Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
EMPLOYMENT AGREEMENT
THIS AGREEMENT made this 21st day of April 1997, by and between Derma
Sciences, Inc., a Pennsylvania corporation (hereinafter referred to as
"Employer") and Charles F. Caudell, III (hereinafter referred to as "Employee").
WHEREAS, Employer desires to employ Employee as the Vice President for
Sales of Employer, and
WHEREAS, Employee desires to so act,
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained, and intending to be legally bound, hereby agree
as follows:
1. Employment. Employer employs Employee, and Employee accepts employment,
as the Vice President for Sales of Employer with powers and duties as may be
determined, from time to time, by the Office of the Chief Executive.
2. Term. The term of this Agreement shall begin on the date hereof and
shall terminate on the second anniversary hereof unless extended or sooner
terminated pursuant to the provisions hereof or by mutual consent of the parties
hereto (the "Term"). The Term hereof shall, from time to time and without
further action of the parties hereto, extend for one additional year if, not
later than ninety days prior to each anniversary hereof, Employer has not
notified Employee of its intention to terminate this Agreement upon the next
succeeding termination date.
3. Compensation. Employer shall pay Employee compensation under this
Agreement as set forth hereunder ("Compensation"):
(a) Base Compensation. Base salary of $150,000 per year, payable
weekly ("Salary").
(b) Incentive Compensation. Incentive Compensation as may, from time
to time, be recommended by the Office of the Chief Executive and approved
by Employer's Board of Directors. Provided, however, such Incentive
Compensation, if any, shall be based upon, inter alia, the following
factors: (1) the extent to which Employer attains its objectives relative
to net sales, income from operations and net income, (2) the extent to
which Employee, by virtue of his responsibilities, is able to, and does,
influence the foregoing results, and (3) Employee's strategic contributions
to Employer. Provided further, that any such incentive compensation shall
not exceed Employee's Base Compensation in any year.
4. Stock Options. As additional compensation for services rendered,
Employer grants to Employee on the date hereof the right and option to purchase
all or any part of an aggregate of 150,000 shares of Employer's Common Stock
(the "Option"), subject to the vesting schedule set forth in subparagraph c
hereof and the adjustments set forth in subparagraph g hereof, which Option is a
nonqualified stock option. The Option is in all respects limited and conditioned
as provided hereunder.
(a) Purchase Price. Except as otherwise provided in subparagraph g
hereof, the purchase price (the "Option Price") of the shares covered by
the Option ("Option Shares") shall be the lower of the closing price of
Employer's Common Stock on the last day on which the Common Stock has
traded on the National Association of Securities Dealers Automated
Quotation System (Nasdaq) preceding the date of execution of this Agreement
or the price per share of the Common Stock offered in Employer's
contemplated private placement.
(b) Option Term. Except as otherwise provided herein, the Option shall
expire on the first to occur of: (i) Ninety (90) days following Employee's
termination of employment with Employer, or (ii) Ten (10) years from the
date of execution hereof.
(c) Exercise of Option. (i) Except as otherwise provided herein, the
right of Employee to exercise the Option is conditioned upon Employee being
in the employ of the Employer, whether pursuant to this Agreement or
otherwise. The Option shall become exercisable to the extent of 50%, 75%
and 100% upon completion by Employee of Six (6), Eighteen (18) and
Twenty-four (24) months of employment, respectively.
(ii) The Option may be exercised, in whole or in part, at any
time or times prior to the expiration or other termination thereof.
(iii) If this Agreement, and Employee's employment with Employer,
is terminated other than For Cause (as defined in paragraph 9) prior
to the expiration date of the Option, such Option may be exercised by
Employee, to the extent the Option is exercisable on the date of such
termination, or to any greater extent permitted by the Board of
Directors, at any time prior to the earlier of: (i) Three (3) months
after the date of termination, or (ii) the expiration date of such
Option. Provided, however, if this Agreement, and Employee's
employment, was terminated For Cause, Employee shall have no right to
exercise this Option on or after the date of such termination.
(iv) The Option shall accelerate and become 100% exercisable upon
the occurrence of the following: (A) Employee's Legal Disability; (B)
Employer's termination of this Agreement other than For Cause; (C)
"Change in Control" of Employer (as hereinafter defined) or (D)
termination of this Agreement by Employee for "Good Reason" (as
hereinafter defined).
(v) For purposes of this Agreement the following definitions
apply:
<PAGE>
(A) "Legal Disability" shall mean either Employee has been unable
to substantially perform his duties hereunder by reason of illness,
accident or other physical or mental disability for a continuous
period of 180 days or an aggregate period of 270 days during any
continuous twelve-month period, or that in the opinion of the Board of
Directors, such opinion to be derived from the reports of three (3)
physicians of its choosing, Employee will be unable to substantially
perform his duties hereunder by reason of illness, accident or other
physical or mental disability for a continuous period of 180 days or
an aggregate period of 270 days during any continuous twelve-month
period.
(B) "Good Reason" shall mean a breach by Employer of its
obligations under this Agreement.
(C) "Change in Control" shall mean: (1) the sale by Employer of
all or substantially all of its assets to any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), the consolidation of Employer with any person, or the merger of
Employer with any person as a result of which merger Employer is not
the surviving entity, or if the surviving entity, Employer is owned by
a parent company; or (2) the sale or transfer by one or more of
Employer's shareholders in one or more transactions, related or
unrelated, to one or more persons under circumstances whereby any
person and its "affiliates" (as defined herein) shall own, as a result
of such sale or transfer thereafter, at least Fifty percent (50%) of
the outstanding shares of Employer. An "affiliate" shall mean any
person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, any other person.
(d) Method of Exercising Option. (i) The Option may be exercised by
giving written notice, in form substantially as set forth in Exhibit 1
hereof, to Employer at its principal office, specifying the number of
Option Shares to be purchased and accompanied by payment in full of the
aggregate purchase price for the Shares. Only full Shares shall be
delivered and any fractional share which might otherwise be deliverable
upon exercise of an Option granted hereunder shall be forfeited.
(ii) The purchase price shall be payable in cash or its
equivalent.
(iii) Upon receipt of such notice and payment, Employer,
within three (3) business days after Exercise, shall deliver or
cause to be delivered a certificate or certificates representing
the Shares with respect to which the Option is exercised. The
certificate or certificates for such Shares shall be registered
in the name of the person exercising the Option (or, if Employee
shall so request in the notice exercising the Option, in the name
of Employee and his spouse, jointly, with right of survivorship)
and shall be delivered as provided above to or upon the written
order of the person exercising the Option. In the event the
Option is exercised by any person after the death or Legal
Disability of Employee, such notice shall be accompanied by
appropriate proof of the right of such person to exercise the
Option. All shares purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable by
Employer.
(e) Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by Employee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of Employee,
the Option shall be exercisable only by Employee or, in the event of his
Legal Disability, by his legal representative.
(f) Withholding of Taxes. The obligation of Employer to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
(g) Adjustments. The number of Option Shares and the Option Price
shall be adjusted as set forth herein:
(i) In the event that a stock dividend shall be declared on the
Common Stock payable in shares of the Common Stock, the Option Shares
shall be adjusted by adding to each Option Share the number of shares
which would be distributable thereon if such Option Share had been
outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend.
(ii) In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of Employer whether through
recapitalization, stock split, combination of shares, or otherwise,
then there shall be substituted for each Option Share the number and
kind of shares of stock or the securities into which each outstanding
share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
(iii) In the event that the outstanding shares of the Common
Stock shall be changed into or exchanged for shares of stock or other
securities of another corporation, whether through reorganization,
sale of assets, merger or consolidation in which Employer is the
surviving corporation, then there shall be substituted for each Option
Share the number and kind of shares of stock or the securities into
which each outstanding share of the Common Stock shall be so changed
or for which each such share shall be exchanged.
(h) Share Ownership. Neither Employee nor Employee's legal
representatives nor the executors or administrators of his estate shall be
or be deemed to be the holder of any share of Common Stock covered by an
Option unless and until a certificate for such share shall have been
issued.
5. Time and Efforts. Employee shall devote all of his business time and
efforts to the affairs of Employer save as specifically otherwise authorized by
the Board of Directors.
6. Disclosure of Information. Employee recognizes and acknowledges that he
will have access to certain confidential information of Employer and that such
information constitutes valuable, special and unique property of Employer.
Employee will not, during or after the term of his employment, disclose any of
such confidential information to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever unless ordered to do so by a
court or other tribunal or government agency with jurisdiction over the subject
matter and Employee. In the event of a breach or threatened breach by Employee
of the provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee from disclosing, in whole or in part, confidential
information of Employer, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such confidential information,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein shall be construed as prohibiting Employer from pursuing any
other remedies available to Employer for such breach or threatened breach,
including the recovery of damages from Employee.
