SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 0-26224
INTEGRA LIFESCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0317849
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Morgan Lane
Plainsboro, New Jersey 08536
(Address of principal executive offices) (Zip code)
(609) 275-0500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[x] - Yes [ ] - No
As of October 10, 1998 the registrant had outstanding 15,752,516 shares
of Common Stock, $.01 par value.
INTEGRA LIFESCIENCES CORPORATION
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 (Unaudited) 3
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 1998
and 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997 (Unaudited) 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
Exhibits 15
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INTEGRA LIFESCIENCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
September 30, 1998 December 31, 1997
------------------ -----------------
ASSETS
Current Assets:
Cash and cash equivalents .......................... $ 2,560 $ 2,083
Short-term investments ............................. 20,692 24,189
Accounts receivable, net ........................... 2,949 2,780
Inventories ........................................ 3,390 2,350
Prepaid expenses and other current assets .......... 935 400
-------------- --------------
Total current assets ........................... 30,526 31,802
Property and equipment, net ............................ 6,506 6,414
Other assets and goodwill .............................. 1,502 140
-------------- --------------
Total assets ................................... $ 38,534 $ 38,356
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade .............................. $ 477 $ 541
Accrued expenses and other current liabilities ....... 3,689 1,854
--------------- --------------
Total current liabilities ...................... 4,166 2,395
Other liabilities ...................................... 303 206
--------------- --------------
Total liabilities .............................. 4,469 2,601
--------------- --------------
Stockholders' Equity:
Preferred stock, $.01 par value (15,000 authorized shares;
500 Series A Convertible shares issued and outstanding
at September 30, 1998, $4,000 liquidation
preference) ......................................... 5 --
Common stock, $.01 par value (60,000 authorized shares;
15,753 and 14,952 issued and outstanding at
September 30, 1998 and December 31, 1997,
respectively) ....................................... 158 150
Additional paid-in capital .............................. 119,904 111,877
Unearned compensation related to stock options .......... (198) (266)
Notes receivable - related parties ...................... (35) (35)
Accumulated other comprehensive income .................. (104) (26)
Treasury stock at cost(46 shares at September 30, 1998).. (259) --
Accumulated deficit ..................................... (85,406) (75,945)
-------------- -------------
Total stockholders' equity ..................... 34,065 35,755
-------------- -------------
Total liabilities and stockholders' equity .............. $ 38,534 $ 38,356
============== =============
The accompanying notes are an integral part
of the condensed consolidated financial statements
3
INTEGRA LIFESCIENCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- ------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
REVENUE
Product sales .............................. $ 3,704 $ 3,754 $ 10,234 $ 10,844
Product license fees ....................... 25 6 1,040 11
Contract product development ............... 276 -- 776 --
Research grants ............................ 233 113 442 411
Royalties .................................. 52 73 186 175
--------- --------- --------- ---------
Total revenue .......................... 4,290 3,946 12,678 11,441
COSTS AND EXPENSES
Cost of product sales ...................... 1,706 1,731 5,036 5,574
Research and development ................... 2,220 1,439 6,436 4,525
Selling and marketing ...................... 1,201 1,456 4,280 3,776
General and administrative ................. 2,383 2,289 7,949 5,416
--------- --------- --------- ---------
Total costs and expenses ............... 7,510 6,915 23,701 19,291
--------- --------- --------- ---------
Operating loss ............................. (3,220) (2,969) (11,024) (7,850)
Other income ............................... 310 507 1,589 1,519
--------- --------- --------- ---------
Net loss ................................... $ (2,910) $ (2,462) $ (9,435) $ (6,331)
========= ========= ========= =========
Basic and diluted net loss per share ....... $ (0.18) $ (0.17) $ (0.59) $ (0.43)
========= ========= ========= =========
Weighted average number of common and common
equivalent shares outstanding .......... 15,952 14,899 15,950 14,756
========= ========= ========= =========
The accompany notes are an integral part
of the condensed consolidated financial statements
4
INTEGRA LIFESCIENCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Nine Months Ended September 30,
-------------------------------
1998 1997
-------- --------
OPERATING ACTIVITIES:
Net loss ..................................................... $ (9,435) $ (6,331)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................. 1,010 1,426
Gain on sale of assets and litigation settlement .......... (264) (115)
Provision for impairment of assets ........................ 145 --
Amortization of discount and interest on investments ...... (327) (55)
Amortization of unearned compensation ..................... 214 92
Changes in assets and liabilities:
Accounts receivable ..................................... 51 (75)
Inventories ............................................ (151) 711
Prepaid expenses and other current assets .............. 90 (83)
Non-current assets...................................... 49 (78)
Deferred revenue ....................................... 250 --
Accounts payable, accrued expenses and other liabilities. 1,524 674
-------- ---------
Net cash used in operating activities ..................... (6,844) (3,834)
-------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of assets ................................. 48 128
Purchase of restricted securities ............................ (500) --
Purchases of available-for-sale investments .................. (23,274) (29,151)
Proceeds from sale/maturity of investments ................... 27,020 29,500
Cash acquired in business acquisition ........................ 1,224 --
Purchases of property and equipment .......................... (939) (499)
-------- ---------
Net cash provided by (used in) investing activities ....... 3,579 (22)
-------- ---------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options ...................... 8 330
Preferred dividend paid ...................................... (7) --
Purchase of treasury stock ................................... (259) --
Proceeds from sale of preferred stock ........................ 4,000 --
-------- ---------
Net cash provided by financing activities ................. 3,742 330
-------- ---------
Net increase (decrease) in cash and cash equivalents ............ 477 (3,526)
Cash and cash equivalents at beginning of period ................. 2,083 11,762
-------- ---------
Cash and cash equivalents at end of period ....................... $ 2,560 $ 8,236
======== =========
- - -----------------------------------------
Supplemental disclosure of non-cash investing and financing
activities:
Common stock and warrants issued in business acquisition... $ 3,886 --
The accompanying notes are an integral part
of the condensed consolidated financial statements
5
INTEGRA LIFESCIENCES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the September 30 unaudited condensed
consolidated financial statements contain all adjustments (consisting only
of normal recurring accruals) which the Company considers necessary for a
fair presentation of the financial position and results of operations of
the Company. Operating results for the periods ended September 30, 1998 are
not necessarily indicative of the results to be expected for the entire
year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, including
disclosures of contingent assets and liabilities and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates. These unaudited condensed consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements for the year ended December 31, 1997
included in the Company's Annual Report on Form 10-K.
