UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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	Commission File Number	
June 30, 2008	0-16093	

CONMED CORPORATION
(Exact name of the registrant as specified in its charter)

New York
(State or other jurisdiction of
incorporation or organization)
 
 	16-0977505
(I.R.S. Employer
Identification No.)	
525 French Road, Utica, New York
(Address of principal executive offices)	13502
(Zip Code)	

(315) 797-8375
(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.
Yes ý   No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer ý          Accelerated filer o           Non-accelerated  filer o          Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo ý

The number of shares outstanding of registrant's common stock, as of  July 30, 2008 is 28,751,229 shares.

 

 

CONMED CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2008

PART I FINANCIAL INFORMATION

Item Number	 	Page	

Item 1.	Financial Statements (unaudited)	 	
 	 	 	
 	- Consolidated Condensed Statements of Income for the three and six month periods ended June 30, 2007 and 2008	1	
 	 	 	
 	- Consolidated Condensed Balance Sheets as of December 31, 2007 and June 30, 2008	2	
 	 	 	
 	- Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2007 and 2008	3	
 	 	 	
 	- Notes to Consolidated Condensed  Financial Statements	4	

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15	
 	 	 	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30	
 	 	 	
Item 4.	Controls and Procedures	30	
 	 	 	
PART II OTHER INFORMATION	
 	 	 	
Item 1.	Legal Proceedings	30	
 	 	 	
Item 4.	Submission of Matters to a Vote of  Security Holders	30	
 	 	 	
Item 6.	Exhibits	32	

 	 	 	
Signatures	 	33	

 

Index

PART I      FINANCIAL INFORMATION
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited, in thousands except per share amounts)

 	 	Three Months Ended	 	 	Six Months Ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	169,258	 	 	$	192,755	 	 	$	340,272	 	 	$	383,528	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	 	83,398	 	 	 	91,865	 	 	 	169,187	 	 	 	184,874	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	85,860	 	 	 	100,890	 	 	 	171,085	 	 	 	198,654	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling and administrative expense	 	 	58,207	 	 	 	69,549	 	 	 	118,012	 	 	 	138,195	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development expense	 	 	7,453	 	 	 	8,689	 	 	 	15,047	 	 	 	16,767	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other expense (income)	 	 	1,312	 	 	 	-	 	 	 	(4,102	)	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	66,972	 	 	 	78,238	 	 	 	128,957	 	 	 	154,962	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	 	 	18,888	 	 	 	22,652	 	 	 	42,128	 	 	 	43,692	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	4,329	 	 	 	2,439	 	 	 	8,845	 	 	 	5,613	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	 	 	14,559	 	 	 	20,213	 	 	 	33,283	 	 	 	38,079	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Provision for income taxes	 	 	5,214	 	 	 	7,758	 	 	 	12,016	 	 	 	14,614	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	9,345	 	 	$	12,455	 	 	$	21,267	 	 	$	23,465	 	

Per share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
    Basic	 	$	.33	 	 	$	.43	 	 	$	.76	 	 	$	.82	 	
    Diluted	 	 	.32	 	 	 	.43	 	 	 	.74	 	 	 	.81	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
    Basic	 	 	28,180	 	 	 	28,662	 	 	 	27,988	 	 	 	28,643	 	
    Diluted	 	 	28,831	 	 	 	29,063	 	 	 	28,608	 	 	 	29,035	 	

See notes to consolidated condensed financial statements.

1

Index

CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited, in thousands except share and per share amounts)

 	 	December 31,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	
ASSETS	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	
Cash and cash equivalents	 	$	11,695	 	 	$	17,850	 	
Accounts receivable, net	 	 	80,642	 	 	 	106,317	 	
Inventories	 	 	164,969	 	 	 	161,057	 	
Income taxes receivable	 	 	1,425	 	 	 	-	 	
Deferred income taxes	 	 	11,697	 	 	 	11,664	 	
Prepaid expenses and other current assets	 	 	8,594	 	 	 	9,971	 	
Total current assets	 	 	279,022	 	 	 	306,859	 	
Property, plant and equipment, net	 	 	123,679	 	 	 	134,805	 	
Goodwill	 	 	289,508	 	 	 	289,767	 	
Other intangible assets, net	 	 	191,807	 	 	 	198,021	 	
Other assets	 	 	9,935	 	 	 	8,595	 	
Total assets	 	$	893,951	 	 	$	938,047	 	

