-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M5xGoEXRCETyJ88xYbVH38pAMURrfMHilJH0T7E33iwBAquYpKxjfAdSnTDuYhTK RnB+W09GU20NMKP0WW0epA== 0000950144-05-003659.txt : 20050407 0000950144-05-003659.hdr.sgml : 20050407 20050407172427 ACCESSION NUMBER: 0000950144-05-003659 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050401 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050407 DATE AS OF CHANGE: 20050407 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WRIGHT MEDICAL GROUP INC CENTRAL INDEX KEY: 0001137861 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 134088127 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-32883 FILM NUMBER: 05739946 BUSINESS ADDRESS: STREET 1: 5677 AIRLINE ROAD CITY: ARLINGTON STATE: TN ZIP: 38002 BUSINESS PHONE: 9018679971 8-K 1 g94400e8vk.htm WRIGHT MEDICAL GROUP, INC. - FORM 8-K WRIGHT MEDICAL GROUP, INC. - FORM 8-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 1, 2005

WRIGHT MEDICAL GROUP, INC.

(Exact name of registrant as specified in its charter)
         
Delaware
(State or other jurisdiction
of incorporation) 		  000-32883
(Commission
File Number) 		  13-4088127
(IRS Employer
Identification No.)
     
5677 Airline Road,
Arlington, Tennessee
(Address of principal executive offices) 		  38002
(Zip Code)

Registrant’s telephone number, including area code: (901) 867-9971

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

     
o
  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
    
o
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
    
o
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
    
o
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

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Item 1.01. Entry into a Material Definitive Agreement.
Item 9.01. Financial Statements and Exhibits.
SIGNATURE
EXHIBIT INDEX
EX-10.1 AMENDMENT TO CREDIT AGREEMENT
EX-10.2 AMENDMENT TO EMPLOYMENT AGREEMENT

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Item 1.01. Entry into a Material Definitive Agreement.

Amendment of Credit Agreement

Effective as of April 1, 2005, Wright Medical Group, Inc. (the “Company”) amended the credit agreement with its lenders. The amendment modifies the credit agreement as follows:

•   The maximum aggregate principal amount of “Material Indebtedness” is increased from $5,000,000 to $20,000,000.
 
•   The types of investments constituting “Permitted Investments” are expanded, and the dollar limits on such investments are eliminated.

A copy of the amendment to the credit agreement is attached to this report as Exhibit 10.1 and is incorporated herein by reference.

Amendment of Employment Agreement of Laurence Y. Fairey

Effective as of April 4, 2005, the Company amended the employment agreement with Laurence Y. Fairey, its President and Chief Executive Officer. The amendment modifies Mr. Fairey’s employment agreement in the following material ways:

•   The Company’s recent adoption of the Executive Performance Incentive Plan, which will be in effect for 2005, is reflected in the provision entitling Mr. Fairey to receive an annual performance incentive bonus.

•   More specific language has been added to the provision describing when a disability to Mr. Fairey occurs which could lead to the termination of his employment. In addition, in the event of his termination for disability, Mr. Fairey will be entitled to receive his former base salary and health and life insurance benefits for 18 months after termination.

•   In the event of his termination for “cause” (as defined in the employment agreement), Mr. Fairey may be entitled to receive his former base salary and health and life insurance benefits with respect to up to 24 months after termination, as determined by the Company in its discretion, as consideration for his covenants not to compete or interfere with the Company’s business.

•   In the event of his termination without cause, Mr. Fairey will be entitled to receive his former base salary and health and life insurance benefits with respect to between 12 and 24 months after termination, as determined by the Company in its discretion, as consideration for his covenants not to compete or interfere with the Company’s business.

•   The duration of Mr. Fairey’s covenants not to compete or interfere with the Company’s business following the termination of his employment has been made coterminous with the period with respect to which he receives post-employment pay and benefits from the Company.