2. Inventory
Inventories consist of the following (in thousands):
September 30, 1998 December 31, 1997
------------------ -----------------
Finished goods............................. $ 1,376 $ 773
Work-in-process............................ 1,440 1,251
Raw materials.............................. 574 326
------------ ------------
$ 3,390 $ 2,350
============ ============
3. Current Liabilities
Accrued expenses and other liabilities consist of the following
(in thousands):
September 30, 1998 December 31, 1997
------------------ -----------------
Legal fees................................. $ 1,407 $ 471
Lease termination.......................... 215 --
Contract research.......................... 462 252
Vacation .................................. 213 214
Deferred revenue........................... 250 --
Other ..................................... 1,142 917
------------ -----------
$ 3,689 $ 1,854
============ ===========
6
4. Net loss and loss per share
Since the Company incurred net losses in all periods presented,
outstanding options and warrants to purchase an aggregate of
2,445,000 and 1,303,000 shares of common stock at September 30, 1998
and 1997, respectively, and preferred stock convertible into 250,000
shares of common stock at September 30, 1998, were not included in
the diluted per share calculations, as their effect would be
antidilutive.
The Company adopted Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for reporting and display an alternative income
measurement and its components (revenue, expenses, gains and losses)
in a full set of general-purpose financial statements. The total
comprehensive loss for the three and nine months ended September 30,
1998 was $2,943,000 and $9,513,000, respectively, compared to
$2,485,000 and $6,355,000 for the three and nine months ended
September 30, 1997, respectively. Total comprehensive income includes
the net loss and the net unrealized gains and losses on securities.
5. Acquisition
On September 28, 1998, the Company acquired the Rystan Company for 800,000
shares of common stock of the Company and two warrants each having the right
to purchase 150,000 shares of the Company's common stock. Each of the Warrants
may be exercised for shares of Common Stock at any time after September 28,
1998, for a purchase price per share of $6.00 and $7.00, respectively, subject
to customary antidilution adjustments. The $6.00 warrant expires on January
31, 2000, provided that if the average closing price on the Nasdaq National
Market for shares of common stock for the thirty trading days ending on the
fifth day immediately preceding the then-current expiration date is less than
$8.00 per share, then the expiration date shall be extended for one year, but
in no event shall be extended beyond January 31, 2003. The $7.00 warrant
expires on December 31, 2002.
The purchase price was valued at $3.9 million. The purchase price exceeded the
preliminary assessment of the fair value of net assets acquired by
approximately $1.5 million, which will be amortized on a straight-line basis
over 15 years. The acquisition has been accounted for using the purchase
method of accounting.
The unaudited assets and liabilities acquired were as follows (in thousands):
Cash and cash equivalents $ 1,224
Accounts receivable 225
Inventory 889
Property & equipment 357
Residual goodwill 1,454
Liabilities (157)
--------
$ 3,992
========
7
The following summarized unaudited pro forma financial information assumes the
acquisition had occurred on January 1 of each year:
Pro Forma Information (in thousands, except per share data):
Nine Months Ended
September 30,
-----------------------
1998 1997
---- ----
Total revenue ...................... $14,636 $13,339
Net loss ........................... (9,064) (6,097)
Basic and diluted loss per share ... (0.54) (0.39)
The above amounts include the Rystan Company's actual results for the
first nine months of 1998 and 1997. The pro forma amounts are based
upon certain assumptions and estimates, and do not reflect any
activities that might have occurred as a result of the acquisition.
The pro forma results do not necessarily represent results which would
have occurred if the acquisition had taken place on the basis assumed
above, nor are they indicative of the results of future combined
operations.
6. Stockholders' Equity
The Company's shareholders approved a one-for-two reverse split of the
Company's common stock at the annual shareholders meeting held on May
18, 1998. All outstanding common share and per share amounts have been
retroactively adjusted to reflect the reverse split.
During the second quarter of 1998, the Company sold 500,000 shares of
Series A Preferred Stock ("Preferred Stock") for $4 million to Century
Medical, Inc. The Preferred Stock pays an annual dividend of $0.16 per
share, payable quarterly, and has a liquidation preference of $4
million. Each share of Preferred Stock is convertible at any time into
one-half share of Company common stock and is redeemable at the option
of the Company after December 31, 2007.
7. Leases
In June 1998, the Company entered into a Lease Termination Agreement
(the "Agreement") related to the closing of the Company's facility in
West Chester, Pennsylvania. The Agreement requires an aggregate
payment of $330,000 related to the facility's maintenance, certain
operating costs and other commitments and is payable through April
1999. As result of the Agreement, the Company incurred an additional
asset impairment charge of $145,000 related to the West Chester
facility, which charge was included in general and administrative
expense in the second quarter of 1998. The West Chester facility is
owned by a company controlled by a related party of an officer of the
Company.
8
8. Legal Matters
On or about November 4, 1997, Integra (Artificial Skin) Corporation
("IASC"), a wholly-owned subsidiary of the Company, and the
Massachusetts Institute of Technology ("MIT") filed a patent
infringement lawsuit against LifeCellCorporation ("LifeCell").
LifeCell filed counterclaims seeking declaratory judgments of
non-infringement and patent invalidity and filed a complaint against
MIT and IASC in Texas state court claiming tortious interference,
business and product disparagement, unfair competition amoung other
charges. LifeCell was seeking unspecified actual monetary damages in
an amount not less than $12 million together with treble damages,
unspecified punitive damages, and other relief. On April 9, 1998, the
Company and LifeCell agreed to settle all litigation pending between
the parties. Under the terms of the settlement, the Company has agreed
not to assert certain patents against LifeCell's current technology or
reasonable equivalents thereof and LifeCell has acknowledged the
validity of these patents. As part of the settlement agreement, the
Company agreed to purchase $500,000 of LifeCell common stock, and
LifeCell agreed to a royalty-bearing license for any possible future
biomaterials-based matrix products developed by LifeCell that may be
covered by the patents.