 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS' EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Current portion of long-term debt	 	$	3,349	 	 	$	3,830	 	
Accounts payable	 	 	38,987	 	 	 	36,111	 	
Accrued compensation and benefits	 	 	19,724	 	 	 	19,144	 	
Other current liabilities	 	 	15,224	 	 	 	17,000	 	
Total current liabilities	 	 	77,284	 	 	 	76,085	 	
 	 	 	 	 	 	 	 	 	
Long-term debt	 	 	219,485	 	 	 	224,791	 	
Deferred income taxes	 	 	71,188	 	 	 	84,512	 	
Other long-term liabilities	 	 	20,992	 	 	 	18,623	 	
Total liabilities	 	 	388,949	 	 	 	404,011	 	
 	 	 	 	 	 	 	 	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Shareholders' equity:	 	 	 	 	 	 	 	 	
Preferred stock, par value $.01 per share;	 	 	 	 	 	 	 	 	
authorized 500,000 shares; none outstanding	 	 	-	 	 	 	-	 	
Common stock, par value $.01 per share;	 	 	 	 	 	 	 	 	
100,000,000 shares authorized; 31,299,203 and	 	 	 	 	 	 	 	 	
31,299,203 shares issued in 2007 and 2008,	 	 	 	 	 	 	 	 	
respectively	 	 	313	 	 	 	313	 	
Paid-in capital	 	 	287,926	 	 	 	289,219	 	
Retained earnings	 	 	284,850	 	 	 	307,997	 	
Accumulated other comprehensive income (loss)	 	 	(505	)	 	 	2,375	 	
Less 2,684,163 and 2,616,107 shares of common stock in	 	 	 	 	 	 	 	 	
treasury, at cost in 2007 and 2008, respectively	 	 	(67,582	)	 	 	(65,868	)	
Total shareholders’ equity	 	 	505,002	 	 	 	534,036	 	
Total liabilities and shareholders’ equity	 	$	893,951	 	 	$	938,047	 	

See notes to consolidated condensed financial statements.

2

Index

CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited, in thousands)

 	 	Six months ended	 	
 	 	  June 30,	 	
 	 	2007	 	 	2008	 	
Cash flows from operating activities:	 	 	 	 	 	 	
Net income	 	$	21,267	 	 	$	23,465	 	
Adjustments to reconcile net income	 	 	 	 	 	 	 	 	
to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation	 	 	6,134	 	 	 	6,621	 	
Amortization	 	 	9,266	 	 	 	8,908	 	
Stock-based compensation expense	 	 	1,885	 	 	 	2,094	 	
Deferred income taxes	 	 	10,470	 	 	 	12,360	 	
Sale of accounts receivable	 	 	2,000	 	 	 	(3,000	)	
Increase (decrease) in cash flows	 	 	 	 	 	 	 	 	
from changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(3,924	)	 	 	(4,768	)	
Inventories	 	 	(15,150	)	 	 	3,028	 	
Accounts payable	 	 	(2,579	)	 	 	(5,299	)	
Accrued compensation and benefits	 	 	(2,388	)	 	 	(843	)	
Other assets	 	 	619	 	 	 	(1,081	)	
Other liabilities	 	 	(1,802	)	 	 	(6,399	)	
 	 	 	4,531	 	 	 	11,621	 	
Net cash provided by operating activities	 	 	25,798	 	 	 	35,086	 	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Purchases of property, plant, and equipment	 	 	(9,556	)	 	 	(15,212	)	
Payments related to business acquisitions	 	 	(1,278	)	 	 	(21,838	)	
Net cash used in investing activities	 	 	(10,834	)	 	 	(37,050	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Net proceeds from common stock issued	 	 	 	 	 	 	 	 	
under employee plans	 	 	10,604	 	 	 	595	 	
Payments on senior credit agreement	 	 	(26,326	)	 	 	(675	)	
Proceeds of senior credit agreement	 	 	-	 	 	 	7,000	 	
Payments on mortgage notes	 	 	(471	)	 	 	(538	)	
Net change in cash overdrafts	 	 	(236	)	 	 	-	 	
Net cash provided by	 	 	 	 	 	 	 	 	
(used in) financing activities	 	 	(16,429	)	 	 	6,382	 	
 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes	 	 	 	 	 	 	 	 	
on cash and cash equivalents	 	 	1,513	 	 	 	1,737	 	
 	 	 	 	 	 	 	 	 	
Net increase in cash and cash equivalents	 	 	48	 	 	 	6,155	 	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at beginning of period	 	 	3,831	 	 	 	11,695	 	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	3,879	 	 	$	17,850	 	

See notes to consolidated condensed financial statements.