•   In the event that Mr. Fairey breaches any of his covenants not to compete or interfere with the Company’s business:

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•   the Company’s obligations to provide Mr. Fairey with post-employment pay and benefits following the termination of his employment and to make a “CIC payment” (see below) to him will cease;

•   Mr. Fairey will be required to pay to the Company, upon demand, 90% of any post-employment pay and benefits and any CIC payment that he has received plus interest on such amounts until they are repaid; and

•   Mr. Fairey will be required to pay to the Company, upon demand, the reasonable costs and expenses that it incurs in enforcing this provision.

•   In the event that a transaction resulting in a “change in control” (as defined in the employment agreement) of the Company occurs on or before March 31, 2007, in which the market value of the consideration received by the Company’s stockholders is less than or equal to $44.00 per share, Mr. Fairey will be entitled to receive from the Company (or the surviving entity) a “CIC payment” in an amount equal to:

  •   a minimum of $3,000,000 and a maximum of $6,000,000, depending on the amount of the consideration per share received by the Company’s stockholders in the change-in-control transaction; plus
 
  •   the sum of all taxes assessed against Mr. Fairey as a result of his receipt of the CIC payment; minus
 
  •   the intrinsic value of Mr. Fairey’s stock options measured as the difference between the aggregate market value of the consideration received upon the exercise or deemed exercise of the stock options minus the aggregate exercise price of the stock options.

A copy of the amendment to Mr. Fairey’s employment agreement is attached to this report as Exhibit 10.2 and is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(c)   Exhibits.

     
Exhibit    
Number   Description
10.1
  Amendment No. 5 dated March 29, 2005 (effective as of April 1, 2005), to the Credit Agreement dated as of August 1, 2001, as amended, among Wright Medical Group, Inc., Wright Medical Technology, Inc., the lenders thereunder, JPMorgan Chase Bank, N.A. (formerly named The Chase Manhattan Bank), as administrative agent and collateral agent, and the other parties thereto.
10.2
  First Amendment to Employment Agreement dated April 6, 2005 (effective as of April 4, 2005), between Wright Medical Technology, Inc. and Laurence Y. Fairey.

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SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
Date: April 7, 2005
        
 
        
    WRIGHT MEDICAL GROUP, INC.
 
        
  By:   /s/ Laurence Y. Fairey
       
      Laurence Y. Fairey
President and Chief Executive Officer

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EXHIBIT INDEX

     
Exhibit Number   Description
10.1
  Amendment No. 5 dated March 29, 2005 (effective as of April 1, 2005), to the Credit Agreement dated as of August 1, 2001, as amended, among Wright Medical Group, Inc., Wright Medical Technology, Inc., the lenders thereunder, JPMorgan Chase Bank, N.A. (formerly named The Chase Manhattan Bank), as administrative agent and collateral agent, and the other parties thereto.
10.2
  First Amendment to Employment Agreement dated April 6, 2005 (effective as of April 4, 2005), between Wright Medical Technology, Inc. and Laurence Y. Fairey.