In January 1994, ABS LifeSciences, Inc., a wholly-owned subsidiary of
the Company, entered into a five-year distribution agreement with the
distributor of the Company's Chronicure product pursuant to which the
distributor is obligated to purchase certain minimum quantities of
wound care products. In October 1995, the Company's subsidiary filed a
complaint in the United States District Court for the District of New
Jersey claiming the distributor breached the distribution agreement
by, among other things, not paying the subsidiary for certain products
delivered. In November 1995, the distributor filed an affirmative
defense and counterclaim alleging, among other things, fraudulent
misrepresentation and breach of contract and seeking damages of
approximately $1.2 million plus unspecified punitive damages. In June
1998, the Company's subsidiary and the distributor entered into a
settlement agreement in which the distributor agreed to pay an
aggregate of $550,000 in installments over the remainder of 1998. The
Company recorded in other income a net gain of $545,000 as a result of
the settlement.
In July 1996, Telios Pharmaceuticals, Inc. ("Telios") filed a patent
infringement lawsuit against three parties: Merck KGaA, a German
corporation, Scripps Research Institute, a California nonprofit
corporation, and David A. Cheresh, Ph.D., a research scientist with
Scripps. The lawsuit was filed in the U.S. District Court for the
Southern District of California. The complaint charges, among other
things, that the defendant Merck KGaA "willfully and deliberately
induced, and continues to willfully and deliberately induce,
defendants Scripps Research Institute and Dr. David A. Cheresh to
infringe United States Letters Patent No. 4,729,255." This patent is
one of a group of five patents granted to The Burnham Institute and
licensed by Telios that are based on the interaction between a family
of cell surface proteins called integrins and the
arginine-glycine-aspartic acid (known as "RGD") peptide sequence found
in many extracellular matrix proteins. The Company is pursuing
numerous medical applications of the RGD technology in the fields of
anti-thrombic agents, cancer, osteoporosis, and a cell adhesive
coating designed to improve the performance of implantable devices and
their acceptance by the body. The defendants have filed a countersuit
asking for an award of defendants' reasonable attorney fees. The
Company's financial statements do not reflect any significant amounts
related to a possible unfavorable outcome of this matter.
9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion contains trend information and other
forward-looking statements related to the future use and revenues of the
INTEGRA(Registered) Artificial Skin product, the timing of regulatory approvals
for the Company's DuraGen(Trademark) product, anticipated expenditure levels and
the potential affect of the Rystan Company acquisition, and are made pursuant to
the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties which may cause the results to differ
materially from those set forth in these statements. In addition, the economic,
competitive, governmental, technological and other factors identified in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission could affect such results.
General
The Company develops, manufactures and markets medical devices, implants
and biomaterials primarily used in the treatment of burns and skin defects,
spinal and cranial disorders, orthopedics and other surgical applications. The
Company seeks to be the world's leading company specializing in implantable
medical and biopharmaceutical therapies to target and control cell behavior,
and to build shareholder value by acquiring, discovering and developing
cost-effective, off-the-shelf products that satisfy unmet medical needs.
On September 28, 1998 the Company acquired the Rystan Company
("Rystan") by issuing 800,000 shares of the Company's common stock and two
warrants each having the right to purchase 150,000 shares of the Company's
common stock at $7.00 and $6.00 per share, respectively. Although the
operating results of Rystan for the post acquisition period covered by this
report were immaterial given the acquisition date, the future operating
results of Rystan are expected to have a positive net impact on the financial
results of the Company.
Results of Operations
Three Months Ended September 30, 1998 Compared to the Three Months Ended
September 30, 1997
Total revenues increased to approximately $4.3 million for the three
months ended September 30, 1998 from $3.9 million for the three months ended
September 30,1997, due primarily to an increase in revenues from contract
product development and research grants. Product sales declined by $50,000 to
$3.7 million for the three months ended September 30, 1998 as a $100,000
increase in sales of INTEGRA(Registered) Artificial Skin ("INTEGRA") to $1.7
million for the three months ended September 30, 1998 was offset by a decrease
in sales of the Company's other medical devices. For the third quarter of 1998,
international INTEGRA sales represented 36% of total INTEGRA product sales
compared to 33% in the same period of 1997. The Company has clinical data on the
use of INTEGRA in reconstructive and wound healing procedures and believes that
growth in the use and sale of INTEGRA will depend on its ability to market the
product for reconstructive and other additional indications. In March 1998 the
Company received CE Mark approval in the European Community to market INTEGRA
for use in burns and reconstructive surgery. These additional indications
require approval by the FDA before the product can be marketed in the United
States, and there can be no assurance the Company will receive any additional
indication approval in the United States or any other international markets. The
Company plans on submitting a pre-approval market amendment to the FDA seeking
the additional indications in the United States.
10
Sales of the Company's other medical devices were approximately $2.0
million for the three months ended September 30, 1998 down from $2.2 million
for the three months ended September 30, 1997. Approximately $60,000 of the
decline was related to discontinued products with the remaining decrease
related to the timing of orders for the Company's dental line products. Sales
of the Company's other medical products can vary significantly on a quarter to
quarter basis depending on the timing of shipments to private label customers
and contract distributors. Export sales for the three months ended September
30, 1998 were $690,000 (including $600,000 of international INTEGRA sales)
compared to sales of $550,000 for the three months ended September 30, 1997.
A substantial portion of Rystan's historical revenues has come from two
products, with approximately 67% of its 1997 revenue from its lead product,
Panafil(Registered). Panafil(Registered) is an enzymatic debridement agent that
is used to remove nacrotic tissue in wounds, including chronic diabetic foot
ulcers. Panafil(Registered) sales have historically been seasonally weighted
with 38% of 1997 product sales coming in the fourth quarter due to certain
pricing and distribution activities.