3

Index

CONMED CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited, in thousands except per share amounts)

Note 1 – Operations and Significant Accounting Policies

Organization and operations

CONMED Corporation (“CONMED”, the “Company”, “we” or “us”) is a medical technology company with an emphasis on surgical devices and equipment for minimally invasive procedures and monitoring.  The Company’s products serve the clinical areas of arthroscopy, powered surgical instruments, electrosurgery, cardiac monitoring disposables, endosurgery and endoscopic technologies.  They are used by surgeons and physicians in a variety of specialties including orthopedics, general surgery, gynecology, neurosurgery, and gastroenterology.

Note 2 - Interim financial information

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements.  Results for the period ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The consolidated condensed financial statements and notes thereto should be read in conjunction with the financial statements and notes for the year-ended December 31, 2007 included in our Annual Report on Form 10-K.

Note 3 – Other comprehensive income

Comprehensive income consists of the following:

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	9,345	 	 	$	12,455	 	 	$	21,267	 	 	$	23,465	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
    Pension liability	 	 	144	 	 	 	90	 	 	 	289	 	 	 	180	 	
    Foreign currency	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
       translation adjustment	 	 	1,452	 	 	 	715	 	 	 	1,941	 	 	 	2,700	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	$	10,941	 	 	$	13,260	 	 	$	23,497	 	 	$	26,345	 	

4

Index

Accumulated other comprehensive income consists of the following:

 	 	 	 	 	 	 	 	Accumulated	 	
 	 	Minimum	 	 	Cumulative	 	 	Other	 	
 	 	Pension	 	 	Translation	 	 	Comprehensive	 	
 	 	Liability	 	 	Adjustments	 	 	Income (loss)	 	
 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2007	 	$	(9,563	)	 	$	9,058	 	 	$	(505	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Pension liability	 	 	180	 	 	 	-	 	 	 	180	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Foreign currency translation	 	 	 	 	 	 	 	 	 	 	 	 	
       adjustments	 	 	-	 	 	 	2,700	 	 	 	2,700	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, June 30, 2008	 	$	(9,383	)	 	$	11,758	 	 	$	2,375	 	

Note 4 – Fair value measurement

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years.  This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements.  This statement applies under other accounting pronouncements that require or permit fair value measurements.  The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.  SFAS 157 defines fair value based upon an exit price model.

Relative to SFAS 157, the FASB issued FASB Staff Positions (“FSP”) 157-1 and 157-2.  FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, “Accounting for Leases” (“SFAS 13”) and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of the application of SFAS 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.

We adopted SFAS 157 as of January 1, 2008 with the exception of the application of the statement to non-recurring nonfinancial assets and nonfinancial liabilities.  Nonrecurring nonfinancial assets and nonfinancial liabilities for which we have not applied the provisions of SFAS 157 include those measured at fair value in goodwill impairment testing, indefinite lived intangible assets measured at fair value for impairment testing, and those initially measured at fair value in a business combination.

Liabilities carried at fair value and measured on a recurring basis as of June 30, 2008 consist of a forward foreign exchange contract and two embedded derivatives associated with our 2.50% convertible senior subordinated notes (the “Notes”).  The value of these liabilities was determined within Level 2 of the valuation hierarchy and was not material either individually or in the aggregate to our financial position, results of operations or cash flows.

5

Index

Note 5 - Inventories

Inventories consist of the following:

 	 	December 31,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	
Raw materials	 	$	60,081	 	 	$	53,717	 	
 	 	 	 	 	 	 	 	 	
Work-in-process	 	 	18,669	 	 	 	21,055	 	
 	 	 	 	 	 	 	 	 	
Finished goods	 	 	86,219	 	 	 	86,285	 	
 	 	 	 	 	 	 	 	 	
               Total	 	$	164,969	 	 	$	161,057	 	

Note 6 – Earnings per share

Basic earnings per share (“basic EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding resulting from employee stock options, restricted stock units and stock appreciation rights during the period. The following table sets forth the computation of basic and diluted earnings per share for the three and six month periods ended June 30, 2007 and 2008.