4

EX-10.1 2 g94400exv10w1.txt EX-10.1 AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.1 AMENDMENT NO. 5 dated as of March 29, 2005 (this "Amendment"), to the Credit Agreement dated as of August 1, 2001, as heretofore amended (the "Credit Agreement"), among WRIGHT MEDICAL GROUP, INC., a Delaware corporation, WRIGHT MEDICAL TECHNOLOGY, INC., a Delaware corporation, the LENDERS from time to time party thereto, JPMORGAN CHASE BANK, N.A., as administrative agent and collateral agent, and the other parties thereto. A. Pursuant to the Credit Agreement, the Lenders and the Issuing Bank have extended credit to the Borrower, and have agreed to extend credit to the Borrower, in each case pursuant to the terms and subject to the conditions set forth therein. B. Holdings and the Borrower have informed the Administrative Agent the they seek an amendment of Section 1.01 of the Credit Agreement to amend the definitions of the terms "Material Indebtedness" and "Permitted Investments", in each case as set forth herein. C. The Required Lenders are willing to agree to such amendments pursuant to the terms, subject to the conditions and to the extent set forth herein. D. Each capitalized term used and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement. Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendments. Section 1.01 of the Credit Agreement is hereby amended as follows: (a) The definition of "Material Indebtedness is hereby amended and restated in its entirety to read as follows: "Material Indebtedness" means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Borrower and the Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of Holdings, the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time." 2 (b) The definition of "Permitted Investments" is hereby amended and restated in its entirety to read as follows: "Permitted Investments" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency or instrumentality thereof), in each case maturing within 36 months from the date of acquisition thereof; (b) investments in commercial paper maturing within nine months from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-1 by Standard & Poor's and P1 by Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits, in each case maturing within six months from the date of acquisition thereof, issued or guaranteed by or placed with any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof (a "U.S. Commercial Bank") that, at such date of acquisition, has a long term rating of A or better by S&P or Moody's, is a member of the Federal Deposit Insurance Corporation and is among the 50 largest U.S. Commercial Banks ranked according to total assets (a "Qualified U.S. Commercial Bank"); (d) money market deposit accounts or money market funds issued or offered by (i) any U.S. Commercial Bank that, at the date of investment, is a Qualified U.S. Commercial Bank or (ii) any domestic office of any investment bank that, at the date of investment, has a long term rating of A or better by S&P or Moody's, has total capital in excess of $500,000,000 and is a member of the Securities Investor Protection Corporation; (e) Eurodollar time deposits maturing within 14 days from the date of acquisition thereof placed with any international commercial bank that, at such date of placement, has a long term rating of A or better by S&P or Moody's or a comparable rating by a comparable rating agency and that is among the 50 largest global banks ranked according to total assets; (f) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a Qualified U.S. Commercial Bank; (g) tax free auction rate securities, variable rate demand notes, other tax exempt securities and taxable auction rate securities that, in each case, are liquid within 15 months from the date of acquisition thereof and having, at such date of acquisition, a long-term investment credit rating of AA or better by S&P and Aa or better by Moody's or guaranteed by an irrevocable letter of credit 3 issued by a U.S. Commercial Bank; (h) municipal bonds and corporate bonds, in each case, maturing within 36 months from the date of acquisition thereof and having, at such date of acquisition, a long-term investment credit rating of AA or better by S&P and Aa or better by Moody's; (i) floating rate notes maturing within 24 months from the date of acquisition thereof and having, at such date of acquisition, a long-term investment credit rating of AA or better by S&P and Aa or better by Moody's; and (j) shares of money market preferred or similar funds maturing within six months from the date of acquisition thereof and having, at such date of acquisition, a rating of AA or better by S&P and Aa or better by Moody's." SECTION 2. Representations and Warranties. Each of Holdings and the Borrower represents and warrants to each other party hereto that (a) this Amendment has been duly executed and delivered by each of Holdings and the Borrower and constitutes a legal, valid and binding obligation