Other revenue, which includes grant revenue, license fees, product
development revenue and royalties, was approximately $590,000 for the three
months ended September 30, 1998 compared to $190,000 for the three months
ended September 30, 1997. The Company's product development revenue increased
by $280,000 with $250,000 in funding received under the Company's development
and marketing agreement with Johnson & Johnson Professional, Inc. The Company
continues to seek research grants, licensing arrangements and development
funding for several of its technologies, although the timing and amount of
such revenue, if any, can not be predicted.
Cost of product sales was $1.7 million (46% of product sales) for the
three months ended September 30, 1998 and 1997. Lower operating costs due to
the closing of the Company's West Chester, Pennsylvania production facility
were largely offset by higher unit costs for INTEGRA and higher royalty costs.
Due to the relatively high fixed costs of the manufacturing facility for
INTEGRA, the Company is anticipating higher unit costs until there is a
requirement for higher production volume. The Company believes its current
capacity to produce INTEGRA and its other medical products is sufficient to
support significant growth, and the utilization of this capacity will affect
its gross margin on product sales. The Company is anticipating an increase in
cost of product sales and a temporary decline in gross margins for the next
two quarters as a result of purchase accounting adjustments associated with
the Rystan acquisition. After the sale of acquired inventory, the Rystan
acquisition should improve the Company's total gross margin on product sales.
Research and development expense increased to approximately $2.2 million
for the three-month period ended September 30, 1998 from $1.4 million for the
three-month period ended September 30, 1997. Increases included the addition
of development personnel and the funding of several development programs for
the skin, neurosurgical and orthopedic business lines. The Company expects
that the level of research and development expenditures in 1998 will continue
to exceed 1997 levels as the Company continues to expand its development
programs. The amount and allocation of resources to fund research and
development will vary depending upon a number of factors, including the
progress of development of the Company's technologies, the timing and outcome
of pre-clinical and clinical results, changing competitive conditions,
potential funding opportunities and determinations with respect to the
commercial potential of the Company's technologies.
11
Selling and marketing expense decreased to approximately $1.2 million
for the three-month period ended September 30, 1998 from $1.5 million for the
three-month period ended September 30, 1997. Declines in both selling and
marketing costs for INTEGRA were partially offset by additional costs
associated with the Company's planned marketing launch of its
DuraGen(Trademark), dural repair product. Domestic cost reductions, which
included a decline in sales and marketing personnel, were partial offset by
higher international selling costs associated with the launch of INTEGRA in the
European Community following its CE mark approval in March 1998. Additional
costs included technical personnel and consultants involved in training and
promotional activities, international marketing and training materials. The
Company is anticipating an increase in selling and marketing costs compared to
the current quarter as activities for the DuraGen(Trademark) product continue
with an anticipated market launch in early 1999. The Company also expects see an
increase in selling and marketing costs in the near term as a result of the
marketing of the Rystan products.
General and administrative expense increased to approximately $2.4
million for the three-month period ended September 30, 1998 from $2.3 million
for the three-month period ended September 30, 1997 due primarily to slightly
higher legal and personnel costs.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Total revenues increased to approximately $12.7 million for the nine
months ended September 30, 1998 from $11.4 million for the nine months ended
September 30,1997, as a decline in product sales was offset by increases in
product license fees and product development revenue. Product sales decreased
to $10.2 million for the nine months ended September 30, 1998 from $10.8
million for the nine months ended September 30, 1997. Sales of INTEGRA
declined slightly to just over $4.5 million for the nine months ended
September 30, 1998 compared to $4.6 million for the six months ended September
30, 1997. International INTEGRA sales increases of 31% to $1.7 million offset
a decline in North American sales. Product sales of the Company's other
medical products were $5.7 million for the nine months ended September 30,
1998 down from $6.2 million for the nine months ended September 30, 1997.
Approximately $590,000 of the decline was related to discontinued products.
Export sales, including INTEGRA, for the nine months ended September 30, 1998
increased to $2.0 million from $1.5 million for the nine months ended
September 30, 1997.
Other revenue was approximately $2.4 million for the nine months ended
September 30, 1998 compared to $600,000 for the nine months ended September
30, 1997. The largest increase was in product license fees due to a $1 million
non-refundable licensing fee from Century Medical, Inc. related to the
Company's neurosurgical business product line. The Company's product
development revenue increased by $780,000 largely as a result of funding
received under the Company's development and marketing agreement with Johnson
& Johnson Professional, Inc.
Cost of product sales declined to approximately $5.0 million (49% of
product sales) for the nine months ended September 30, 1998 from $5.6 million
(51% of product sales) for the nine months ended September 30, 1997. The
decrease in cost of product sales as a percentage of product sales is
attributable to lower inventory write-offs, lower operating costs and higher
manufacturing utilization compared to the prior year.
12
Research and development expense increased to approximately $6.4
million for the nine months ended September 30, 1998 compared to $4.5 million
for the nine months ended September 30, 1997 due to additional development
personnel and the funding of several contract development programs for the
skin, orthopedic, neurosurgical and ventures business lines.
Selling and marketing expense increased to approximately $4.3 million for
the nine-month period ended September 30, 1998 from $3.8 million for the
nine-month period ended September 30, 1997. Increases included international
sales and marketing expenses associated with the addition of technical
personnel and consultants involved in training and promotional activities,
marketing materials and costs associated with the Company's cost reimbursement
training programs. These increases were partially offset by a decline in sales
personnel.
General and administrative expense increased to approximately $7.9
million for the nine-month period ended September 30, 1998 from $5.4 million
for the nine-month period ended September 30, 1997 due primarily to costs
related to the closing of the West Chester, Pennsylvania facility, severance
costs, costs associated with the hiring of management personnel during the
latter part of 1997 (including the Company's Chief Executive Officer and Chief
Operating Officer) and additional legal and other professional costs. These
costs are expected to continue to represent an increase over the comparable
1997 periods for the remainder of 1998. The Company settled three litigation
matters during the second quarter of 1998, but significant litigation costs
are expected to continue due to the Company's patent infringement lawsuit
against Merck KGaA.
Liquidity and Capital Resources
At September 30, 1998, the Company had cash, cash equivalents and
short-term investments of approximately $23.3 million and no long-term debt.