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	9,345	 	 	$	12,455	 	 	$	21,267	 	 	$	23,465	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic – weighted average shares	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     outstanding	 	 	28,180	 	 	 	28,662	 	 	 	27,988	 	 	 	28,643	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of dilutive potential	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      securities	 	 	651	 	 	 	401	 	 	 	620	 	 	 	392	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted – weighted average	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
      shares outstanding	 	 	28,831	 	 	 	29,063	 	 	 	28,608	 	 	 	29,035	 	

Basic EPS	 	$	.33	 	 	$	.43	 	 	$	.76	 	 	$	.82	 	
Diluted EPS	 	 	.32	 	 	 	.43	 	 	 	.74	 	 	 	.81	 	

The shares used in the calculation of diluted EPS exclude options and SARs to purchase shares where the exercise price was greater than the average market price of common shares for the period.  Shares excluded from the calculation of diluted EPS aggregated 0.3 and 0.6 million for the three and six months ended June 30, 2007, respectively. Shares excluded from the calculation of diluted EPS aggregated 1.0 million for both the three and six months ended June 30, 2008.  Upon  conversion of our 2.50% convertible senior subordinated notes (the "Notes"), the holder of each Note will receive the conversion value of the Note payable in cash up to the principal amount of the Note and CONMED common stock for the Note's conversion value in excess of such principal  amount.  As of June 30, 2008, our share price has not exceeded the conversion price of the Notes, therefore the conversion value was less than the principal amount of the Notes.  Under the net share settlement method and in accordance with Emerging Issues Task Force (“EITF”) Issue 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share”, there were no potential shares issuable under the Notes to be used in the calculation of diluted EPS.  The maximum number of shares we may issue with respect to the Notes is 5,750,000.

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Index

Note 7 – Goodwill and other intangible assets

The changes in the net carrying amount of goodwill for the six months ended June 30, 2008 are as follows:

Balance as of January 1, 2008	 	$	289,508	 	
 	 	 	 	 	
Adjustments to goodwill resulting from	 	 	 	 	
   business acquisitions finalized	 	 	441	 	
 	 	 	 	 	
Foreign currency translation	 	 	(182	)	
 	 	 	 	 	
Balance as of June 30, 2008	 	$	289,767	 	

Goodwill associated with each of our principal operating units is as follows:

 	 	December 31,	 	 	June 30,	 	
                                        	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	
CONMED Electrosurgery	 	$	16,645	 	 	$	16,645	 	
 	 	 	 	 	 	 	 	 	
CONMED Endosurgery	 	 	42,439	 	 	 	42,439	 	
 	 	 	 	 	 	 	 	 	
CONMED Linvatec	 	 	171,332	 	 	 	171,150	 	
 	 	 	 	 	 	 	 	 	
CONMED Patient Care	 	 	59,092	 	 	 	59,533	 	
 	 	 	 	 	 	 	 	 	
Balance	 	$	289,508	 	 	$	289,767	 	

Other intangible assets consist of the following:

 	 	December 31, 2007	 	 	June 30, 2008	 	
 	 	Gross	 	 	 	 	 	Gross	 	 	 	 	
 	 	Carrying	 	 	Accumulated	 	 	Carrying	 	 	Accumulated	 	
 	 	Amount	 	 	Amortization	 	 	Amount	 	 	Amortization	 	
Amortized intangible assets:	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Customer relationships	 	$	118,124	 	 	$	(28,000	)	 	$	127,026	 	 	$	(30,096	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Patents and other intangible assets	 	 	39,812	 	 	 	(26,473	)	 	 	40,231	 	 	 	(27,484	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unamortized intangible assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Trademarks and tradenames	 	 	88,344	 	 	 	-	 	 	 	88,344	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	$	246,280	 	 	$	(54,473	)	 	$	255,601	 	 	$	(57,580	)	

Other intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses.  The weighted average amortization period for intangible assets which are amortized is 24 years.  Customer relationships are being amortized over a weighted average life of 33 years.  Patents and other intangible assets are being amortized over a weighted average life of 11 years.

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Amortization expense related to intangible assets which are subject to amortization totaled $1,402 and $2,557 in the three and six months ended June 30, 2007, respectively, and $1,559 and $3,107 in the three and six months ended June 30, 2008, respectively, and is included in selling and administrative expense on the consolidated condensed statement of income.

The estimated amortization expense for the year ending December 31, 2008, including the six month period ended June 30, 2008 and for each of the five succeeding years is as follows:

2008	6,286	
2009	6,286	
2010	6,227	
2011	5,596	
2012	5,502	
2013	5,269	

Note 8 — Guarantees

We provide warranties on certain of our products at the time of sale.  The standard warranty period for our capital and reusable equipment is generally one year.  Liability under service and warranty policies is based upon a review of historical warranty and service claim experience.  Adjustments are made to accruals as claim data and historical experience warrant.

