Exhibit
10.2
RETENTION
AGREEMENT
THIS RETENTION AGREEMENT (this
“Agreement”) is entered into by and between Orthovita,
Inc., a Pennsylvania corporation having its principal offices in
Malvern, PA (the “Company”), and Albert J. Pavucek, Jr.
(the “Executive”) as of May 15, 2009.
WHEREAS, the Company and the
Executive entered into an Employment Agreement effective as of
April 30, 2007, which was subsequently amended and restated
effective as of December 15, 2008 (the “Original
Agreement”), and which sets forth the terms and conditions of
the Executive’s employment with the Company.
WHEREAS, the Company has determined
that it is in the Company’s best interest to enter into this
Agreement.
WHEREAS, the Company desires to
retain the Executive’s employment in order to provide certain
critical services, and to pay a retention bonus to the Executive
for the performance of such services, as more fully set forth in
this Agreement.
WHEREAS, the Company and the
Executive desire to enter into this Agreement, which the parties
have agreed shall supersede and replace the Original Agreement in
its entirety as of the Effective Date set forth below.
NOW, THEREFORE, in consideration of
the premises and of the mutual covenants and agreements hereinafter
set forth, the Company and the Executive hereby agree as
follows:
1. Employment .
(a) Term . The term of this
Agreement shall begin as of May 15, 2009 (the “Effective
Date”) and shall continue until April 30, 2010, unless
sooner terminated by either party as hereinafter provided. The
period commencing on the Effective Date and ending on the date on
which the term of the Executive’s employment under the
Agreement terminates is referred to herein as the
“Term.” In no event shall the expiration of the Term of
this Agreement be deemed, in and of itself, a termination of the
Executive’s employment for purposes of this Agreement,
including a termination without Cause for purposes of
Section 7.
(b) Duties . During the
period commencing on the Effective Date and ending on the date on
which the Company employs a new Chief Financial Officer, the
Executive shall serve as the Chief Financial Officer of the Company
with duties, responsibilities and authority commensurate therewith
and shall report to the Chief Executive Officer of the Company. The
Executive shall perform all duties and accept all responsibilities
incident to such position as may be reasonably assigned to him by
the Chief Executive Officer, including, but not limited to, duties
with respect to accounting functions and controls, financial
reporting, financial analysis, preparation of annual and quarterly
reports required to be filed with the Securities and Exchange
Commission (“SEC”), and budget analysis and
forecasting. On and after the date on which the Company employs a
new Chief Financial Officer, the Executive shall serve for at least
sixty (60)
days (subject to the Company’s rights set
forth in Section 7(a)) as the Company’s Principal
Financial Consultant with such duties, responsibilities and
authority as the Chief Executive Officer, the Company’s
then-current Chief Financial Officer or the Board of Directors of
the Company (the “Board”) may determine. The Executive
represents to the Company that he is not subject to or a party to
any employment agreement, non-competition covenant, understanding
or restriction which would be breached by or prohibit the Executive
from executing this Agreement and performing fully his duties and
responsibilities hereunder.
(c) Best Efforts . During the
Term, the Executive shall devote his best efforts and full time and
attention to promote the business and affairs of the Company and
its affiliated entities, and shall be engaged in other business
activities only to the extent that such activities do not
materially interfere or conflict with the Executive’s
obligations to the Company hereunder, including, without
limitation, obligations pursuant to Section 14 below. The
foregoing also shall not be construed as preventing the Executive
from (i) serving on civic, educational, philanthropic or
charitable boards or committees, or, with the prior written consent
of the Board, in its sole discretion, on corporate boards, and
(ii) managing personal investments, so long as such activities
are permitted under the Company’s Code of Conduct and
employment policies. Notwithstanding any provision of this
Section 1 of the Agreement to the contrary, in no event shall
the Executive invest in any business competitive with the Company
or that would otherwise violate the provisions of Section 14
below (other than as a shareholder of less than 1% of a publicly
traded company).
2. Base Salary . During the
Term, for all of the services rendered by the Executive hereunder,
the Company shall pay Executive a base salary (“Base
Salary”), at the annual rate of $219,300, payable in
installments at such times as the Company customarily pays its
other employees.