The Company's principal uses of funds during the nine-month period ended
September 30, 1998 were $6.8 million for operations and $940,000 in purchases
of property and equipment. The Company received $4.0 million in funds from the
issuance of Series A preferred stock during the second quarter of 1998 and
$1.2 in the acquisition of Rystan in the third quarter of 1998. The Company
anticipates that it will continue to use its liquid assets to fund operations
until sufficient revenues can be generated through product sales and
collaborative arrangements. There can be no assurance that the Company will be
able to generate sufficient revenues to obtain positive operating cash flows
or profitability.
Year 2000 Disclosure
As is true for most companies, the potential for problems involving
existing information systems as we approach and pass January 1, 2000 creates a
risk for Integra. These potential problems are the result of the inability of
certain date-sensitive computer programs and embedded controls to recognize a
two-digit date field designated as "00" as the year 2000 instead of the year
1900, the consequences of which could lead to system failures or
miscalculations causing disruptions to operations and normal business
activities. This is a significant issue with far reaching implications, some
of which cannot be anticipated or predicted with any degree of certainty.
13
Integra has completed its initial assessment of the magnitude of the impact of
Year 2000 on itself and is currently in the process of developing,
implementing and monitoring a Year 2000 correction plan in all areas
identified as potentially compromised by the advent of the Year 2000. This
correction plan includes (i) the assessment of information technology systems
("IT systems") and non-IT systems for Year 2000 compliance, (ii) the
modification and/or replacement of non-compliant systems, (iii) the testing of
modified and/or replaced systems, and (iv) the deployment of Year 2000
compliant systems. In most cases, Integra anticipates that the Year 2000
correction plan will include upgrading current hardware and software or
purchasing additional hardware and software to enhance Integra's information
systems. Since January 1, 1997, Integra has spent approximately $370,000
upgrading and/or replacing certain components of its information systems.
Integra anticipates spending an additional $60,000 on such information system
upgrades and purchases between the date hereof and December 31, 1999. The
majority of the capital expenditures and operating costs associated with these
upgrades and purchases would have occurred in the normal course of business
regardless of the Year 2000 issue, however a portion of such expenditures and
costs is attributable to Integra's Year 2000 correction plan. Integra expects
that the upgrades and purchases will be implemented and tested by June 1999
and that, in any event, Integra's information systems will be Year 2000
compliant prior to December 31, 1999.
As an additional part of its Year 2000 correction plan, Integra is in the
process of communicating with its customers, distributors, suppliers and other
material third parties to determine the extent of Integra's vulnerability to
the failure of third parties to address their own Year 2000 compliance issues.
This process is not yet complete and Integra will not be able to completely
assess its Year 2000 readiness until such third parties assure Integra of
their Year 2000 compliance or Integra develops a contingency plan for any
third party noncompliance. As of the date hereof, Integra has not been
notified of any such noncompliance by any material third party.
Integra's products do not contain any materials that would make such products
susceptible to disruptions relating to the Year 2000. Given the information
available at this time, Integra currently anticipates that the amount that
Integra will spend to complete its Year 2000 correction plan should not have a
material adverse impact on Integra's business, results of operations,
financial position and cash flow beyond the amounts discuss previously.
Furthermore, Integra does not currently believe that the effects of any Year
2000 non-compliance on Integra's information systems should have any material
adverse impact on Integra's business, results of operations, financial
position or cash flows. However, there can be no assurance that Integra will
not incur additional expenses or experience business disruption as a result of
information system problems associated with the century change, including
system and equipment problems of third parties with whom Integra does
business.
14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Employment Agreement between John B. Henneman, III and
the Company dated September 11, 1998
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed with the Securities and Exchange Commission a
Report on Form 8-K dated October 13, 1998 with respect to the
Company's acquisition of the Rystan Company on September 28, 1998.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEGRA LIFESCIENCES CORPORATION
Date: November 16, 1998 By: /s/ Stuart M. Essig
--------------------------------------
Stuart M. Essig
President and Chief Executive Officer
Date: November 16, 1998 By: /s/ David B. Holtz
--------------------------------------
David B. Holtz
Vice President, Finance and Treasurer
16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of
the 11th day of September, 1998 by and between Integra LifeSciences
Corporation, a Delaware Corporation, and John B. Henneman, III ("Executive").
Background
Company desires to employ Executive, and Executive desires
to enter into the employ of Company, on the terms and conditions contained in
this Agreement. Executive will be substantially involved with Company's
operations and management and will learn trade secrets and other confidential
information relating to Company and its customers; accordingly, the
noncompetition covenant and other restrictive covenants contained in Section
15 of this Agreement constitute essential elements hereof.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein and intending to be legally bound hereby,
the parties hereto agree as follows:
Terms
1. Definitions. The following words and phrases shall have
the meanings set forth below for the purposes of this Agreement (unless the
context clearly indicates otherwise):
(a) "Base Salary" shall have the meaning set forth in
Section 5.
(b) "Board" shall mean the Board of Directors of
Company, or any successor thereto.
(c) "Caruso" shall mean Richard E. Caruso, the Chairman
of the Board and principal stockholder of Company as of the date of this
Agreement.
(d) "Cause," as determined by the Board in good faith,
shall mean Executive has --
(1) failed to perform his stated duties and not
cured such failure (if curable) within 15 days of his
receipt of written notice of the failure;
(2) breached any provision of this Agreement and
not cured such breach (if curable) within 15 days of his
receipt of written notice of the breach;
(3) demonstrated his personal dishonesty in
connection with his employment by Company;
(4) engaged in willful misconduct;
(5) engaged in a breach of fiduciary duty;
(6) willfully violated any law, rule or
regulation, or final cease-and-desist order (other than
traffic violations or similar offenses); or
1
(7) engaged in other serious misconduct of such a
nature that his continued employment may reasonably be
expected to affect Company adversely.