of Holdings and the Borrower, enforceable against it in accordance with its terms, and (b) after giving effect to this Amendment (i) the representations and warranties set forth in Article III of the Credit Agreement are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects as of the earlier date), and (ii) no Default or Event of Default has occurred and is continuing. SECTION 3. Effectiveness. This Amendment shall become effective as of the date set forth above on the date on which the following conditions are satisfied: (a) the Administrative Agent (or its counsel) shall have received from each of Holdings, the Borrower and the Required Lenders a counterpart of this Amendment signed on behalf of such party; and (b) the Administrative Agent shall have received all fees and other invoiced amounts required to be reimbursed by any Loan Party under the Credit Agreement. SECTION 4. Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect, the rights and remedies of the Lenders, the Issuing Bank, Collateral Agent or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle Holdings or the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit 4 Agreement or any other Loan Document in similar or different circumstances. SECTION 5. Counterparts. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by telecopy shall be as effective as delivery of a manually executed counterpart of this Amendment. SECTION 6. Application Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. SECTION 7. Headings. Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment. 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. WRIGHT MEDICAL GROUP, INC., by /s/ Laurence Y. Fairey --------------------------- Name: Laurence Y. Fairey Title: President and CEO WRIGHT MEDICAL TECHNOLOGY, INC., by /s/ Jason P. Hood --------------------------- Name: Jason P. Hood Title: General Counsel and Secretary JPMORGAN CHASE BANK, N.A., as a Lender and as Administrative Agent, by /s/ Stephanie Parker --------------------------- Name: Stephanie Parker Title: Vice President SIGNATURE PAGE TO AMENDMENT NO. 5 TO THE WRIGHT MEDICAL TECHNOLOGY, INC. CREDIT AGREEMENT DATED AS OF AUGUST 1, 2001 Name of Lender: SunTrust Bank By /s/ W. Brooks Hubbard -------------------------- Name: W. Brooks Hubbard Title: Director SIGNATURE PAGE TO AMENDMENT NO. 5 TO THE WRIGHT MEDICAL TECHNOLOGY, INC. CREDIT AGREEMENT DATED AS OF AUGUST 1, 2001 Name of Lender: CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch by /s/ Paul L. Colon ---------------------------- Name: Paul L. Colon Title: Director by /s/ Karim Blasetti ---------------------------- Name: Karim Blasetti Title: Associate SIGNATURE PAGE TO AMENDMENT NO. 5 TO THE WRIGHT MEDICAL TECHNOLOGY, INC. CREDIT AGREEMENT DATED AS OF AUGUST 1, 2001 Name of Lender: Bank of America NA by /s/ Elizabeth L. Knox ---------------------------- Name: Elizabeth L. Knox Title: SVP EX-10.2 3 g94400exv10w2.txt EX-10.2 AMENDMENT TO EMPLOYMENT AGREEMENT EXHIBIT 10.2 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT This First Amendment to Employment Agreement (this "Amendment") is made and entered into as of April 4, 2005, by and between Wright Medical Technology, Inc., a Delaware corporation (the "Company"), and Laurence Y. Fairey (the "Employee"). Introduction. The Company and the Employee are parties to an Employment Agreement dated as of July 1, 2004 (the "Agreement"). The Company and the Employee desire to amend certain provisions of the Agreement. Based on the foregoing, and for and in consideration of the mutual covenants contained herein, the parties, intending to be legally bound, hereby agree as follows: 1. Amendment of Paragraphs 4(b)-(e). Paragraphs 4(b)-(e) of the Agreement are amended to read as follows: "4. Compensation Matters. * * * (b) Incentive Bonus. During the Employee's employment hereunder, in addition to the Base Salary, the Employee shall be eligible to receive an annual performance incentive bonus (an "Incentive Bonus") in accordance with the terms and subject to the conditions of the Company's Executive Performance Incentive Plan, as the same may be amended from time to time (the "Incentive Plan"). The Employee's entitlement to an Incentive Bonus for any year will depend on whether, and to what extent, certain performance goals established for such year by the Compensation Committee of the Board (the "Committee") have been achieved. The Incentive Bonus, if any, payable to the Employee for any year shall not exceed two times the Base Salary earned by the Employee in such year. The Committee shall determine in good faith the Employee's entitlement to an Incentive Bonus based on the achievement of such performance goals as soon as reasonably practicable after the end of each year. The Company shall pay the Incentive Bonus, if any, to the Employee within ten (10) days after the Committee makes such determination and in any event not later than March 15 of the year following the year in which the services