3. Retention Bonus . The
Company shall pay the Executive a retention bonus in the amount of
$50,000 (the “Retention Bonus”) on July 1, 2009 if
the Executive continues to be employed by the Company through
July 1, 2009 and he performs all of his material duties to the
reasonable satisfaction of the Company. The Retention Bonus shall
be paid in a lump sum cash payment on July 1, 2009 or on the
next regularly scheduled payroll date after such date, provided the
conditions of the preceding sentence are met. If the
Executive’s employment is terminated by the Company without
Cause (as defined in Section 13 below) prior to July 1,
2009, and provided the Executive has performed all of his material
duties to the reasonable satisfaction of the Company, the Executive
shall receive the Retention Bonus on July 1, 2009.
4. Retirement and Welfare
Benefits; Automobile Allowance . The Executive shall be
eligible to participate in the Company’s health, life
insurance, long and short-term disability, dental, retirement,
savings and medical programs, directors and officers liability
insurance and other benefit plans or programs generally made
available to other employees of the Company, if any, pursuant to
their respective terms and conditions. Nothing in this Agreement
shall preclude the Company or any affiliate of the Company from
terminating or amending any employee benefit plan or program from
time to time after the Effective Date. During the Term, the Company
shall pay the Executive a monthly car allowance equal to $600 per
month, which amount shall be grossed up for income taxes at the end
of any applicable calendar year.
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5. Vacation . The Executive
shall be entitled to vacation, holiday and sick leave at levels
commensurate with those provided to other senior level employees of
the Company, in accordance with the Company’s vacation,
holiday and other pay for time not worked policies.
6. Expenses . The Company
shall reimburse the Executive for all necessary and reasonable
travel and other business expenses incurred by the Executive in the
performance of his duties hereunder in accordance with such
reasonable accounting procedures as the Company may adopt generally
from time to time for executives.
7. Termination Without Cause
. The provisions of this Section 7 shall apply if the
Executive’s employment is terminated by the Company without
Cause (as defined in Section 13 below) during the Term of this
Agreement.
(a) The Company may
terminate the Executive’s employment with the Company at any
time without Cause upon not less than 30 days’ prior written
notice to the Executive. Provided the Company has not terminated
the Executive for Cause, a resignation by Executive effective the
sixty-first (61 st ) day (or if such day is
not a business day, the next business day thereafter) following the
Company’s employment of a new Chief Financial Officer shall
constitute a termination of Executive’s employment by the
Company without Cause for the purposes of this Agreement. On the
date of the Executive’s termination of employment for any
reason, the Executive agrees to resign all positions, including as
an officer and, if applicable, as a director or member of the board
of directors, of the Company and its parents, subsidiaries and
affiliates.
(b) If the Company terminates the
Executive’s employment without Cause during the Term and if
the Executive executes and does not revoke the Second Release (as
defined in Section 28(c) below), the Executive shall be
entitled to receive in lieu of any payments due under any severance
plan or program for employees or executives, the
following:
(i) An amount equal to 12 months of
the Executive’s annual Base Salary (at the rate in effect
immediately before the Executive’s termination), which shall
be paid in normal installments in accordance with the
Company’s payroll practices. Payments shall commence within
60 days after the effective date of the Executive’s
employment termination.
(ii) A monthly payment equal to the
Executive’s monthly COBRA health care continuation coverage
premium under section 4980B of the Internal Revenue Code of 1986,
as amended (the “Code”) under the Company’s
medical plan, for the 12-month severance period following the
Executive’s termination date or until the date on which the
Executive is eligible for coverage under a plan maintained by a new
employer or under a plan maintained by his spouse’s employer,
whichever is sooner, for himself and, where applicable, his spouse
and dependents. Payments shall commence within 60 days after the
effective date of the Executive’s employment
termination.
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(iii) Notwithstanding any provision
to the contrary in any applicable plan, program or agreement, all
outstanding stock options, restricted stock, restricted stock units
and other equity rights held by the Executive as of the date of the
Executive’s termination without Cause will become fully
vested and exercisable as of the date on which the
Executive’s termination without Cause occurs. This
Section 7(b)(iii) shall not apply upon expiration of the Term
of this Agreement.
(iv) Any other amounts earned,
accrued and owing but not yet paid under Section 2 above (Base
Salary) and any benefits accrued and due under any applicable
benefit plans and programs of the Company.