Changes in the carrying amount of service and product warranties for the six months ended June 30, 2008 are as follows:

Balance as of January 1, 2008	 	$	3,306	 	
 	 	 	 	 	
Provision for warranties	 	 	1,200	 	
 	 	 	 	 	
Claims made	 	 	(1,446	)	
 	 	 	 	 	
Balance as of June 30, 2008	 	$	3,060	 	

Note 9 – Pension plan

Net periodic pension costs consist of the following:

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	1,381	 	 	$	1,536	 	 	$	2,763	 	 	$	3,072	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest cost on projected	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
   benefit obligation	 	 	737	 	 	 	843	 	 	 	1,474	 	 	 	1,685	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expected return on plan assets	 	 	(683	)	 	 	(845	)	 	 	(1,367	)	 	 	(1,690	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net amortization and deferral	 	 	229	 	 	 	142	 	 	 	458	 	 	 	285	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net periodic pension cost	 	$	1,664	 	 	$	1,676	 	 	$	3,328	 	 	$	3,352	 	

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We previously disclosed in our Annual Report on Form 10-K for the year-ended December 31, 2007 that we expect to make $12.0 million in contributions to our pension plan in 2008.  We made $6.0 million in contributions for the six months ended June 30, 2008.

Note 10 – Other expense (income)

Other expense (income) consists of the following:

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	

Termination of product offering	 	$	58	 	 	$	-	 	 	$	148	 	 	$	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Facility closure costs	 	 	1,254	 	 	 	-	 	 	 	1,822	 	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Litigation settlement	 	 	-	 	 	 	-	 	 	 	(6,072	)	 	 	-	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other expense (income)	 	$	1,312	 	 	$	-	 	 	$	(4,102	)	 	$	-	 	

During 2006, we elected to close our facility in Montreal, Canada which manufactured products for our CONMED Linvatec line of integrated operating room systems and equipment.  The products which had been manufactured in the Montreal facility will now be purchased from a third party vendor.  The closing of this facility was completed in the first quarter of 2007.  We incurred a total of $2.2 million in costs associated with this closure, of which $1.3 million related to the write-off of inventory and was included in cost of goods sold during 2006.  The remaining $0.9 million (including $0.3 million in the first quarter of 2007) primarily relates to severance expense and the disposal of fixed assets which we have recorded in other expense (income).

During 2007, we elected to close our Endoscopic Technologies sales office in France.  During the three and six months ended June 30, 2007, we incurred $1.3 million and $1.5 million in costs associated with this closure primarily related to severance expense.  We have recorded such costs in other expense (income); no further expenses are expected to be incurred.

In November 2003, we commenced litigation against Johnson & Johnson and several of its subsidiaries, including Ethicon, Inc. for violations of federal and state antitrust laws. In the lawsuit we claimed that Johnson & Johnson engaged in illegal and anticompetitive conduct with respect to sales of product used in endoscopic surgery, resulting in higher prices to consumers and the exclusion of competition.  We sought relief including an injunction restraining Johnson & Johnson from continuing its anticompetitive practices as well as receiving the maximum amount of damages allowed by law.  During the litigation, Johnson & Johnson represented that the marketing practices which gave rise to the litigation had been altered with respect to CONMED.  On March 31, 2007, CONMED and Johnson & Johnson settled the litigation.  Under the terms of the final settlement agreement, CONMED received a payment of $11.0 million from Johnson & Johnson in return for which we terminated the lawsuit.  After deducting legal and other related costs, we recorded a pre-tax gain of $6.1 million related to the settlement which we have recorded in other expense (income).

Note 11 — Business Segments and Geographic Areas

CONMED conducts its business through five principal operating units, CONMED Endoscopic Technologies, CONMED Endosurgery, CONMED Electrosurgery, CONMED Linvatec and CONMED Patient Care.  We believe each of our segments are similar in the nature of products, production processes, customer base, distribution methods and regulatory environment.

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In accordance with Statement of Financial Accounting Standards No. 131 “Disclosures About Segments of an Enterprise and Related Information” (“SFAS 131”), our CONMED Endosurgery, CONMED Electrosurgery and CONMED Linvatec operating units also have similar economic characteristics and therefore qualify for aggregation under SFAS 131.  Our CONMED Patient Care and CONMED Endoscopic Technologies operating units do not qualify for aggregation under SFAS 131 since their economic characteristics do not meet the criteria for aggregation as a result of the lower overall operating income (loss) in these segments.