upon which the Incentive Bonus is based were performed. (c) Equity Incentive Plan Awards. The Employee shall be eligible to receive stock options and other awards granted by the Committee from time to time under the Company's Third Amended and Restated 1999 Equity Incentive Plan, as the same may be amended from time to time (the "Equity Plan"). Any such grant of stock options or other awards under the Equity Plan shall be made in accordance with and subject to the terms of the Equity Plan and any agreement pursuant to which such stock options or other awards are granted. (d) Fringe Benefits. The Employee shall be eligible to receive, and to participate in programs for, such fringe benefits (including, without limitation, medical insurance and retirement benefits) as the Company may make available generally to its executive officers from time to time during the term of this Agreement. The Employee shall be responsible for making any generally applicable employee contributions required under such fringe benefit programs. (e) Annual Compensation Review. The Committee shall review the Employee's compensation at least once per year and shall make any increase to the Base Salary or award any bonus to the Employee that the Committee, in its sole and absolute discretion, determines is merited based upon the Employee's performance and is consistent with the Company's compensation policies. The Company shall pay any bonus to the Employee not later than March 15 of the year following the year in which the services upon which the bonus in based were performed." 2. Amendment of Paragraphs 7(a)(i), 7(b) and 7(c). Paragraphs 7(a)(i), 7(b) and 7(c) of the Agreement are amended to read as follows: "7. Term. (a) The Employee's employment under this Agreement shall commence on the Effective Date and shall expire on June 30, 2008. Notwithstanding the foregoing but subject to paragraph 7(b), the Company may, at its election, terminate the obligations of the Company as follows: (i) Upon 30 days' notice if the Employee becomes disabled, meaning that as a result of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of at least twelve (12) months, the Employee either (A) is unable to engage in any substantial gainful activity, or (B) receives income replacement benefits for a period of at least three (3) months under an accident and health plan covering employees of the Company; or * * * (b) (i) If this Agreement is terminated pursuant to paragraph 7(a)(i), the Company, subject to paragraph 11(c), shall provide to the Employee with respect to a period of eighteen (18) months after the date of termination (A) (1) the Base Salary for such period, at the Base Salary in effect on the date of termination, minus (2) the amount or amounts (if any) that the Employee receives during such period under any disability insurance policy or plan maintained by the Company or the Employee or under Social Security or similar laws, which net amount shall be payable (after deduction of applicable payroll taxes) in accordance with the Company's customary payroll practices in 2 effect from time to time, and (B) continued coverage for such period under the Company's then existing health benefit and life insurance programs on the same terms that were applicable to the Employee on the date of termination. (ii) If this Agreement is terminated pursuant to paragraph 7(a)(ii), or if the Employee resigns, the Company, subject to paragraph 11(c), may, but shall not be obligated to, provide to the Employee, for and in consideration of the Employee's compliance with the covenants set forth in paragraph 11, with respect to a period of up to twenty-four (24) months after the date of termination or resignation, as determined by the Company in its sole and absolute discretion, the Base Salary for such period, at the Base Salary in effect on the date of termination or resignation, payable (after deduction of applicable payroll taxes) in accordance with the Company's customary payroll practices in effect from time to time and with a final payment due not later than March 15 of the year following the year in which the termination or resignation occurred. (iii) If this Agreement is terminated pursuant to paragraph 7(a)(iii), the Company, subject to paragraph 11(c), shall provide to the Employee, for and in consideration of the Employee's compliance with the covenants set forth in paragraph 11, with respect to a period of not less than twelve (12) months and not more than twenty-four (24) months after the date of termination, as determined by the Company in its sole and absolute discretion, (A) the Base Salary for such period, at the Base Salary in effect on the date of termination, payable (after deduction of applicable payroll taxes) in accordance with the Company's customary payroll practices in effect from time to time and with a final payment due not later than March 15 of the year following the year in which the termination occurred, and (B) continued coverage for such period under the Company's then existing health benefit and life insurance programs on the same terms that were applicable to the Employee on the date of termination. (c) The Employee shall be under no obligation to mitigate any of the costs incurred by the Company in providing post-employment pay and benefits to the Employee under paragraph 7(b)." 