7. Expenses. Employee may incur reasonable expenses for promoting
Employer's business, including expenses for entertainment, travel, and similar
items. Employer will reimburse Employee for all such expenses in accordance with
Employer's applicable policies, rules and regulations as from time to time
issued and amended.
8. Insurance. During the term of this Agreement, Employee will be covered
under Employer's Directors' and Officers' liability insurance to the same extent
Employer's directors and officers are covered.
9. Termination of Agreement.
(a) This Agreement may be terminated by Employer "For Cause". "For
Cause" has the following meaning: If Employee willfully breaches or
habitually neglects or fails to perform the duties which he is required to
perform under the terms of this Agreement, materially fails to follow the
reasonable directives or policies established by or at the direction of the
Board of Directors, or conducts himself in a manner materially detrimental
to the interests of Employer and such breach or failure of performance is
not cured within Thirty (30) days of the delivery to Employee of written
notice thereof, which notice shall have been approved by a majority of
Employer's Board of Directors, Employer may terminate this Agreement and
Employee's employment For Cause.
(b) This Agreement may be terminated by Employee for: (i) Good Reason
(as defined in paragraph 4(c)(v)(B)) if Employer fails to cure its breach
of obligation within Thirty (30) days of the delivery to Employer of
written notice of such breach, or (ii) upon a Change in Control of
Employer.
(c) This Agreement, and therefore Employee's employment with Employer,
shall terminate automatically upon Employee's death. If Employee has been
unable to substantially perform his duties hereunder by virtue of his Legal
Disability (as defined in paragraph 4(c)(vi)(A)), and Employee has not
resumed his duties to the satisfaction of the Board of Directors within
Thirty (30) days of the delivery to Employee of written notice thereof,
which notice shall have been approved by a majority of Employer's Board of
Directors, Employer may terminate this Agreement and Employee's employment.
10. Payments on Termination.
(a) If, prior to the expiration of this Agreement, Employee's
employment is terminated by Employee by reason of a Change in Control of
Employer, or by Employer other than For Cause, Employer shall pay to
Employee: (i) Employee's full Salary through the date of his termination,
and (ii) an amount equal to the greater of the aggregate Salary payments
which Employee would have received during the balance of the Term if such
termination had not occurred, or $150,000. All such Salary payments shall
be made not later than the fifth business day following the date of his
termination.
(b) During the Term, if Employee's employment is terminated For Cause,
Employee shall receive, on the next normal pay date following the date of
his termination, the Salary to which he is entitled through the date of his
termination.
(c) Employee shall not be required to mitigate the amount of any
payment provided for herein by seeking other employment or otherwise, nor
shall the amount of any payment provided for herein be reduced by any
compensation or retirement benefits heretofore or hereafter earned by
Employee as the result of employment by any other person, firm or
corporation.
<PAGE>
11. Restrictive Covenant. For a period of One (1) year after the
termination by Employer For Cause or by Employee other than for Good Reason or
pursuant to a Change in Control or expiration of this Agreement, Employee will
not, within the greater of the currently existing marketing area of Employer or
any future marketing area of Employer established during Employee's employment
under the terms of this Agreement, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of any business related to wound
care therapeutics or otherwise similar to the type of business conducted by
Employer at the time of the termination or expiration of this Agreement.
Provided, however, the aforementioned restrictions shall not be applicable to
activities in which Employee was, and continued to be, engaged in on the date of
this Agreement. In the event of Employee's actual or threatened breach of the
provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee therefrom. Nothing herein shall be construed as prohibiting
Employer from pursuing any other available remedies for such breach or
threatened breach, including the recovery of damages from Employee.
12. Outplacement Assistance. In the event this Agreement is terminated or
not renewed by Employer other than For Cause, Employer shall render to Employee
reasonable and appropriate outplacement assistance.
13. Waiver of Breach. The waiver by Employer of a breach of any provision
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in a writing
signed by an authorized officer of Employer and approved by an absolute majority
of Employer's board of directors.
14. Assignment. Employee acknowledges that the services to be rendered by
him are unique and personal. Accordingly, Employee may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Employer under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Employer.
15. Entire Agreement. This Agreement contains this entire understanding of
the parties. It may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
or discharge is sought to be charged.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
EMPLOYER
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty, Chairman
By: /s/ John T. Borthwick
---------------------
John T. Borthwick, President
EMPLOYEE
By: /s/ Charles F. Caudell, III
---------------------------
Charles F. Caudell, III
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise the nonqualified stock options granted to me as of
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased: ________________
Option price per Share: ________________
Total option price: ________________
Enclosed is my check in the amount of $_________. Please have the
certificate or certificates representing the purchased Shares registered in the
following name(s)1 ______________________________________and sent to
_________________________________.
DATED: ______________, ____.
OPTIONEE
__________________________________
- --------------------------
1Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
EMPLOYMENT AGREEMENT - AMENDMENT AND RESTATEMENT
THIS AMENDMENT AND RESTATEMENT (hereinafter referred to as "Agreement")
made this 30th day of April, 1997, by and between Derma Sciences, Inc., a
Pennsylvania corporation (hereinafter referred to as "Employer") and Robert P.
DiGiovine, RPh (hereinafter referred to as "Employee").
WHEREAS, Employer desires to promote Employee to Vice President for
Scientific Affairs of Employer,
WHEREAS, Employer and Employee entered into that certain employment
agreement dated December 29, 1995 (hereinafter referred to as the "1995
Agreement"), and
WHEREAS, the parties desire to amend and restate in its entirety the 1995
Agreement,
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained, and intending to be legally bound, hereby agree
as follows:
1. Employment. Employer employs Employee, and Employee accepts employment,
as the Vice President for Scientific Affairs of Employer with powers and duties
as may be determined, from time to time, by the Office of the Chief Executive.
2. Term. The term of this Agreement shall begin on April 14, 1997 and shall
terminate on the second anniversary hereof unless extended or sooner terminated
pursuant to the provisions hereof or by mutual consent of the parties hereto
(the "Term"). The Term hereof shall, from time to time and without further
action of the parties hereto, extend for one additional year if, not later than
Ninety (90) days prior to each anniversary hereof, Employer has not notified
Employee of its intention to terminate this Agreement upon the next succeeding
termination date.
3. Compensation. Employer shall pay Employee compensation under this
Agreement as set forth hereunder ("Compensation"):
(a) Base Compensation. Base salary of $100,000 per year, payable
weekly ("Salary"); provided, however, Employer shall review Employee's
performance not later than six months from the date hereof and shall
consider increasing Employee's Salary if, in Employer's discretion, such
increase is warranted.
(b) Incentive Compensation. Incentive Compensation as may, from time
to time, be recommended by the Office of the Chief Executive and approved
by Employer's Board of Directors. Provided, however, such Incentive
Compensation, if any, shall be based upon, inter alia, the following
factors: (1) the extent to which Employer attains its objectives relative
to net sales, income from operations and net income, (2) the extent to
which Employee, by virtue of his responsibilities, is able to, and does,
influence the foregoing results, and (3) Employee's strategic contributions
to Employer. Provided further, that any such incentive compensation shall
not exceed Employee's Salary in any year.
4. Stock Options. As additional compensation for services rendered,
Employer grants to Employee, effective December 29, 1995, the right and option
to purchase all or any part of an aggregate of 15,000 shares of Employer's
Common Stock (the "Option"), subject to the vesting schedule set forth in
subparagraph c hereof and the adjustments set forth in subparagraph g hereof,
which Option is a nonqualified stock option. The Option is in all respects
limited and conditioned as provided hereunder.
(a) Purchase Price. Except as otherwise provided in subparagraph g
hereof, the purchase price (the "Option Price") of the shares covered by
the Option ("Option Shares") shall be $2.50, the closing price of
Employer's Common Stock on the last day on which the Common Stock traded on
the National Association of Securities Dealers Automated Quotation System
(Nasdaq) preceding the date the Board of Directors approved the 1995
Agreement.
(b) Option Term. Except as otherwise provided herein, the Option shall
expire on the first to occur of: (i) Ninety (90) days following Employee's
termination of employment with Employer, or (ii) January 1, 2007.
(c) Exercise of Option. (i) Except as otherwise provided herein, the
right of Employee to exercise the Option is conditioned upon Employee being
in the employ of the Employer, whether pursuant to this Agreement or
otherwise. The Option shall become exercisable in Three (3) equal
installments in accordance with the following schedule:
Date Installment Number of
Becomes Exercisable Option Shares
January 1, 1996 5,000
January 1, 1997 5,000
January 1, 1998 5,000
(ii) The Option may be exercised, in whole or in part, at any time or
times prior to the expiration or other termination thereof.
(iii) If this Agreement, and Employee's employment with Employer, is
terminated other than For Cause (as defined in paragraph 9) prior to the
expiration date of the Option, such Option may be exercised by Employee, to
the extent the Option is exercisable on the date of such termination, or to
any greater extent permitted by the Board of Directors, at any time prior
to the earlier of: (i) Three (3) months after the date of termination, or
(ii) the expiration date of such Option. Provided, however, if this
Agreement, and Employee's employment, was terminated For Cause, Employee
shall have no right to exercise this Option on or after the date of such
termination.