(e) A "Change in Control" of Company shall be deemed to
have occurred:
(1) if the "beneficial ownership" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) of
securities representing more than fifty percent (50%) of the
combined voting power of Company Voting Securities (as herein
defined) is acquired by any individual, entity or group (a
"Person"), other than Caruso (or any entity controlled by
Caruso), Company, any trustee or other fiduciary holding
securities under any employee benefit plan of Company or an
affiliate thereof, or any corporation owned, directly or
indirectly, by the stockholders of Company in substantially
the same proportions as their ownership of stock of Company
(for purposes of this Agreement, "Company Voting Securities"
shall mean the then outstanding voting securities of Company
entitled to vote generally in the election of directors);
provided, however, that any acquisition from Company or any
acquisition pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of paragraph (3) of this
definition shall not be a Change in Control under this
paragraph (1); or
(2) if individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) upon consummation by Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of
Company or the acquisition of assets or stock of another
entity (a "Business Combination"), in each case, unless
immediately following such Business Combination: (i) more
than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors of (x) the corporation resulting
from such Business Combination (the "Surviving Corporation"),
or (y) if applicable, a corporation which as a result of such
transaction owns Company or all or substantially all of
Company's assets either directly or through one or more
subsidiaries (the "Parent Corporation"), is represented,
directly or indirectly, by Company Voting Securities
outstanding immediately prior to such Business Combination
(or, if applicable, is represented by shares into which such
Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the
holders thereof is in substantially the same proportions as
their ownership, immediately prior to such Business
Combination, of the Company Voting Securities; (ii) no
Person (excluding any employee benefit plan (or related
trust) of Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 50% or more of the combined voting power of the
then outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) except to the
extent that such ownership of Company existed prior to the
2
Business Combination; and (iii) at least a majority of the
members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving
Corporation) were members of the Incumbent Board at the time
of the execution of the initial agreement, or the action of
the Board, providing for such Business Combination; or
(4) upon approval by the stockholders of Company
of a complete liquidation or dissolution of Company.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(g) "Company" shall mean Integra LifeSciences Corporation
and any corporation, partnership or other entity owned directly or indirectly,
in whole or in part, by Integra LifeSciences Corporation.
(h) "Disability" shall mean Executive's inability to
perform his duties hereunder by reason of any medically determinable physical
or mental impairment which is expected to result in death or which has lasted
or is expected to last for a continuous period of not fewer than six months.
(i) "Good Reason" shall mean:
(1) a material breach of this Agreement by Company
which is not cured by Company within 15 days of its receipt
of written notice of the breach;
(2) without Executive's express written consent,
the Board reduces Executive's Base Salary or the aggregate
fringe benefits provided to Executive (except to the extent
permitted by Section 5 or Section 6, respectively) or
substantially alters Executive's authority and/or title in a
manner reasonably construed to constitute a demotion;
provided, Executive resigns within 30 days after the
change objected to; or
(3) Company fails to obtain the assumption of this
Agreement by any successor to Company.
(j) "Principal Executive Office" shall mean Company's
principal office for executives, presently located at 105 Morgan Lane,
Plainsboro, New Jersey 08536.
(k) "Retirement" shall mean the termination of
Executive's employment with Company in accordance with the retirement policies,
including early retirement policies, generally applicable to Company's salaried
employees.
(l) "Termination Date" shall mean the date specified in
the Termination Notice.
(m) "Termination Notice" shall mean a dated notice which:
(i) indicates the specific termination provision in this Agreement relied upon
(if any); (ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for the termination of Executive's employment under
such provision; (iii) specifies a Termination Date; and (iv) is given in the
manner specified in Section 16(h).
3
2. Employment. Company hereby employs Executive as Senior
Vice President, Chief Administrative Officer and General Counsel, and Executive
hereby agrees to accept such employment and agrees to render services to Company
in such capacity (or in such other capacity in the future as the Board may
reasonably deem equivalent to such position) on the terms and conditions set
forth in this Agreement. Executive's primary place of employment shall be at the
Principal Executive Office.
3. Term.
(a) Term and Renewal of Agreement. Unless earlier
terminated by Executive or Company as provided in Section 10 hereof, the term of
Executive's employment under this Agreement shall commence on the date of this
Agreement and terminate on December 31, 2000. Subject to subsection 3(b), this
Agreement shall be deemed automatically, without further action, to extend for
an additional year on each January 1 following December 31, 2000.
(b) Annual Review. Prior to the first January 1 renewal
date of this Agreement under subsection 3(a), and each January 1 renewal date
thereafter, the Board shall consider extending the term of this Agreement. The
term shall continue to extend in the manner set forth in subsection 3(a) unless
either the Board does not approve the extension and provides written notice to
Executive of such event, or Executive gives written notice to Company of
Executive's election not to extend the term. In either case, the written notice
shall be given not fewer than 30 days prior to any such renewal date. References
herein to the term of this Agreement shall refer both to the initial term and
successive terms.
4. Duties. Executive shall:
(a) faithfully and diligently do and perform all such
acts and duties, and furnish such services as are assigned to Executive as of
the date this Agreement is signed, and (subject to Section 1(h)(2)) such
additional or different acts, duties and services as the Board may assign in the
future; and
(b) devote his full professional time, energy, skill and
best efforts to the performance of his duties hereunder, in a manner that will
faithfully and diligently further the business and interests of Company, and
shall not be employed by or participate or engage in or in any manner be a part
of the management or operations of any business enterprise other than Company
without the prior written consent of the Chief Executive Officer, which consent
may be granted or withheld in his sole discretion; provided, however, that
notwithstanding the foregoing, Executive may continue to provide consulting
services to Neuromedical Systems, Inc. through December 31, 1999, so long as the
performance of such consulting services by Executive does not materially
interfere with his obligation pursuant to this Agreement.
5. Compensation. Company shall compensate Executive for his
services at a minimum base salary of $160,000 per year (which amount shall be
prorated for periods of less than one year) ("Base Salary"), payable in periodic
installments in accordance with Company's regular payroll practices in effect
from time to time. Executive's Base Salary may be increased from time to time in
such amounts as may be determined by the Board, but may not be decreased without
Executive's express written consent (unless the decrease is pursuant to a
general compensation reduction applicable to all, or substantially all,
executive officers of Company). In addition to his Base Salary, Executive shall
be entitled to receive such bonus payments as may be determined appropriate by
the Board.