3. Amendment of Paragraph 11. Paragraph 11 of the Agreement is amended to read as follows: "11. Covenants Not To Compete or Interfere. (a) During the term of this Agreement and the period, if any, with respect to which the Company provides post-employment pay and benefits to the Employee under paragraph 7(b), the Employee shall not, directly or indirectly (whether as an officer, director, owner, employee, partner or other participant), engage in any Competitive Business in any part of the world. As used herein, the term "Competitive Business" means the manufacturing, supplying, producing, selling, distributing, marketing, or providing for sale of any orthopaedic product, device or instrument manufactured or sold by the 3 Company or its subsidiaries or in clinical development sponsored by the Company or its subsidiaries, in each case, as of the date of termination of the Employee's employment. (b) During the term of this Agreement and the period, if any, with respect to which the Company provides post-employment pay and benefits to the Employee under paragraph 7(b), the Employee shall not interfere with, disrupt or attempt to interfere with or disrupt the relationships, contractual and otherwise, between the Company and its subsidiaries and the suppliers, employees, sales representatives, distributors, customers, contractors, lessors and lessees of the Company and its subsidiaries. (c) Without limiting the rights and remedies available to the Company, in the event of any breach by the Employee of any of the covenants set forth in this paragraph 11: (i) the Company's obligation to make any payment or provide any benefits to the Employee under paragraphs 7(b) and 13 shall cease immediately and permanently; (ii) the Employee shall repay to the Company, within ten (10) days after he receives written demand therefor, an amount equal to (A) ninety percent (90%) of the payments and benefits previously received by the Employee under paragraphs 7(b) and 13 of this Agreement, plus (B) interest on such amount, at an annual rate equal to the lesser of (1) 10 percent (10%) or (2) the maximum non-usurious rate under applicable law, from the dates on which such payments and benefits were received to the date of repayment to the Company; and (iii) the Employee shall pay to the Company from time to time, within ten (10) days after he receives written demand therefor, an amount or amounts equal to the reasonable costs and expenses (including reasonable attorneys' fees and expenses) incurred by or on behalf of the Company in enforcing this paragraph 11(c) from and after the date on which the Company delivers notice of such breach to the Employee. (d) It is the desire and intent of the parties that the provisions of this paragraph 11 be enforced to the fullest extent permissible under the applicable laws in each jurisdiction in which enforcement is sought. Accordingly, if any portion of this paragraph 11 is adjudicated to be invalid or unenforceable, this paragraph 11 shall be deemed curtailed, whether as to time or location, to the minimum extent required for its validity under applicable law and shall be binding and enforceable with respect to the Employee as so curtailed, such curtailment to apply only with respect to the operation of this paragraph 11 in the jurisdiction in which such adjudication is made. If a court in any jurisdiction, in adjudicating the validity of this paragraph 11, imposes any 4 additional terms or restrictions with respect to this paragraph 11, this paragraph 11 shall be deemed amended to incorporate such additional terms or restrictions." 4. Amendment of Paragraph 12. Paragraph 12 of the Agreement is amended to read as follows: "12. Remedies. The Employee acknowledges and agrees that (a) a monetary remedy for any breach of any of the covenants set forth in paragraphs 9, 10 and 11 would be inadequate and impracticable, (b) such a breach would cause the Company irreparable harm, and (c) the Company shall be entitled to specific performance and to temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages. Therefore, in addition to any other right or remedy to which the Company may be entitled at law or in equity (including, without limitation, the rights and remedies set forth in paragraph 11(c)), the Company shall be entitled to enforce the covenants set forth in paragraphs 9, 10 and 11 by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent any breach or threatened breach of any such covenants, without posting any bond or other undertaking." 