(iv) The Option shall accelerate and become 100% exercisable upon the
occurrence of the following: (A) Employee's Legal Disability; (B)
Employer's termination of this Agreement other than For Cause; (C) "Change
in Control" of Employer (as hereinafter defined) or (D) termination of this
Agreement by Employee for "Good Reason" (as hereinafter defined).
(v) For purposes of this Agreement the following definitions apply:
(A) "Legal Disability" shall mean either Employee has been unable to
substantially perform his duties hereunder by reason of illness, accident
or other physical or mental disability for a continuous period of 180 days
or an aggregate period of 270 days during any continuous twelve-month
period, or that in the opinion of the Board of Directors, such opinion to
be derived from the reports of three (3) physicians of its choosing,
Employee will be unable to substantially perform his duties hereunder by
reason of illness, accident or other physical or mental disability for a
continuous period of 180 days or an aggregate period of 270 days during any
continuous twelve-month period.
(B) "Good Reason" shall mean a breach by Employer of its obligations
under this Agreement.
(C) "Change in Control" shall mean: (1) the sale by Employer of all or
substantially all of its assets to any person (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934), the
consolidation of Employer with any person, or the merger of Employer with
any person as a result of which merger Employer is not the surviving
entity, or if the surviving entity, Employer is owned by a parent company;
or (2) the sale or transfer by one or more of Employer's shareholders in
one or more transactions, related or unrelated, to one or more persons
under circumstances whereby any person and its "affiliates" (as defined
herein) shall own, as a result of such sale or transfer thereafter, at
least Fifty percent (50%) of the outstanding shares of Employer. An
"affiliate" shall mean any person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, any other person.
(d) Method of Exercising Option. (i) The Option may be exercised by
giving written notice, in form substantially as set forth in Exhibit 1
hereof, to Employer at its principal office, specifying the number of
Option Shares to be purchased and accompanied by payment in full of the
aggregate purchase price for the Shares. Only full Shares shall be
delivered and any fractional share which might otherwise be deliverable
upon exercise of an Option granted hereunder shall be forfeited.
(ii) The purchase price shall be payable in cash or its
equivalent.
(iii) Upon receipt of such notice and payment, Employer, within
three (3) business days after Exercise, shall deliver or cause to be
delivered a certificate or certificates representing the Shares with
respect to which the Option is exercised. The certificate or
certificates for such Shares shall be registered in the name of the
person exercising the Option (or, if Employee shall so request in the
notice exercising the Option, in the name of Employee and his spouse,
jointly, with right of survivorship) and shall be delivered as
provided above to or upon the written order of the person exercising
the Option. In the event the Option is exercised by any person after
the death or Legal Disability of Employee, such notice shall be
accompanied by appropriate proof of the right of such person to
exercise the Option. All shares purchased upon the exercise of the
Option as provided herein shall be fully paid and nonassessable by
Employer.
(e) Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by Employee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of Employee,
the Option shall be exercisable only by Employee or, in the event of his
Legal Disability, by his legal representative.
(f) Withholding of Taxes. The obligation of Employer to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
(g) Adjustments. The number of Option Shares and the Option Price
shall be adjusted as set forth herein:
(i) In the event that a stock dividend shall be declared on the
Common Stock payable in shares of the Common Stock, the Option Shares
shall be adjusted by adding to each Option Share the number of shares
which would be distributable thereon if such Option Share had been
outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend.
(ii) In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of Employer whether through
recapitalization, stock split, combination of shares, or otherwise,
then there shall be substituted for each Option Share the number and
kind of shares of stock or the securities into which each outstanding
share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
(iii) In the event that the outstanding shares of the Common
Stock shall be changed into or exchanged for shares of stock or other
securities of another corporation, whether through reorganization,
sale of assets, merger or consolidation in which Employer is the
surviving corporation, then there shall be substituted for each Option
Share the number and kind of shares of stock or the securities into
which each outstanding share of the Common Stock shall be so changed
or for which each such share shall be exchanged.
(h) Share Ownership. Neither Employee nor Employee's legal
representatives nor the executors or administrators of his estate shall be
or be deemed to be the holder of any share of Common Stock covered by an
Option unless and until a certificate for such share shall have been
issued.
5. Time and Efforts. Employee shall devote all of his business time and
efforts to the affairs of Employer save as specifically otherwise authorized by
the Board of Directors.
6. Disclosure of Information. Employee recognizes and acknowledges that he
will have access to certain confidential information of Employer and that such
information constitutes valuable, special and unique property of Employer.
Employee will not, during or after the term of his employment, disclose any of
such confidential information to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever unless ordered to do so by a
court or other tribunal or government agency with jurisdiction over the subject
matter and Employee. In the event of a breach or threatened breach by Employee
of the provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee from disclosing, in whole or in part, confidential
information of Employer, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such confidential information,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein shall be construed as prohibiting Employer from pursuing any
other remedies available to Employer for such breach or threatened breach,
including the recovery of damages from Employee.
7. Expenses. Employee may incur reasonable expenses for promoting
Employer's business, including expenses for entertainment, travel, and similar
items. Employer will reimburse Employee for all such expenses in accordance with
Employer's applicable policies, rules and regulations as from time to time
issued and amended.
8. Insurance. During the term of this Agreement, Employee will be covered
under Employer's Directors' and Officers' liability insurance to the same extent
Employer's officers are covered.
9. Termination of Agreement.
(a) This Agreement may be terminated by Employer "For Cause". "For
Cause" has the following meaning: If Employee willfully breaches or
habitually neglects or fails to perform the duties which he is required to
perform under the terms of this Agreement, materially fails to follow the
reasonable directives or policies established by or at the direction of the
Board of Directors, or conducts himself in a manner materially detrimental
to the interests of Employer and such breach or failure of performance is
not cured within Thirty (30) days of the delivery to Employee of written
notice thereof, which notice shall have been approved by a majority of
Employer's Board of Directors, Employer may terminate this Agreement and
Employee's employment For Cause.
(b) This Agreement may be terminated by Employee for: (i) Good Reason
(as defined in paragraph 4(c)(v)(B)) if Employer fails to cure its breach
of obligation within Thirty (30) days of the delivery to Employer of
written notice of such breach, or (ii) upon a Change in Control of
Employer.
(c) This Agreement, and therefore Employee's employment with Employer,
shall terminate automatically upon Employee's death. If Employee has been
unable to substantially perform his duties hereunder by virtue of his Legal
Disability (as defined in paragraph 4(c)(v)(A)), and Employee has not
resumed his duties to the satisfaction of the Board of Directors within
Thirty (30) days of the delivery to Employee of written notice thereof,
which notice shall have been approved by a majority of Employer's Board of
Directors, Employer may terminate this Agreement and Employee's employment.
10. Payments on Termination.
(a) If, prior to the expiration of this Agreement, Employee's
employment is terminated by Employee by reason of a Change in Control of
Employer, or by Employer other than For Cause, Employer shall pay to
Employee: (i) Employee's full Salary through the date of his termination,
and (ii) an amount equal to the greater of the aggregate Salary payments
which Employee would have received during the balance of the Term if such
termination had not occurred, or $100,000. All such Salary payments shall
be made not later than the fifth business day following the date of his
termination.
(b) During the Term, if Employee's employment is terminated For Cause,
Employee shall receive, on the next normal pay date following the date of
his termination, the Salary to which he is entitled through the date of his
termination. Provided, however, Employee shall not be denied the benefits
of paragraph 10(a) and those set forth in paragraph 4(c)(iv) unless the
cause for termination is one of willful breach rather than neglect of
duties as set forth in this Agreement.
(c) Employee shall not be required to mitigate the amount of any
payment provided for herein by seeking other employment or otherwise, nor
shall the amount of any payment provided for herein be reduced by any
compensation or retirement benefits heretofore or hereafter earned by
Employee as the result of employment by any other person, firm or
corporation.
11. Restrictive Covenant. For a period of One (1) year after the
termination by Employer For Cause or by Employee other than for Good Reason or
pursuant to a Change in Control or expiration of this Agreement, Employee will
not, within the greater of the currently existing marketing area of Employer or
any future marketing area of Employer established during Employee's employment
under the terms of this Agreement, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of any business related to wound
care therapeutics or otherwise similar to the type of business conducted by
Employer at the time of the termination or expiration of this Agreement.
Provided, however, the aforementioned restrictions shall not be applicable to
activities in which Employee was, and continued to be, engaged in on the date of
this Agreement. In the event of Employee's actual or threatened breach of the
provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee therefrom. Nothing herein shall be construed as prohibiting
Employer from pursuing any other available remedies for such breach or
threatened breach, including the recovery of damages from Employee.