CONMED Endosurgery, CONMED Electrosurgery and CONMED Linvatec consist of a single aggregated segment comprising a complete line of endo-mechanical instrumentation for minimally invasive laparoscopic procedures, electrosurgical generators and related surgical instruments, arthroscopic instrumentation for use in orthopedic surgery and small bone, large bone and specialty powered surgical instruments.  CONMED Patient Care product offerings include a line of vital signs and cardiac monitoring products as well as suction instruments & tubing for use in the operating room.  CONMED Endoscopic Technologies product offerings include a comprehensive line of minimally invasive endoscopic diagnostic and therapeutic instruments used in procedures in the digestive tract.

The following is net sales information by product line and reportable segment:

 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Arthroscopy	 	 	64,949	 	 	 	76,775	 	 	 	127,192	 	 	 	152,298	 	
Powered Surgical Instruments	 	 	35,993	 	 	 	39,718	 	 	 	73,543	 	 	 	80,175	 	
CONMED Linvatec	 	 	100,942	 	 	 	116,493	 	 	 	200,735	 	 	 	232,473	 	
CONMED Electrosurgery	 	 	22,123	 	 	 	25,856	 	 	 	46,149	 	 	 	52,640	 	
CONMED Endosurgery	 	 	15,465	 	 	 	17,284	 	 	 	29,040	 	 	 	32,485	 	
CONMED Linvatec, Endosurgery,	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
and Electrosurgery	 	 	138,530	 	 	 	159,633	 	 	 	275,924	 	 	 	317,598	 	
CONMED Patient Care	 	 	17,315	 	 	 	19,807	 	 	 	37,676	 	 	 	40,118	 	
CONMED Endoscopic Technologies	 	 	13,413	 	 	 	13,315	 	 	 	26,672	 	 	 	25,812	 	
Total	 	$	169,258	 	 	$	192,755	 	 	$	340,272	 	 	$	383,528	 	

Total assets, capital expenditures, depreciation and amortization information are not available by segment.

The following is a reconciliation between segment operating income and income before income taxes:

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 	 	Three months ended	 	 	Six months ended	 	
 	 	June 30,	 	 	June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
CONMED Endosurgery, Electrosurgery	 	 	 	 	 	 	 	 	 	 	 	 	
  and Linvatec	 	$	24,916	 	 	$	27,678	 	 	$	43,709	 	 	$	55,175	 	
CONMED Patient Care	 	 	(1,265	)	 	 	589	 	 	 	(238	)	 	 	1,143	 	
CONMED Endoscopic Technologies	 	 	(2,432	)	 	 	(2,366	)	 	 	(3,643	)	 	 	(4,845	)	
Corporate	 	 	(2,331	)	 	 	(3,249	)	 	 	2,300	 	 	 	(7,781	)	
Income from Operations	 	 	18,888	 	 	 	22,652	 	 	 	42,128	 	 	 	43,692	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense 	 	 	4,329	 	 	 	2,439	 	 	 	8,845	 	 	 	5,613	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	 	$	14,559	 	 	$	20,213	 	 	$	33,283	 	 	$	38,079	 	

Note 12 – Legal proceedings

From time to time, we are a defendant in certain lawsuits alleging product liability, patent infringement, or other claims incurred in the ordinary course of business. Likewise, from time to time, the Company may receive a subpoena from a government agency such as the Equal Employment Opportunity Commission, Occupational Safety and Health Administration, the Department of Labor, the Treasury Department, and other federal and state agencies or foreign governments or government agencies.  These subpoenae may or may not be routine inquiries, or may begin as routine inquiries and over time develop into enforcement actions of various types.  The product liability claims are generally covered by various insurance policies, subject to certain deductible amounts and maximum policy limits.  When there is no insurance coverage, as would typically be the case primarily in lawsuits alleging patent infringement or in connection with certain government investigations, we establish reserves sufficient to cover probable losses associated with such claims.  We do not expect that the resolution of any pending claims or investigations will have a material adverse effect on our financial condition, results of operations or cash flows.  There can be no assurance, however, that future claims or investigations, or the costs associated with responding to such claims or investigations, especially claims and investigations not covered by insurance, will not have a material adverse effect on our future performance.
 