5. Amendment of Paragraph 13. Paragraph 13 of the Agreement is amended to read as follows: "13. Certain Change in Control. (a) If a transaction resulting in a Change in Control (a "CIC Transaction") occurs on or before March 31, 2007, wherein the aggregate Market Value of the cash, securities or other property received or to be received by the Company's stockholders (other than stockholders exercising their appraisal rights, if any, under applicable law) as consideration (the "CIC Consideration") is less than or equal to $44.00 per share as of the date on which the CIC Transaction occurs (the "CIC Date"), then the Company (or the surviving entity in the CIC Transaction (the "Surviving Entity")) shall make a one-time payment to the Employee, in cash in a single lump sum within fifteen (15) days after the CIC Date, in an amount equal to the Net Value plus the Tax Amount minus the Intrinsic Option Value (the "CIC Payment"). The CIC Payment shall be calculated on behalf of the Company (or the Surviving Entity) by an independent, nationally recognized accounting firm or executive compensation consulting firm to be selected by the Company (or the Surviving Entity). Together with the CIC Payment, the Company (or the CIC Surviving Entity) shall provide the Employee with written materials setting forth in reasonable detail the calculation of the CIC Payment. (b) In connection with the CIC Transaction, (i) the Company shall accelerate the vesting of any and all unvested Stock Options so that all such Stock Options are fully exercisable on the CIC Date; (ii) the Company shall cancel, with the Employee's express consent (which the Employee hereby 5 provides), any and all "out-of-the-money" Stock Options immediately prior to the CIC Date; and (iii) the Employee shall exercise any and all "in-the-money" Stock Options on the CIC Date, unless the agreement pursuant to which the CIC Transaction occurs provides for the deemed exercise of the Stock Options as of the CIC Date. (c) For the purposes of this Agreement, the following terms have the meanings specified below: "Change in Control" means the first to occur on or after April 4, 2005, of any of the following: (i) the acquisition by any person or persons acting as a group ("Person") of capital stock of the Company which, when added to any capital stock of the Company already owned by the Person, constitutes more than fifty percent (50%) of either (A) the total fair market value of the outstanding capital stock of the Company, or (B) the total voting power of the outstanding capital stock of the Company; provided, however, that a Change in Control will not be deemed to have occurred when any Person who owns more than fifty percent (50%) of the total fair market value or the total voting power of the outstanding capital stock of the Company as of the date of this Agreement acquires any additional capital stock of the Company; and provided further, that an increase in the percentage of the outstanding capital stock of the Company owned by a Person as a result of a transaction in which the Company acquires its capital stock in exchange for property will be treated as an acquisition of such capital stock by such Person; or (ii) the acquisition by a Person, in a single transaction or a series of transactions within a twelve (12) month period, of capital stock of the Company representing not less than thirty-five percent (35%) of the total voting power of the outstanding capital stock of the Company; or (iii) the acquisition by a Person, in a single transaction or a series of transactions within a twelve (12) month period, of assets of the Company which have a total gross fair market value of not less than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition(s), in each case without regard to any liabilities associated with such assets; provided, however, that a Change in Control will not be deemed to have occurred when such assets are acquired by: (A) an entity of which the Company owns, directly or indirectly, fifty percent (50%) or more of the total fair market value or the total voting power of the outstanding capital stock; 6 (B) a Person which owns, directly or indirectly, fifty percent (50%) or more of the total fair market value or the total voting power of the outstanding capital stock of the Company; (C) an entity of which a Person described in clause (B) owns, directly or indirectly, fifty percent (50%) or more of the total fair market value or the total voting power of the outstanding capital stock; (D) an entity which is controlled by the stockholders of the Company immediately after the transfer; or (E) a stockholder of the Company in exchange for or with respect to capital stock of the Company; or (iv) a majority of the members of the Board is replaced in any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. In making a determination as to whether a Change in Control has occurred, the foregoing definition shall be construed and applied in a manner that avoids the imposition of federal income tax on the Employee by operation