12. Inventions Assignment.
(a) Ownership of Inventions. Employee agrees that any and all
inventions, discoveries or improvements relative to wound care or other
products invented or discovered by Employee during the term of his
employment, and improvements on any such inventions whenever made
(hereinafter referred to as "Inventions"), shall immediately become the
absolute property of Employer.
(b) Cooperation as to Inventions. Employee agrees to make application
for letters patent on such Inventions as Employer may deem necessary,
desirable or useful and to sign and execute any and all documents incident
to the filing, prosecution and perfection of said applications and letters
patent issued thereon. Employer agrees to bear and defray the costs and
expenses incident to the aforesaid obligations of Employee.
(c) Assignment. Employee agrees that, without any royalties or further
consideration, Employee will sell and assign, and hereby sells and assigns,
all of Employee's right, title and interest to Inventions to Employer.
Employee will sell and assign, and hereby sells and assigns, to Employer
the exclusive right to apply for and obtain patents on Inventions in the
United States and such foreign jurisdictions as Employer may select.
(d) Termination of Employment. The termination or cancellation of the
employment of Employee shall not relieve Employee of his obligations under
this paragraph 12.
13. Outplacement Assistance. In the event this Agreement is terminated or
not renewed by Employer other than For Cause, Employer shall render to Employee
reasonable and appropriate outplacement assistance.
14. Waiver of Breach. The waiver by Employer of a breach of any provision
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in a writing
signed by an authorized officer of Employer and approved by an absolute majority
of Employer's board of directors.
15. Assignment. Employee acknowledges that the services to be rendered by
him are unique and personal. Accordingly, Employee may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Employer under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Employer.
16. Entire Agreement. This Agreement contains this entire understanding of
the parties. It may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
or discharge is sought to be charged.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
EMPLOYER
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty, Chairman
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick, President
EMPLOYEE
By: /s/ Robert P. DiGiovine, RPh
----------------------------
Robert P. DiGiovine, RPh
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise the nonqualified stock options granted to me as of
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased: ________________
Option price per Share: ________________
Total option price: ________________
Enclosed is my check in the amount of $_________. Please have the
certificate or certificates representing the purchased Shares registered in the
following name(s)1 ______________________________________and sent to
_________________________________.
DATED: ______________, ____.
OPTIONEE
__________________________________
- --------------------------
1Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
EMPLOYMENT AGREEMENT - AMENDMENT AND RESTATEMENT
THIS AMENDMENT AND RESTATEMENT (hereinafter referred to as "Agreement")
made this 2nd day of May, 1997, by and between Derma Sciences, Inc., a
Pennsylvania corporation (hereinafter referred to as "Employer") and Edward J.
Quilty (hereinafter referred to as "Employee").
WHEREAS, Employer and Employee entered into that certain employment
agreement dated August 1, 1996 (hereinafter referred to as the "1996
Agreement"), and
WHEREAS, the parties desire to amend and restate in its entirety the 1996
Agreement,
NOW, THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants herein contained, and intending to be legally bound, hereby agree
as follows:
1. Employment. Employer employs Employee, and Employee accepts employment,
as the Chairman of the Board and member of the Office of the Chief Executive of
Employer, with powers and duties as may be determined, from time to time, by
Employer's Board of Directors, which powers and duties shall not be inconsistent
with the powers and duties customarily performed and exercised by persons
holding equivalent positions. Provided, however, the employment of Employee
hereunder is contingent upon Employee's status as a director of Employer.
Provided, further, Employer shall undertake and perform all acts reasonably
necessary or desirable to maintain such status.
2. Term. The term of this Agreement shall begin on May 22, 1996, and shall
terminate on May 21, 1999, unless sooner terminated pursuant to paragraph 9
hereof or unless extended by mutual consent of the parties hereto (the "Term").
3. Compensation. Employer shall pay Employee compensation for services
rendered under this Agreement as set forth hereunder ("Compensation"):
(a) Base Compensation. Base salary of $125,000 per year, payable
weekly ("Salary").
(b) Bonus. Bonus Compensation of $25,000 per year payable monthly in
consideration of Employee's experience in building value via the
establishment of strategic alliances and relationships.
(c) Incentive Compensation. Incentive Compensation as may, from time
to time, be recommended by Employer's Compensation Committee and approved
by its Board of Directors. Provided, however, such Incentive Compensation,
if any, shall be based upon, inter alia, the following factors: (1) the
extent to which Employer attains its objectives relative to net sales,
income from operations and net income, (2) the extent to which Employee, by
virtue of his responsibilities, is able to, and does, influence the
foregoing results, and (3) Employee's strategic contributions to Employer.
Provided further, that any such incentive compensation shall not exceed
Employee's Salary in any year.
4. Stock Options. As additional compensation for services rendered,
Employer grants to Employee the right and option to purchase all or any part of
an aggregate of 150,000 shares of Employer's Common Stock (the "Option"),
subject to the vesting schedule set forth in subparagraph c hereof and the
adjustments set forth in subparagraph g hereof, which Option is a nonqualified
stock option. The Option is in all respects limited and conditioned as provided
hereunder.
(a) Purchase Price. Except as otherwise provided in subparagraph g
hereof, the purchase price (the "Option Price") of the shares covered by
the Option ("Option Shares") shall be the lower of the closing price of
Employer's Common Stock on the National Association of Securities Dealers
Automated Quotation System (Nasdaq) on April 8, 1997, to wit: $1.1875, or
the price per share of the Common Stock offered in Employer's contemplated
private placement.
(b) Option Term. Except as otherwise provided herein, the Option shall
expire on the first to occur of: (i) Ninety (90) days following Employee's
termination of employment with Employer, or (ii) May 22, 2007.
(c) Exercise of Option. (i) Except as otherwise provided herein, the
right of Employee to exercise the Option is conditioned upon Employee: (A)
being in the employ of the Employer, whether pursuant to this Agreement or
otherwise, or (B) serving as a director of Employer. The Option shall be
exercisable (subject to subparagraph b hereof): (1) on April 8, 1997 with
respect to up to 50% of the Option Shares, (2) during the period commencing
on October 8, 1997 and ending on April 8, 1998 with respect to up to 75% of
the Option Shares, (3) during the period commencing on April 8, 1998 and
ending on May 22, 2007 with respect to up to 100% of the Option Shares.
(ii) The Option may be exercised, in whole or in part, at any
time or times prior to the expiration or other termination thereof.
(iii) If this Agreement, and Employee's employment with Employer,
is terminated other than For Cause (as defined in paragraph 9) prior
to the expiration date of the Option, such Option may be exercised by
Employee, to the extent the Options are exercisable on the date of
such termination, or to any greater extent permitted by the
Compensation Committee, at any time prior to the earlier of: (i) Three
(3) months after the date of termination, or (ii) the expiration date
of such Option. Provided, however, if this Agreement, and Employee's
employment, was terminated For Cause, Employee shall have no right to
exercise his Option on or after the date of such termination.
(iv) The Option shall accelerate and become 100% exercisable upon
the occurrence of the following: (A) Employee's Death or Legal
Disability; (B) Employer's termination of this Agreement other than
For Cause; (C) "Change in Control" of Employer (as hereinafter
defined) or (D) termination of this Agreement by Employee for "Good
Reason" (as hereinafter defined).
(v) For purposes of this Agreement the following definitions
apply:
(A) "Legal Disability" shall mean either Employee has been unable
to substantially perform his duties hereunder by reason of illness,
accident or other physical or mental disability for a continuous
period of 180 days or an aggregate period of 270 days during any
continuous twelve-month period, or that in the opinion of the Board of
Directors, such opinion to be derived from the reports of three (3)
physicians of its choosing, Employee will be unable to substantially
perform his duties hereunder by reason of illness, accident or other
physical or mental disability for a continuous period of 180 days or
an aggregate period of 270 days during any continuous twelve-month
period.
(B) "Good Reason" shall mean a breach by Employer of its
obligations under this Agreement. Provided, however, "Good Reason"
shall not include any failure of shareholders of Employer to elect
Employee as a director of Employer under paragraph 1 hereof.
(C) "Change in Control" shall mean: (1) the sale by Employer of
all or substantially all of its assets to any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), the consolidation of Employer with any person, or the merger of
Employer with any person as a result of which merger Employer is not
the surviving entity, or if the surviving entity, Employer is owned by
a parent company; or (2) the sale or transfer by one or more of
Employer's shareholders in one or more transactions, related or
unrelated, to one or more persons under circumstances whereby any
person and its "affiliates" (as defined herein) shall own, as a result
of such sale or transfer thereafter, at least Fifty percent (50%) of
the outstanding shares of Employer. Nothing contained in this
definition shall limit or restrict the right of Employee, in his
capacity as Chairman of the Board of Directors, from participating in
any discussions or voting on any matter relative to a Change in
Control of Employer at any meeting of the Board of Directors. An
"affiliate" shall mean any person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, any other person.