Manufacturers of medical products may face exposure to significant product liability claims. To date, we have not experienced any product liability claims that are material to our financial statements or condition, but any such claims arising in the future could have a material adverse effect on our business or results of operations. We currently maintain commercial product liability insurance of $25 million per incident and $25 million in the aggregate annually, which we believe is adequate. This coverage is on a claims-made basis.  There can be no assurance that claims will not exceed insurance coverage or that such insurance will be available in the future at a reasonable cost to us.
 
Our operations are subject, and in the past have been subject, to a number of environmental laws and regulations governing, among other things, air emissions, wastewater discharges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater remediation and employee health and safety. In some jurisdictions environmental requirements may be expected to become more stringent in the future. In the United States certain environmental laws can impose liability for the entire cost of site restoration upon each of the parties that may have contributed to conditions at the site regardless of fault or the lawfulness of the party’s activities.  While we do not believe that the present costs of environmental compliance and remediation are material, there can be no assurance that future compliance or remedial obligations could not have a material adverse effect on our financial condition, results of operations or cash flows.
 
On April 7, 2006, CONMED received a copy of a complaint filed in the United States District for the Northern District of New York on behalf of a purported class of former CONMED Linvatec sales representatives.  

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The complaint alleges that the former sales representatives were entitled to, but did not receive, severance in 2003 when CONMED Linvatec restructured its distribution channels.  The range of loss associated with this complaint ranges from $0 to $3.0 million, not including any interest, fees or costs that might be awarded if the five named plaintiffs were to prevail on their own behalf as well as on behalf of the approximately 70 (or 90 as alleged by the plaintiffs) other members of the purported class.   CONMED Linvatec did not generally pay severance during the 2003 restructuring because the former sales representatives were offered sales positions with CONMED Linvatec’s new manufacturer’s representatives.  Other than three of the five named plaintiffs in the class action, nearly all of CONMED Linvatec’s former sales representatives accepted such positions.

The Company’s motions to dismiss and for summary judgment, which were heard at a hearing held on January 5, 2007, were denied by a Memorandum Decision and Order dated May 22, 2007.  The District Court also granted the plaintiffs’ motion to certify a class of former CONMED Linvatec sales representatives whose employment with CONMED Linvatec was involuntarily terminated in 2003 and who did not receive severance benefits.   With discovery essentially completed, on July 21, 2008, the Company filed motions seeking summary judgment and to decertify the class.  In addition, on July 21, 2008, Plaintiffs filed a motion seeking summary judgment.  These motions are scheduled to be heard on August 26, 2008, although there is no fixed time frame within which the Court would then be required to rule on the motions.  The Company believes there is no merit to the claims asserted in the Complaint, and plans to vigorously defend the case.  There can be no assurance, however, that the Company will prevail in the litigation.

Note 13 – New accounting pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141 (revised 2007), “Business Combinations”   (“SFAS 141R”). SFAS 141R requires the use of "full fair value" to record all the identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination. SFAS 141R is effective for fiscal years beginning on or after December 15, 2008.  The Company is currently assessing the impact of SFAS 141R on its consolidated financial statements.

              In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS  161”).  SFAS 161 expands quarterly disclosure requirements about an entity’s derivative instruments and hedging activities. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently assessing the impact of SFAS 161 on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS No. 162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles”. The implementation of this standard will not have a material impact on our consolidated financial statements.

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In May 2008, the FASB issued FASB Staff Position No. APB 14-1 (FSP). The FSP specifies that issuers of convertible debt instruments that permit or require the issuer to pay cash upon conversion should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The Company will need to apply the guidance retrospectively to all past periods presented. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are currently assessing the impact the adoption of APB 14-1 will have on our consolidated financial statements.

Note 14 – Business acquisition

On January 9, 2008, we purchased our Italian distributor’s business for approximately $21.6 million in cash, of which an initial installment of $14.6 million was paid in January 2008 with the balance of $7.0 million paid in April 2008 (the “Italy acquisition”).  Under the terms of the acquisition agreement, we agreed to pay additional consideration in 2009 based upon the 2008 results of the acquired business.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as a result of the Italy acquisition.  The allocation of purchase price is preliminary and therefore subject to adjustment in future periods.

Cash	 	$	953	 	
Inventory	 	 	3,444	 	
Accounts receivable	 	 	19,701	 	
Other assets	 	 	784	 	
Customer relationships	 	 	8,862	 	
 	 	 	 	 	
Total assets acquired	 	 	33,744	 	
 	 	 	 	 	
Income taxes payable	 	 	(2,443	)	
Other current liabilities	 	 	(9,658	)	
 	 	 	 	 	
Total liabilities assumed	 	 	(12,101	)	
 	 	 	 	 	
Net assets acquired	 	$	21,643	 	

The Italy acquisition did not have a material impact on our results of operations or earnings per share in the quarterly and six month periods ended June 30, 2008.