of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"). The term "in-the-money," in describing a Stock Option, means that the Market Value of the underlying security exceeds the exercise price of the Stock Option. "Intrinsic Option Value" means, with respect to in-the-money Stock Options, (i) the aggregate Market Value of the CIC Consideration as of the CIC Date received or to be received by the Employee upon the exercise or deemed exercise of the Stock Options, minus (ii) the aggregate exercise price of the Stock Options. "Market Value" means, as of the date on which it is calculated, the following: (i) in the case of cash, the dollar amount thereof; (ii) in the case of any security, (A) if the security is listed on a national securities exchange, the mean between the highest and lowest sale prices reported as having occurred on the primary exchange on which the security is listed and traded on the day immediately preceding the calculation date, or if there was no such sale on that day, then on the last preceding day on which such a sale was reported; (B) if the security is not listed on any national securities exchange but is quoted on the Nasdaq Stock Market, the mean between 7 the highest and lowest sale prices reported on the day immediately preceding the calculation date, or if there was no such sale on that day, then on the last preceding day on which such a sale was reported; or (C) if the security is not listed on a national securities exchange or quoted on the Nasdaq Stock Market, the amount determined by the Board to be the fair market value based upon a good faith attempt to value the security accurately; and (iii) in the case of any other property, the fair market value thereof determined by the Board based upon a good faith attempt to value such property accurately. "Net Value" means an amount determined by reference to the Market Value of the CIC Consideration per share as of the CIC Date in accordance with the following table:
CIC Consideration Per Share Net Value ----------------- ---------- $36.00 or below $3,000,000 $37.00 $3,250,000 $38.00 $3,500,000 $39.00 $4,000,000 $40.00 $4,500,000 $41.00 $5,000,000 $42.00 $5,500,000 $43.00 $5,750,000 $44.00 $6,000,000
If the Market Value of the CIC Consideration per share as of the CIC Date falls between two whole numbers in the above table, the Net Value shall be adjusted proportionately. For example, if the CIC Consideration per share is $39.25, the Net Value shall be $4,125,000. The term "out-of-the-money," in describing a Stock Option, means that the exercise price of the Stock Option exceeds the Market Value of the underlying security. "Stock Options" means the unexpired stock options granted by the Company to the Employee under the Equity Plan or otherwise. "Tax Amount" means the sum of all applicable income, Social Security, and Medicare taxes (at an assumed combined rate of 37.5%), excise taxes, and other taxes assessed by any federal, state, local or foreign government or governmental authority against the Employee in connection with the receipt of the CIC Payment." 8 6. Addition of Paragraph 21. The following is added as Paragraph 21 of the Agreement: "21. Delayed Commencement of Certain Payments. Notwithstanding any provision of this Agreement to the contrary, the parties intend that this Agreement be construed and applied in a manner that will conform its provisions with the requirements for avoidance of additional federal income tax pursuant to Section 409A of the Code, to the extent that such Section applies to the payments provided hereunder. Without limiting the foregoing, in the event that the Employee is a "specified employee" within the contemplation of Section 409A(a)(2)(B) of the Code at the time that any payment otherwise would be made based upon the Employee's separation from service with the Company within the contemplation of Section 409A(a)(2)(A)(i) of the Code, then in no event shall such payment or the commencement thereof be made before the six-month anniversary of the date of such separation from service or, if earlier, the date of the Employee's post-separation death." 7. Effect of Amendment. The provisions of this Amendment shall modify and supersede all inconsistent provisions of the Agreement. Except as expressly modified and superseded by this Amendment, the provisions of the Agreement are ratified and confirmed in all respects and shall remain in full force and effect. Any reference to the Agreement therein shall be and mean a reference to the Agreement as amended hereby. [Rest of page intentionally left blank] 9 IN WITNESS WHEREOF, this Amendment is executed and delivered by the parties hereto on April 6, 2005, but effective as of April 4, 2005. COMPANY: WRIGHT MEDICAL TECHNOLOGY, INC. By: /s/ F. Barry Bays ---------------------------------- F. Barry Bays Executive Chairman of the Board EMPLOYEE: /s/ Laurence Y. Fairey --------------------------------------- Laurence Y. Fairey 10 -----END PRIVACY-ENHANCED MESSAGE-----