(d) Method of Exercising Option. (i) The Option may be exercised by
giving written notice, in form substantially as set forth in Exhibit 1
hereof, to Employer at its principal office, specifying the number of
Option Shares to be purchased and accompanied by payment in full of the
aggregate purchase price for the Shares. Only full Shares shall be
delivered and any fractional share which might otherwise be deliverable
upon exercise of an Option granted hereunder shall be forfeited.
(ii) The purchase price shall be payable in cash or its
equivalent.
(iii) Upon receipt of such notice and payment, Employer,
within three (3) business days after Exercise, shall deliver or
cause to be delivered a certificate or certificates representing
the Shares with respect to which the Option is exercised. The
certificate or certificates for such Shares shall be registered
in the name of the person exercising the Option (or, if Employee
shall so request in the notice exercising the Option, in the name
of Employee and his spouse, jointly, with right of survivorship)
and shall be delivered as provided above to or upon the written
order of the person exercising the Option. In the event the
Option is exercised by any person after the death or Legal
Disability of Employee, such notice shall be accompanied by
appropriate proof of the right of such person to exercise the
Option. All shares purchased upon the exercise of the Option as
provided herein shall be fully paid and nonassessable by
Employer.
(e) Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by Employee, otherwise than by will or
by the laws of descent and distribution. During the lifetime of Employee,
the Option shall be exercisable only by Employee or, in the event of his
Legal Disability, by his legal representative.
(f) Withholding of Taxes. The obligation of Employer to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
(g) Adjustments. The number of Option Shares and the Option Price
shall be adjusted as set forth herein:
(i) In the event that a stock dividend shall be declared on the
Common Stock payable in shares of the Common Stock, the Option Shares
shall be adjusted by adding to each Option Share the number of shares
which would be distributable thereon if such Option Share had been
outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend.
(ii) In the event that the outstanding shares of the Common Stock
shall be changed into or exchanged for a different number or kind of
shares of stock or other securities of Employer whether through
recapitalization, stock split, combination of shares, or otherwise,
then there shall be substituted for each Option Share the number and
kind of shares of stock or the securities into which each outstanding
share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
(iii) In the event that the outstanding shares of the Common
Stock shall be changed into or exchanged for shares of stock or other
securities of another corporation, whether through reorganization,
sale of assets, merger or consolidation in which Employer is the
surviving corporation, then there shall be substituted for each Option
Share the number and kind of shares of stock or the securities into
which each outstanding share of the Common Stock shall be so changed
or for which each such share shall be exchanged.
(iv) In the event that any sale of shares of Common Stock (except
any such sale made pursuant to any right, option, warrant or
convertible security outstanding prior to the date of this Agreement),
or the issuance of any rights, options, or warrants to subscribe for
or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) occurs after the date of this
Agreement, which sale or issuance will increase the number of shares
of Common Stock outstanding during the Term by Forty percent (40%),
then, upon each such sale or issuance, Employee shall be issued
additional Option Shares such that, when the additional Option Shares
are aggregated with the Option Shares heretofore owned by Employee,
Employee has the right to purchase, at the same times set forth in
paragraph 4(c), the same percentage of Common Stock at the same price
per share as Employee maintained prior to such sale or issuance.
(h) Share Ownership. Neither Employee nor Employee's legal
representatives nor the executors or administrators of his estate shall be
or be deemed to be the holder of any share of Common Stock covered by an
Option unless and until a certificate for such share shall have been
issued.
5. Time and Efforts. Employee shall devote as much of his business time and
efforts to the affairs of Employer as may reasonably be necessary to adequately
perform his duties hereunder. Provided, however, Employer recognizes that
Employee serves as the president and chief executive officer of Palatin
Technologies, Inc., a publicly traded biopharmaceutical company. Nothing
contained herein shall be deemed to restrict Employee's right to continue in
such capacity or, in lieu thereof, to serve in a similar capacity with another
employer.
6. Disclosure of Information. Employee recognizes and acknowledges that he
will have access to certain confidential information of Employer and that such
information constitutes valuable, special and unique property of Employer.
Employee will not, during or after the term of his employment, disclose any of
such confidential information to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever unless ordered to do so by a
court or other tribunal or government agency with jurisdiction over the subject
matter and Employee. In the event of a breach or threatened breach by Employee
of the provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee from disclosing, in whole or in part, confidential
information of Employer, or from rendering any services to any person, firm,
corporation, association, or other entity to whom such confidential information,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein shall be construed as prohibiting Employer from pursuing any
other remedies available to Employer for such breach or threatened breach,
including the recovery of damages from Employee.
7. Expenses. Employee may incur reasonable expenses for promoting
Employer's business, including expenses for entertainment, travel, and similar
items. Employer will reimburse Employee for all such expenses in accordance with
Employer's applicable policies, rules and regulations as from time to time
issued and amended.
8. Insurance. During the Term, Employee will be covered under Employer's
Directors' and Officers' liability insurance to the same extent Employer's
directors and officers are covered.
9. Termination of Agreement. (a) This Agreement may be terminated by
Employer in the following instances:
(i) For Cause. If Employee willfully breaches or habitually
neglects or fails to perform the duties which he is required to
perform under the terms of this Agreement, materially fails to follow
the reasonable directives or policies established by or at the
direction of the Board of Directors, or conducts himself in a manner
materially detrimental to the interests of Employer and such breach or
failure of performance is not cured within Thirty (30) days of the
delivery to Employee of written notice thereof, which notice shall
have been approved by a majority of Employer's Board of Directors,
Employer may terminate this Agreement and Employee's employment For
Cause.
(ii) Failure of Shareholders to Elect. If the shareholders of
Employer fail to elect Employee as director of Employer, this
Agreement shall forthwith terminate, cease and determine.
(b) This Agreement may be terminated by Employee for: (i) Good Reason
(as defined in paragraph 4(c)(v)(B)) if Employer fails to cure its breach
of obligation within Thirty (30) days of the delivery to Employer of
written notice of such breach, or (ii) upon a Change in Control of
Employer.
(c) This Agreement, and therefore Employee's employment with Employer,
shall terminate automatically upon Employee's death. If Employee has been
unable to substantially perform his duties hereunder by virtue of his Legal
Disability (as defined in paragraph 4(c)(v)(A)), and Employee has not
resumed his duties to the satisfaction of the Board of Directors within
Thirty (30) days of the delivery to Employee of written notice thereof,
which notice shall have been approved by a majority of Employer's Board of
Directors, Employer may terminate this Agreement and Employee's employment.
<PAGE>
10. Payments on Termination.
(a) If, prior to the expiration of this Agreement, Employee's
employment is terminated by Employee by reason of a Change in Control of
Employer, Employer shall pay to Employee: (i) Employee's full Salary
through the date of his termination, and (ii) an amount equal to the
greater of the aggregate Salary payments which Employee would have received
during the balance of the Term if such termination had not occurred, or
$125,000. All such Salary payments shall be made not later than the fifth
business day following the date of his termination.
(b) During the Term, if Employee's employment is terminated pursuant
to paragraph 9, Employee shall receive, on the next normal pay date
following the date of his termination, the Salary to which he is entitled
through the date of his termination.
(c) Employee shall not be required to mitigate the amount of any
payment provided for herein by seeking other employment or otherwise, nor
shall the amount of any payment provided for herein be reduced by any
compensation or retirement benefits heretofore or hereafter earned by
Employee as the result of employment by any other person, firm or
corporation.
11. Restrictive Covenant. For a period of One (1) year after the
termination by Employer For Cause or by Employee other than for Good Reason or
pursuant to a Change in Control or expiration of this Agreement, Employee will
not, within the greater of the currently existing marketing area of Employer or
any future marketing area of Employer established during Employee's employment
under the terms of this Agreement, directly or indirectly, own, manage, operate,
control, be employed by, participate in, or be connected in any manner with the
ownership, management, operation, or control of any business related to wound
care therapeutics or otherwise similar to the type of business conducted by
Employer at the time of the termination or expiration of this Agreement.
Provided, however, the aforementioned restrictions shall not be applicable to
activities in which Employee was, and continued to be, engaged in on the date of
this Agreement. In the event of Employee's actual or threatened breach of the
provisions of this paragraph, Employer shall be entitled to an injunction
restraining Employee therefrom. Nothing herein shall be construed as prohibiting
Employer from pursuing any other available remedies for such breach or
threatened breach, including the recovery of damages from Employee.
12. Waiver of Breach. The waiver by Employer of a breach of any provision
of this Agreement by Employee shall not operate or be construed as a waiver of
any subsequent breach by Employee. No waiver shall be valid unless in a writing
signed by an authorized officer of Employer and approved by an absolute majority
of Employer's board of directors.
13. Assignment. Employee acknowledges that the services to be rendered by
him are unique and personal. Accordingly, Employee may not assign any of his
rights or delegate any of his duties or obligations under this Agreement. The
rights and obligations of Employer under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of Employer.