4
6. Benefit Plans. Executive shall be entitled to
participate in and receive benefits under any employee benefit plan or
stock-based plan of Company, and shall be eligible for any other plans and
benefits covering executives of Company, to the extent commensurate with his
then duties and responsibilities fixed by the Board. Company shall not make any
change in such plans or benefits which would adversely affect Executive's rights
thereunder, unless such change affects all, or substantially all, executive
officers of Company.
7. Vacation. Executive shall be entitled to paid annual
vacation in accordance with the policies established from time to time by the
Board, which shall in no event be fewer than three weeks per annum. Regardless
of what the Company's standard vacation policy may be, Executive shall not be
entitled to extra cash payments for any vacation he does not utilize.
8. Business Expenses. Company shall reimburse Executive or
otherwise pay for all reasonable expenses incurred by Executive in furtherance
of or in connection with the business of Company, including, but not limited to,
automobile and traveling expenses and all reasonable entertainment expenses,
subject to such reasonable documentation and other limitations as may be
established by the Board.
9. Disability. In the event Executive incurs a Disability,
Executive's obligation to perform services under this Agreement will terminate,
and the Board may terminate this Agreement upon written notice to Executive.
10. Termination
(a) Termination without Salary Continuation. In the
event (i) Executive terminates his employment hereunder other than for Good
Reason, or (ii) Executive's employment is terminated by Company due to his
Retirement, Disability or death, or for Cause, Executive shall have no right to
compensation or other benefits pursuant to this Agreement for any period after
his last day of active employment.
(b) Termination with Salary Continuation (No Change in
Control). Except as provided in subsection 10(c) in the event of a Change in
Control, in the event (i) Executive's employment is terminated by Company for a
reason other than Retirement, Disability, death or Cause, or (ii) Executive
terminates his employment for Good Reason, or (iii) Company shall fail to extend
this Agreement pursuant to the provisions of Section 3, then Company shall:
(1) pay Executive a severance amount equal to the
unpaid portion of Executive's Base Salary (determined without
regard to any reduction in violation of Section 5) for the
remainder of the then current term of this Agreement, but in
no event for a period of less than one year; the severance
amount shall be paid in a single sum on the first business
day of the month following the Termination Date (unless
Executive elects, in writing and on, or not later than 30
days after, the date this Agreement is executed, to receive
the severance payment divided into 24 equal monthly
installments, paid beginning on the first business day of
the month following the Termination Date); and
(2) maintain and provide to Executive, at no cost
to Executive, for a period ending at the earliest of (i) the
expiration of the then current term of this Agreement; (ii)
the date of Executive's full-time employment by another
employer; or (iii) Executive's death, continued participation
in all group insurance, life insurance,
5
health and accident, disability, and other employee benefit
plans in which Executive would have been entitled to
participate had his employment with Company continued
throughout such period, provided that such participation is
not prohibited by the terms of the plan or by Company for
legal reasons.
(c) Termination with Salary Continuation (Change in
Control). Notwithstanding anything to the contrary set forth in subsection
10(b), in the event within twelve months of a Change in Control: (i) Executive
terminates his employment for Good Reason, or (ii) Executive's employment is
terminated by Company for a reason other than Retirement, Disability, death or
Cause, or (iii) Company shall fail to extend this Agreement pursuant to
Section 3, then Company shall:
(1) pay Executive a severance amount equal to
2.99 times Executive's Base Salary (determined without regard
to any reduction in violation of Section 5) as of his last
day of active employment; the severance amount shall be paid
in a single sum on the first business day of the month
following the Termination Date (unless Executive elects, in
writing and on, or not later than 30 days after, the date this
Agreement is executed, to receive the severance payment
divided into 24 equal monthly installments, paid beginning
on the first business day of the month following the
Termination Date); and
(2) maintain and provide to Executive, at no cost
to Executive, for a period ending at the earliest of (i) the
expiration of the then current term of this Agreement; (ii)
the date of Executive's full-time employment by another
employer; or (iii) Executive's death, continued participation
in all group insurance, life insurance, health and accident,
disability, and other employee benefit plans in which
Executive would have been entitled to participate had his
employment with Company continued throughout such period,
provided that such participation is not prohibited by the
terms of the plan or by Company or legal reasons.
(d) Termination Notice. Except in the event of Executive's
death, a termination under this Agreement shall be effected by means of a
Termination Notice.
11. Withholding. Company shall have the right to withhold
from all payments made pursuant to this Agreement any federal, state, or local
taxes and such other amounts as may be required by law to be withheld from such
payments.
12. Assignability. Company may assign this Agreement and
its rights and obligations hereunder in whole, but not in part, to any entity to
which Company may transfer all or substantially all of its assets, if in any
such case said entity shall expressly in writing assume all obligations of
Company hereunder as fully as if it had been originally made a party hereto.
Company may not otherwise assign this Agreement or its rights and obligations
hereunder. This Agreement is personal to Executive and his rights and duties
hereunder shall not be assigned except as expressly agreed to in writing by
Company.
13. Death of Executive. Any amounts due Executive under this
Agreement (not including any Base Salary not yet earned by Executive) unpaid as
of the date of Executive's death shall be paid in a single sum as soon as
practicable after Executive's death to Executive's surviving spouse, or if none,
to the duly appointed personal representative of his estate.
6
14. Restrictive Covenants.
(a) Covenant Not to Compete. During the term of this
Agreement and for a period of two (2) years following the Termination Date,
Executive shall not directly or indirectly: (i) engage, anywhere within the
geographical areas in which Company is conducting business operations or
providing services as of the date of Executive's termination of employment, in
the tissue engineering business (the use of implantable absorbable materials,
with or without a bioactive component, to attempt to elicit a specific cellular
response in order to regenerate tissue or to impede the growth of tissue or
migration of cells) (the "Tissue Engineering Business") or any other business
the revenues of which constituted at least 30% of Company's revenues during the
six (6) month period prior to the Termination Date (together with the Tissue
Engineering Business, the "Business"); (ii) be or become a stockholder, partner,
owner, officer, director or employee or agent of, or a consultant to or give
financial or other assistance to, any person or entity engaged in the Business;
(iii) seek in competition with the business of Company to procure orders from or
do business with any customer of Company; (iv) solicit or contact with a view to
the engagement or employment by any person or entity of any person who is an
employee of Company; (v) seek to contract with or engage (in such a way as to
adversely affect or interfere with the business of Company) any person or entity
who has been contracted with or engaged to manufacture, assemble, supply or
deliver products, goods, materials or services to Company; or (vi) engage in or
participate in any effort or act to induce any of the customers, associates,
consultants, or employees of Company to take any action which might be
disadvantageous to Company; provided, however, that nothing herein shall
prohibit Executive and his affiliates from owning, as passive investors, in the
aggregate not more than 5% of the outstanding publicly traded stock of any
corporation so engaged.