(c) Notwithstanding the foregoing,
if the Executive is determined to be a Specified Employee (as
defined in Section 13(d) below), any amounts payable to him
upon separation from service that are considered deferred
compensation under section 409A of the Code shall be postponed and
shall be paid in a lump sum after the first to occur of
(i) the date that is six months following the
Executive’s separation from service or (ii) the
Executive’s death, if required by section 409A. The lump sum
payment of such postponed amounts shall be made within five days
following the end of the six-month period or within 60 days
following the Executive’s death, as applicable. The section
409A postponement period shall not apply to: (x) separation
pay that is exempt from section 409A under the separation pay
exception, which exempts an amount up to two times the lesser of
(1) the Executive’s annualized compensation for the year
prior to the year of separation, or (2) the maximum amount
that may be taken into account under a qualified plan pursuant to
section 401(a)(17) of the Code and which is paid no later than the
last day of the Executive’s second taxable year following the
taxable year in which his separation from service occurs; and
(y) any amount exempt from section 409A under the short term
deferral exception or another exception.
8. Voluntary Termination .
The Executive may voluntarily terminate his employment for any
reason upon 30 days’ prior written notice. In such event,
after the effective date of such termination, no payments shall be
due under this Agreement, except that the Executive shall be
entitled to any amounts earned, accrued and owing but not yet paid
under Section 2 above and any benefits accrued and due under
any applicable benefit plans and programs of the
Company.
9. Disability . If the
Executive incurs a Disability (as defined in Section 13 below)
during the Term, the Executive’s employment shall terminate
on the date of Disability. If the Executive’s employment
terminates on account of Disability, the Executive shall be
entitled to receive any amounts earned, accrued and owing but not
yet paid under Section 2 above and any benefits accrued and
due under any applicable benefit plans and programs of the
Company.
10. Death . If the Executive
dies while employed by the Company, the Executive’s
employment shall terminate on the date of death and the Company
shall pay to the Executive’s executor, legal representative,
administrator or designated beneficiary, as applicable, any amounts
earned, accrued and owing but not yet paid under Section 2
above and any benefits accrued and due under any applicable benefit
plans and programs of the Company. Otherwise, the Company shall
have no further liability or obligation under this Agreement to the
Executive’s
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executors, legal representatives,
administrators, heirs or assigns or any other person claiming under
or through the Executive.
11. Cause . The Company may
terminate the Executive’s employment at any time for Cause
upon written notice to the Executive, in which event all payments
under this Agreement shall cease, except for any amounts earned,
accrued and owing but not yet paid under Section 2 above and
any benefits accrued and due under any applicable benefit plans and
programs of the Company.
12. Change of Control
.
(a) Acceleration of Equity
Rights. Notwithstanding any provision to the contrary in any
applicable plan, program or agreement, upon the occurrence of a
Change of Control (as defined in Section 13 below) during the
Term, all outstanding stock options, restricted stock, restricted
stock units and other equity rights held by the Executive as of the
date of the Change of Control will become fully vested and
exercisable as of the date on which the Change of Control
occurs.
(b) Application of
Section 280G of the Code . Notwithstanding any provision
of this Agreement to the contrary, if it is determined that any
amount or benefit to be paid or provided under this Agreement or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement by the Company to or for the benefit
of the Executive would be an “excess parachute
payment,” within the meaning of section 280G of the Code, or
any successor provision thereof, then the payments and benefits to
be paid or provided under this Agreement shall be reduced to the
minimum extent necessary (but in no event less than zero) so that
no portion of any such payment or benefit, as so reduced,
constitutes an excess parachute payment as therein defined. The
fact that the Executive’s right to payments or benefits may
be reduced by reason of the limitations contained in this
Section 12(b), shall not of itself limit or otherwise affect
any other rights of the Executive other than pursuant to this
Agreement.
(i) All determinations to be made
under this Section 12(b) shall be made by the Company’s
independent public accounting firm as in effect immediately prior
to the Change of Control (the “Accounting Firm”), which
firm shall provide its determinations and any supporting
calculations to the Company and Chief Executive Officer within 10
business days of the event that gives rise to the “excess
parachute payment.” Any such determination by the Accounting
Firm shall be binding upon the Company and the Executive. Within
five days after the Accounting Firm’s determination, the
Company shall pay (or cause to be paid) or distribute (or cause to
be distributed) to or for the benefit of the Executive such amounts
as are then due to the Executive under this Agreement.
(ii) Within two years after the
event that gives rise to the “excess parachute
payment,” the Accounting Firm shall review the determination
made pursuant to the preceding paragraph. If the Accounting Firm
determines that any payments will have been made by the Company
which should not have been made (“Overpayment”),
consistent with the
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calculations required to be made
hereunder, any such Overpayment shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the
Company, together with interest at the applicable Federal rate
provided for in section 7872(f)(2) of the Code (the “Federal
Rate”). In the event that the Accounting Firm determines that
additional payments which have not been made by