14. Entire Agreement. This Agreement contains this entire understanding of
the parties. It may be changed only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension,
or discharge is sought to be charged.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
EMPLOYER
DERMA SCIENCES, INC.
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick, President
EMPLOYEE
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise the nonqualified stock options granted to me as of
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased: ________________
Option price per Share: ________________
Total option price: ________________
Enclosed is my check in the amount of $_________. Please have the
certificate or certificates representing the purchased Shares registered in the
following name(s)1 ______________________________________and sent to
_________________________________.
DATED: ______________, ____.
OPTIONEE
__________________________________
- --------------------------
1Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
DERMA SCIENCES, INC.
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 30th day of
April, 1997 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Edward J. Quilty (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase all or any part of an aggregate of 50,000 shares (the
"Option") which Option is intended as a "nonqualified stock option". The Option
is in all respects limited and conditioned as hereinafter provided.
2. Purchase Price. The purchase price per share (the "Option Price") of the
Shares covered by the Option (the "Option Shares") shall be the lower of: (a)
the closing price of the Company's Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) on April
8, 1997 (the "Grant Date"), to wit: $1.1875, or (b) the price of the Company's
Common Stock as determined in connection with the Company's contemplated private
placement thereof.
3. Term. The Option will expire on April 8, 2007 (the "Expiration Date").
4. Exercise of Option. (a) Except as provided in paragraph 4.(d) below, the
right of the Optionee to exercise is subject to the condition that the Optionee
be an employee of the Company. Except as provided in paragraph 4.(b) below, the
Option shall become exercisable in five (5) equal installments and the Optionee
shall have the right to purchase from the Company, on and after the following
dates, the following number of shares:
Date Installment Number of
Becomes Exercisable Option Shares
April 8, 1997 10,000
April 8, 1998 10,000
April 8, 1999 10,000
April 8, 2000 10,000
April 8, 2001 10,000
(b) The foregoing notwithstanding, the Option shall become exercisable
and the Optionee shall have the right to purchase from the Company, on and
after the occurrence of the following events, not less than the following
number of shares:
Event Upon Which Number of
Option Becomes Exercisable Option Shares
Net sales greater than $6,000,000 25,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $3.00 for a period
of 180 consecutive days
________________________________________________________________________________
Net sales greater than $8,000,000 50,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $5.00 for a period
of 180 consecutive days
(c) The right of the Optionee to purchase the Option Shares may be
exercised, in whole or in part, at any time or times prior to the
expiration or other termination of the Option.
(d) If the Optionee's employment by the Company is terminated prior to
the Expiration Date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Option Shares with respect to
which the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Board of Directors of the
Company, at any time prior to the earlier of: (i) three (3) months after
the date of termination, or (ii) the Expiration Date of such Option;
provided, however, if the Optionee's employment was terminated voluntarily
by the Optionee or by the Company "For Cause" (as defined below), Optionee
shall have no right to exercise his Option on or after the date of such
termination. As used herein, termination of an Optionee's employment by the
Company shall be "For Cause" if the Board of Directors reasonably concludes
that the Optionee has materially failed to perform his responsibilities to
the Company, materially failed to follow directives or policies established
by or at the direction of the Board of Directors, or conducted himself in a
manner materially detrimental to the interests of the Company.
5. Method of Exercising Option. (a) Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by giving written notice to
the Company at its principal office specifying the number of Option Shares to be
purchased and accompanied by payment in full of the aggregate purchase price for
the Shares. Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited. Attached as Exhibit 1 is a form of written notice acceptable
to the Company.
(b) The purchase price shall be payable: (i) in cash or its
equivalent, or (ii) in whole or in part through the transfer of Common
Stock previously acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly
as possible, shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the Option is so
exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons exercising the Option (or,
if the Optionee shall so request in the notice exercising the Option, in
the name of the Optionee and his spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising the Option. In the event
the Option is exercised by any person or persons after the death or legal
disability of the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All
shares that are purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
6. Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. Withholding of Taxes. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. Governing Law. This Agreement shall be construed in a manner consistent
with the Internal Revenue Code provisions concerning nonqualified stock options
and its interpretation shall otherwise be governed by Pennsylvania law.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
DERMA SCIENCES, INC.
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick
President
OPTIONEE
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________ Shares)1.
Please have the certificate or certificates representing the purchased Shares
registered in the following name or names2 ________________________________ and
sent to _________________________________________________.
DATED: ______________, ____.
OPTIONEE
_________________________
- --------
1The option price may be paid in whole or in part by delivery of Shares, subject
to the terms of the Optionee's Stock Option Agreement.
2Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
DERMA SCIENCES, INC.
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 30th day of
April, 1997 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and John T. Borthwick (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase all or any part of an aggregate of 50,000 shares (the
"Option") which Option is intended as a "nonqualified stock option". The Option
is in all respects limited and conditioned as hereinafter provided.
2. Purchase Price. The purchase price per share (the "Option Price") of the
Shares covered by the Option (the "Option Shares") shall be the lower of: (a)
the closing price of the Company's Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) on April
8, 1997 (the "Grant Date"), to wit: $1.1875, or (b) the price of the Company's
Common Stock as determined in connection with the Company's contemplated private
placement thereof.
3. Term. The Option will expire on April 8, 2007 (the "Expiration Date").
4. Exercise of Option. (a) Except as provided in paragraph 4.(d) below, the
right of the Optionee to exercise is subject to the condition that the Optionee
be an employee of the Company. Except as provided in paragraph 4.(b) below, the
Option shall become exercisable in five (5) equal installments and the Optionee
shall have the right to purchase from the Company, on and after the following
dates, the following number of shares:
Date Installment Number of
Becomes Exercisable Option Shares
April 8, 1997 10,000
April 8, 1998 10,000
April 8, 1999 10,000
April 8, 2000 10,000
April 8, 2001 10,000
(b) The foregoing notwithstanding, the Option shall become exercisable and
the Optionee shall have the right to purchase from the Company, on and after the
occurrence of the following events, not less than the following number of
shares:
Event Upon Which Number of
Option Becomes Exercisable Option Shares
Net sales greater than $6,000,000 25,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $3.00 for a period
of 180 consecutive days
________________________________________________________________________________
Net sales greater than $8,000,000 50,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $5.00 for a period
of 180 consecutive days
(c) The right of the Optionee to purchase the Option Shares may be
exercised, in whole or in part, at any time or times prior to the
expiration or other termination of the Option.
(d) If the Optionee's employment by the Company is terminated prior to
the Expiration Date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Option Shares with respect to
which the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Board of Directors of the
Company, at any time prior to the earlier of: (i) three (3) months after
the date of termination, or (ii) the Expiration Date of such Option;
provided, however, if the Optionee's employment was terminated voluntarily
by the Optionee or by the Company "For Cause" (as defined below), Optionee
shall have no right to exercise his Option on or after the date of such
termination. As used herein, termination of an Optionee's employment by the
Company shall be "For Cause" if the Board of Directors reasonably concludes
that the Optionee has materially failed to perform his responsibilities to
the Company, materially failed to follow directives or policies established
by or at the direction of the Board of Directors, or conducted himself in a
manner materially detrimental to the interests of the Company.
<PAGE>
5. Method of Exercising Option. (a) Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by giving written notice to
the Company at its principal office specifying the number of Option Shares to be
purchased and accompanied by payment in full of the aggregate purchase price for
the Shares. Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited. Attached as Exhibit 1 is a form of written notice acceptable
to the Company.
(b) The purchase price shall be payable: (i) in cash or its
equivalent, or (ii) in whole or in part through the transfer of Common
Stock previously acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly
as possible, shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the Option is so
exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons exercising the Option (or,
if the Optionee shall so request in the notice exercising the Option, in
the name of the Optionee and his spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising the Option. In the event
the Option is exercised by any person or persons after the death or legal
disability of the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All
shares that are purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
6. Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. Withholding of Taxes. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. Governing Law. This Agreement shall be construed in a manner consistent
with the Internal Revenue Code provisions concerning nonqualified stock options
and its interpretation shall otherwise be governed by Pennsylvania law.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
Chariman of the Board
OPTIONEE
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________ Shares)1.
Please have the certificate or certificates representing the purchased Shares
registered in the following name or names2 ________________________________ and
sent to _________________________________________________.
DATED: ______________, ____.
OPTIONEE
_________________________
- --------
1The option price may be paid in whole or in part by delivery of Shares, subject
to the terms of the Optionee's Stock Option Agreement.
2Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
DERMA SCIENCES, INC.
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 30th day of
April, 1997 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Gary L. Borthwick (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase all or any part of an aggregate of 50,000 shares (the
"Option") which Option is intended as a "nonqualified stock option". The Option
is in all respects limited and conditioned as hereinafter provided.