(b) Confidentiality. Executive acknowledges a duty of
confidentiality owed to Company and shall not, at any time during or after his
employment by Company, retain in writing, use, divulge, furnish, or make
accessible to anyone, without the express authorization of the Board, any trade
secret, private or confidential information or knowledge of Company obtained or
acquired by him while so employed. All computer software, business cards,
telephone lists, customer lists, price lists, contract forms, catalogs, Company
books, records, files and know-how acquired while an employee of Company are
acknowledged to be the property of Company and shall not be duplicated, removed
from Company's possession or premises or made use of other than in pursuit of
Company's business or as may otherwise be required by law or any legal process,
or as is necessary in connection with any adversarial proceeding against Company
and, upon termination of employment for any reason, Executive shall deliver to
Company, without further demand, all copies thereof which are then in his
possession or under his control. No information shall be treated as
"confidential information" if it is generally available public knowledge at the
time of disclosure or use by Executive.
(c) Inventions and Improvements. Executive shall
promptly communicate to Company all ideas, discoveries and inventions which are
or may be useful to Company or its business. Executive acknowledges that all
such ideas, discoveries, inventions, and improvements which heretofore have been
or are hereafter made, conceived, or reduced to practice by him at any time
during his employment with Company heretofore or hereafter gained by him at any
time during his employment with Company are the property of Company, and
Executive hereby irrevocably assigns all such ideas, discoveries, inventions,
and improvements to Company for its sole use and benefit, without additional
compensation. The provisions of this Section 15(c) shall apply whether such
ideas, discoveries, inventions, or improvements were or are conceived, made or
gained by him alone or with others, whether during or after usual working hours,
whether on or off the job, whether applicable to matters directly or indirectly
related to Company's business interests (including potential business
interests), and whether or not within the specific realm of his duties.
Executive shall, upon request of Company, but at
7
no expense to Executive, at any time during or after his employment with
Company, sign all instruments and documents reasonably requested by Company and
otherwise cooperate with Company to protect its right to such ideas,
discoveries, inventions, or improvements including applying for, obtaining, and
enforcing patents and copyrights thereon in such countries as Company shall
determine.
(d) Breach of Covenant. Any breach or violation of the
provisions in this Section 15 by Executive will result in forfeiture by
Executive and all other persons of all rights to any further payments or
benefits under this Agreement, and in such event Company shall have no further
obligation to pay any amounts related thereto. Executive expressly acknowledges
that damages alone will be an inadequate remedy for any breach or violation of
any of the provisions of this Section 15 and that Company, in addition to all
other remedies, shall be entitled as a matter of right to equitable relief,
including injunctions and specific performance, in any court of competent
jurisdiction. If any of the provisions of this Section 15 are held to be in any
respect unenforceable, then they shall be deemed to extend only over the maximum
period of time, geographic area, or range of activities as to which they may be
enforceable.
15. Miscellaneous
(a) Amendment. No provision of this Agreement may be
amended unless such amendment is signed by Executive and such officer as may
be specifically designated by the Board to sign on Company's behalf.
(b) Nature of Obligations. Nothing contained herein
shall create or require Company to create a trust of any kind to fund any
benefits which may be payable hereunder, and to the extent that Executive
acquires a right to receive benefits from Company hereunder, such right shall be
no greater than the right of any unsecured general creditor of Company.
(c) Prior Employment. Executive represents and warrants
that his acceptance of employment with Company has not breached, and the
performance of his duties hereunder will not breach, any duty owed by him to
any prior employer or other person.
(d) Headings. The Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. In the event of a conflict between
a heading and the content of a Section, the content of the Section shall
control.
(e) Gender and Number. Whenever used in this Agreement,
a masculine pronoun is deemed to include the feminine and a neuter pronoun is
deemed to include both the masculine and feminine, unless the context clearly
indicates otherwise. The singular form, whenever used herein, shall mean or
include the plural form where applicable.
(f) Severability. If any provision of this Agreement or
the application thereof to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable any other provision of this Agreement and shall not
affect the application of any provision to other persons or circumstances.
(g) Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, permitted assigns, heirs, executors, and administrators.
8
(h) Notice. For purposes of this Agreement, notices and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given if hand-delivered, sent by documented
overnight delivery service or by certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
below:
To the Company:
Integra LifeSciences Corporation
105 Morgan Lane
Plainsboro, New Jersey 08536
Attn: President
To the Executive:
John B. Henneman, III
325 Mastia Place
Ridgewood, NJ 07450
(i) Entire Agreement. This Agreement sets forth the
entire understanding of the parties and supersedes all prior agreements,
arrangements and communications, whether oral or written, pertaining to the
subject matter hereof.
(j) Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the United States where applicable and otherwise by the laws of the State of
New Jersey.
IN WITNESS WHEREOF, this Agreement has been executed as of
the date first above written.
INTEGRA LIFESCIENCES CORPORATION
By: ________________________________
Title: _____________________________
EXECUTIVE
____________________________________
9
5
1000
9-MOS
DEC-31-1998
JAN-01-1998
SEP-30-1998
2,560
20,692
2,949
0
3,390
30,526
11,975
5,469
38,534
4,166
0
0
5
158
119,904
38,534
10,234
12,678
5,036
5,036
0
0
0
(9,435)
0
(9,435)
0
0
0
(9,435)
(.59)
(.59)