2. Purchase Price. The purchase price per share (the "Option Price") of the
Shares covered by the Option (the "Option Shares") shall be the lower of: (a)
the closing price of the Company's Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) on April
8, 1997 (the "Grant Date"), to wit: $1.1875, or (b) the price of the Company's
Common Stock as determined in connection with the Company's contemplated private
placement thereof.
3. Term. The Option will expire on April 8, 2007 (the "Expiration Date").
4. Exercise of Option. (a) Except as provided in paragraph 4.(d) below, the
right of the Optionee to exercise is subject to the condition that the Optionee
be an employee of the Company. Except as provided in paragraph 4.(b) below, the
Option shall become exercisable in five (5) equal installments and the Optionee
shall have the right to purchase from the Company, on and after the following
dates, the following number of shares:
Date Installment Number of
Becomes Exercisable Option Shares
April 8, 1997 10,000
April 8, 1998 10,000
April 8, 1999 10,000
April 8, 2000 10,000
April 8, 2001 10,000
(b) The foregoing notwithstanding, the Option shall become exercisable
and the Optionee shall have the right to purchase from the Company, on and
after the occurrence of the following events, not less than the following
number of shares:
Event Upon Which Number of
Option Becomes Exercisable Option Shares
Net sales greater than $6,000,000 25,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $3.00 for a period
of 180 consecutive days
________________________________________________________________________________
Net sales greater than $8,000,000 50,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $5.00 for a period
of 180 consecutive days
(c) The right of the Optionee to purchase the Option Shares may be
exercised, in whole or in part, at any time or times prior to the
expiration or other termination of the Option.
(d) If the Optionee's employment by the Company is terminated prior to
the Expiration Date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Option Shares with respect to
which the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Board of Directors of the
Company, at any time prior to the earlier of: (i) three (3) months after
the date of termination, or (ii) the Expiration Date of such Option;
provided, however, if the Optionee's employment was terminated voluntarily
by the Optionee or by the Company "For Cause" (as defined below), Optionee
shall have no right to exercise his Option on or after the date of such
termination. As used herein, termination of an Optionee's employment by the
Company shall be "For Cause" if the Board of Directors reasonably concludes
that the Optionee has materially failed to perform his responsibilities to
the Company, materially failed to follow directives or policies established
by or at the direction of the Board of Directors, or conducted himself in a
manner materially detrimental to the interests of the Company.
5. Method of Exercising Option. (a) Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by giving written notice to
the Company at its principal office specifying the number of Option Shares to be
purchased and accompanied by payment in full of the aggregate purchase price for
the Shares. Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited. Attached as Exhibit 1 is a form of written notice acceptable
to the Company.
(b) The purchase price shall be payable: (i) in cash or its
equivalent, or (ii) in whole or in part through the transfer of Common
Stock previously acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly
as possible, shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the Option is so
exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons exercising the Option (or,
if the Optionee shall so request in the notice exercising the Option, in
the name of the Optionee and his spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising the Option. In the event
the Option is exercised by any person or persons after the death or legal
disability of the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All
shares that are purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
6. Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. Withholding of Taxes. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. Governing Law. This Agreement shall be construed in a manner consistent
with the Internal Revenue Code provisions concerning nonqualified stock options
and its interpretation shall otherwise be governed by Pennsylvania law.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
Chariman of the Board
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick
President
OPTIONEE
By: /s/ Gary L. Borthwick
-----------------------
Gary L. Borthwick
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________ Shares)1.
Please have the certificate or certificates representing the purchased Shares
registered in the following name or names2 ________________________________ and
sent to _________________________________________________.
DATED: ______________, ____.
OPTIONEE
_________________________
- --------
1The option price may be paid in whole or in part by delivery of Shares, subject
to the terms of the Optionee's Stock Option Agreement.
2Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
DERMA SCIENCES, INC.
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 21st day of
April, 1997 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Charles F. Caudell, III (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase all or any part of an aggregate of 50,000 shares (the
"Option") which Option is intended as a "nonqualified stock option". The Option
is in all respects limited and conditioned as hereinafter provided.
2. Purchase Price. The purchase price per share (the "Option Price") of the
Shares covered by the Option (the "Option Shares") shall be the lower of: (a)
the closing price of the Company's Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) on April
8, 1997 (the "Grant Date"), to wit: $1.1875, or (b) the price of the Company's
Common Stock as determined in connection with the Company's contemplated private
placement thereof.
3. Term. The Option will expire on April 8, 2007 (the "Expiration Date").
4. Exercise of Option. (a) Except as provided in paragraph 4.(d) below, the
right of the Optionee to exercise is subject to the condition that the Optionee
be an employee of the Company. Except as provided in paragraph 4.(b) below, the
Option shall become exercisable in five (5) equal installments and the Optionee
shall have the right to purchase from the Company, on and after the following
dates, the following number of shares:
Date Installment Number of
Becomes Exercisable Option Shares
April 8, 1997 10,000
April 8, 1998 10,000
April 8, 1999 10,000
April 8, 2000 10,000
April 8, 2001 10,000
(b) The foregoing notwithstanding, the Option shall become exercisable
and the Optionee shall have the right to purchase from the Company, on and
after the occurrence of the following events, not less than the following
number of shares:
Event Upon Which Number of
Option Becomes Exercisable Option Shares
Net sales greater than $6,000,000 25,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $3.00 for a period
of 180 consecutive days
________________________________________________________________________________
Net sales greater than $8,000,000 50,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $5.00 for a period
of 180 consecutive days
(c) The right of the Optionee to purchase the Option Shares may be
exercised, in whole or in part, at any time or times prior to the
expiration or other termination of the Option.
(d) If the Optionee's employment by the Company is terminated prior to
the Expiration Date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Option Shares with respect to
which the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Board of Directors of the
Company, at any time prior to the earlier of: (i) three (3) months after
the date of termination, or (ii) the Expiration Date of such Option;
provided, however, if the Optionee's employment was terminated voluntarily
by the Optionee or by the Company "For Cause" (as defined below), Optionee
shall have no right to exercise his Option on or after the date of such
termination. As used herein, termination of an Optionee's employment by the
Company shall be "For Cause" if the Board of Directors reasonably concludes
that the Optionee has materially failed to perform his responsibilities to
the Company, materially failed to follow directives or policies established
by or at the direction of the Board of Directors, or conducted himself in a
manner materially detrimental to the interests of the Company.
5. Method of Exercising Option. (a) Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by giving written notice to
the Company at its principal office specifying the number of Option Shares to be
purchased and accompanied by payment in full of the aggregate purchase price for
the Shares. Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited. Attached as Exhibit 1 is a form of written notice acceptable
to the Company.
(b) The purchase price shall be payable: (i) in cash or its
equivalent, or (ii) in whole or in part through the transfer of Common
Stock previously acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly
as possible, shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the Option is so
exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons exercising the Option (or,
if the Optionee shall so request in the notice exercising the Option, in
the name of the Optionee and his spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising the Option. In the event
the Option is exercised by any person or persons after the death or legal
disability of the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All
shares that are purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
6. Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. Withholding of Taxes. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. Governing Law. This Agreement shall be construed in a manner consistent
with the Internal Revenue Code provisions concerning nonqualified stock options
and its interpretation shall otherwise be governed by Pennsylvania law.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
Chariman of the Board
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick
President
OPTIONEE
By: /s/ Charles F. Caudell, III
---------------------------
Charles F. Caudell, III
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________ Shares)1.
Please have the certificate or certificates representing the purchased Shares
registered in the following name or names2 ________________________________ and
sent to _________________________________________________.
DATED: ______________, ____.
OPTIONEE
_________________________
- --------
1The option price may be paid in whole or in part by delivery of Shares, subject
to the terms of the Optionee's Stock Option Agreement.
DERMA SCIENCES, INC.
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 30th day of
April, 1997 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Robert P. DiGiovine, RPh (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase all or any part of an aggregate of 50,000 shares (the
"Option") which Option is intended as a "nonqualified stock option". The Option
is in all respects limited and conditioned as hereinafter provided.
2. Purchase Price. The purchase price per share (the "Option Price") of the
Shares covered by the Option (the "Option Shares") shall be the lower of: (a)
the closing price of the Company's Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) on April
8, 1997 (the "Grant Date"), to wit: $1.1875, or (b) the price of the Company's
Common Stock as determined in connection with the Company's contemplated private
placement thereof.
3. Term. The Option will expire on April 8, 2007 (the "Expiration Date").
4. Exercise of Option. (a) Except as provided in paragraph 4.(d) below, the
right of the Optionee to exercise is subject to the condition that the Optionee
be an employee of the Company. Except as provided in paragraph 4.(b) below, the
Option shall become exercisable in five (5) equal installments and the Optionee
shall have the right to purchase from the Company, on and after the following
dates, the following number of shares:
Date Installment Number of
Becomes Exercisable Option Shares
April 8, 1997 10,000
April 8, 1998 10,000
April 8, 1999 10,000
April 8, 2000 10,000
April 8, 2001 10,000
(b) The foregoing notwithstanding, the Option shall become exercisable and
the Optionee shall have the right to purchase from the Company, on and after the
occurrence of the following events, not less than the following number of
shares:
Event Upon Which Number of
Option Becomes Exercisable Option Shares
Net sales greater than $6,000,000 25,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $3.00 for a period
of 180 consecutive days
________________________________________________________________________________
Net sales greater than $8,000,000 50,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $5.00 for a period
of 180 consecutive days
(c) The right of the Optionee to purchase the Option Shares may be
exercised, in whole or in part, at any time or times prior to the
expiration or other termination of the Option.
(d) If the Optionee's employment by the Company is terminated prior to
the Expiration Date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Option Shares with respect to
which the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Board of Directors of the
Company, at any time prior to the earlier of: (i) three (3) months after
the date of termination, or (ii) the Expiration Date of such Option;
provided, however, if the Optionee's employment was terminated voluntarily
by the Optionee or by the Company "For Cause" (as defined below), Optionee
shall have no right to exercise his Option on or after the date of such
termination. As used herein, termination of an Optionee's employment by the
Company shall be "For Cause" if the Board of Directors reasonably concludes
that the Optionee has materially failed to perform his responsibilities to
the Company, materially failed to follow directives or policies established
by or at the direction of the Board of Directors, or conducted himself in a
manner materially detrimental to the interests of the Company.
5. Method of Exercising Option. (a) Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by giving written notice to
the Company at its principal office specifying the number of Option Shares to be
purchased and accompanied by payment in full of the aggregate purchase price for
the Shares. Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited. Attached as Exhibit 1 is a form of written notice acceptable
to the Company.
(b) The purchase price shall be payable: (i) in cash or its
equivalent, or (ii) in whole or in part through the transfer of Common
Stock previously acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly
as possible, shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the Option is so
exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons exercising the Option (or,
if the Optionee shall so request in the notice exercising the Option, in
the name of the Optionee and his spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising the Option. In the event
the Option is exercised by any person or persons after the death or legal
disability of the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All
shares that are purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
6. Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. Withholding of Taxes. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. Governing Law. This Agreement shall be construed in a manner consistent
with the Internal Revenue Code provisions concerning nonqualified stock options
and its interpretation shall otherwise be governed by Pennsylvania law.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
Chariman of the Board
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick
President
OPTIONEE
By: /s/ Robert P. DiGiovine, RPh
----------------------------
Robert P. DiGiovine, RPh
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________ Shares)1.
Please have the certificate or certificates representing the purchased Shares
registered in the following name or names2 ________________________________ and
sent to _________________________________________________.
DATED: ______________, ____.
OPTIONEE
_________________________
- --------
1The option price may be paid in whole or in part by delivery of Shares, subject
to the terms of the Optionee's Stock Option Agreement.
2Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
DERMA SCIENCES, INC.
SENIOR MANAGEMENT STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, hereby made and dated as of the 14 day of
April, 1997 between Derma Sciences, Inc., a Pennsylvania corporation (the
"Company"), and Richard Mink (the "Optionee").
WHEREAS, the Company desires to afford the Optionee an opportunity to
purchase shares of Common Stock, $.01 par value per share, of the Company
("Shares") as hereinafter provided,
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration the legal sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase all or any part of an aggregate of 50,000 shares (the
"Option") which Option is intended as a "nonqualified stock option". The Option
is in all respects limited and conditioned as hereinafter provided.
2. Purchase Price. The purchase price per share (the "Option Price") of the
Shares covered by the Option (the "Option Shares") shall be the lower of: (a)
the closing price of the Company's Common Stock as reported on the National
Association of Securities Dealers Automated Quotation System (Nasdaq) on April
8, 1997 (the "Grant Date"), to wit: $1.1875, or (b) the price of the Company's
Common Stock as determined in connection with the Company's contemplated private
placement thereof.
3. Term. The Option will expire on April 8, 2007 (the "Expiration Date").
4. Exercise of Option. (a) Except as provided in paragraph 4.(d) below, the
right of the Optionee to exercise is subject to the condition that the Optionee
be an employee of the Company. Except as provided in paragraph 4.(b) below, the
Option shall become exercisable in five (5) equal installments and the Optionee
shall have the right to purchase from the Company, on and after the following
dates, the following number of shares:
Date Installment Number of
Becomes Exercisable Option Shares
April 8, 1997 10,000
April 8, 1998 10,000
April 8, 1999 10,000
April 8, 2000 10,000
April 8, 2001 10,000
(b) The foregoing notwithstanding, the Option shall become exercisable
and the Optionee shall have the right to purchase from the Company, on and
after the occurrence of the following events, not less than the following
number of shares:
Event Upon Which Number of
Option Becomes Exercisable Option Shares
Net sales greater than $6,000,000 25,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $3.00 for a period
of 180 consecutive days
_______________________________________________________________________________
Net sales greater than $8,000,000 50,000
during any period of 12 consecutive
months, or
Attainment of an average share
price of at least $5.00 for a period
of 180 consecutive days
(c) The right of the Optionee to purchase the Option Shares may be
exercised, in whole or in part, at any time or times prior to the
expiration or other termination of the Option.
(d)If the Optionee's employment by the Company is terminated prior to
the Expiration Date of his Option, such Option may be exercised by the
Optionee, to the extent of the number of Option Shares with respect to
which the Optionee could have exercised it on the date of such termination,
or to any greater extent permitted by the Board of Directors of the
Company, at any time prior to the earlier of: (i) three (3) months after
the date of termination, or (ii) the Expiration Date of such Option;
provided, however, if the Optionee's employment was terminated voluntarily
by the Optionee or by the Company "For Cause" (as defined below), Optionee
shall have no right to exercise his Option on or after the date of such
termination. As used herein, termination of an Optionee's employment by the
Company shall be "For Cause" if the Board of Directors reasonably concludes
that the Optionee has materially failed to perform his responsibilities to
the Company, materially failed to follow directives or policies established
by or at the direction of the Board of Directors, or conducted himself in a
manner materially detrimental to the interests of the Company.
5. Method of Exercising Option. (a) Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by giving written notice to
the Company at its principal office specifying the number of Option Shares to be
purchased and accompanied by payment in full of the aggregate purchase price for
the Shares. Only full Shares shall be delivered and any fractional share which
might otherwise be deliverable upon exercise of an Option granted hereunder
shall be forfeited. Attached as Exhibit 1 is a form of written notice acceptable
to the Company.
(b) The purchase price shall be payable: (i) in cash or its
equivalent, or (ii) in whole or in part through the transfer of Common
Stock previously acquired by the Optionee.
(c) Upon receipt of such notice and payment, the Company, as promptly
as possible, shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the Option is so
exercised. The certificate or certificates for such Shares shall be
registered in the name of the person or persons exercising the Option (or,
if the Optionee shall so request in the notice exercising the Option, in
the name of the Optionee and his spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon the
written order of the person or persons exercising the Option. In the event
the Option is exercised by any person or persons after the death or legal
disability of the Optionee, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option. All
shares that are purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable.
6. Non-transferability of Option. The Option is not assignable or
transferable, in whole or in part, by the Optionee other than by will or by the
laws of descent and distribution. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee or, in the event of his legal
disability, by his legal representative.
7. Withholding of Taxes. The obligation of the Company to deliver Shares
upon the exercise of any Option shall be subject to any applicable federal,
state and local tax withholding requirements.
8. Governing Law. This Agreement shall be construed in a manner consistent
with the Internal Revenue Code provisions concerning nonqualified stock options
and its interpretation shall otherwise be governed by Pennsylvania law.
IN WITNESS WHEREOF, the parties have set their hands and seals the day and
year first written above.
DERMA SCIENCES, INC.
By: /s/ Edward J. Quilty
--------------------
Edward J. Quilty
Chariman of the Board
By: /s/ John T. Borthwick
-----------------------
John T. Borthwick
President
OPTIONEE
By: /s/ Richard Mink
----------------
Richard Mink
<PAGE>
EXHIBIT 1
DERMA SCIENCES, INC.
NOTICE OF EXERCISE OF STOCK OPTION
I hereby exercise nonqualified stock options granted to me on
_______________ by Derma Sciences, Inc. with respect to the following number of
shares of Derma Sciences, Inc. Common Stock, $.01 par value per share,
("Shares") covered by said option:
Number of Shares to be purchased ________________
Option price per Share ________________
Total option price ________________
Enclosed is my check in the amount of $_________ (and/or ________ Shares)1.
Please have the certificate or certificates representing the purchased Shares
registered in the following name or names2 ________________________________ and
sent to _________________________________________________.
DATED: ______________, ____.
OPTIONEE
_________________________
- --------
1The option price may be paid in whole or in part by delivery of Shares, subject
to the terms of the Optionee's Stock Option Agreement.
2Certificates may be registered in the name of the Optionee alone or in the
joint names of the Optionee and his spouse.