Note 15 – Restructuring

During the second quarter of 2008, we announced a plan to restructure certain of our operations.  The restructuring plan includes the closure of two manufacturing facilities totaling approximately 200,000 square feet and located in the Utica, New York area with manufacturing to be transferred either into our Corporate headquarters location in Utica, New York or into a newly constructed leased manufacturing facility in Chihuahua, Mexico.  In addition, manufacturing presently done by a contract manufacturing facility in Juarez, Mexico will be transferred in-house to the Chihuahua facility.  Finally, certain domestic distribution activities will be centralized in a new consolidated distribution center to be leased in Atlanta, Georgia.  We believe our restructuring plan will reduce our cost base by consolidating our Utica, New York operations into a single facility as well as expanding our lower cost Mexican operations, and improve service to our customers by shipping orders from more centralized distribution centers.  The transition of manufacturing operations and consolidation of distribution activities is scheduled to begin in the fourth quarter of 2008 and is expected to be largely completed by the fourth quarter of 2009.

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In conjunction with our restructuring plan, we considered Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").  SFAS 144 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Based on the announced restructuring plan, our current expectation is that it is more likely than not, that the two manufacturing facilities located in the Utica, New York area scheduled to be closed as a result of the restructuring plan, will be sold prior to the end of their previously estimated useful lives.  Even though we expect to sell these facilities prior to the end of their useful lives, we do not believe that at present we meet the criteria contained within SFAS 144 to designate these assets as held for sale and accordingly we have tested them for impairment under the guidance for long-lived assets to be held and used.  We performed our impairment testing on the two manufacturing facilities scheduled to close under the restructuring plan by comparing future cash flows expected to be generated by these facilities (undiscounted and without interest charges) against their carrying amounts ($2.3 million and $2.9 million, respectively, as of June 30, 2008).  Since future cash flows expected to be generated by these facilities exceeds their carrying amounts, we do not believe any impairment exists at this time.  However, we cannot be certain an impairment charge will not be taken in the future when the facilities are no longer in use.

We cannot currently estimate the costs of the restructuring plan as details of the plan are still being finalized, however we do not believe such costs will have a material impact on our financial condition, results of operations or cash flows.  During the execution of our restructuring plan, we will incur certain charges, including employee termination and other exit costs.  However, based on the criteria contained within Statement of Financial Accounting Standards No. 146 "Accounting for Costs Associated with Exit or Disposal Activities", no accrual for such costs has been made at this time.  The restructuring plan impacts Corporate manufacturing and distribution facilities which support multiple reporting segments.  As a result, any costs associated with the restructuring plan will be reflected in the Corporate line within our business segment reporting.

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Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION	 	
 	AND RESULTS OF OPERATIONS	 	

Forward-Looking Statements
 
In this Report on Form 10-Q, we make forward-looking statements about our financial condition, results of operations and business. Forward-looking statements are statements made by us concerning events that may or may not occur in the future.  These statements may be made directly in this document or may be “incorporated by reference” from other documents.  Such statements may be identified by the use of words such as “anticipated”, “expects”, “estimates”, “intends” and “believes” and variations thereof and other terms of similar meaning.

Forward-Looking Statements are not Guarantees of Future Performance
 
Forward-looking statements involve known and unknown risks, uncertainties and other factors, including those that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include those identified under “Risk Factors” in our Annual Report on Form 10-K for the year-ended December 31, 2007 and the following, among others:

·  	      general economic and business conditions;	
 
·  	      cyclical customer purchasing patterns due to budgetary and other constraints;	
 
·  	      changes in customer preferences;	
 
·  	      competition;	
 
·  	      changes in technology;	
 
·  	      the ability to evaluate, finance and integrate acquired businesses, products and companies;	
 
·  	      the introduction and acceptance of new products;	
 
·  	      changes in business strategy;	
 
·  	      the availability and cost of materials;	
 
·  	      the possibility that United States or foreign regulatory and/or administrative agencies may initiate enforcement actions against us or our distributors;	
 
·  	      future levels of indebtedness and capital spending;	
 
·  	      changes in foreign exchange and interest rates;	
 
·  	      quality of our management and business abilities and the judgment of our personnel;	
 
·  	      the risk of litigation, especially patent litigation as well as the cost associated with patent and other litigation;	
 
·  	      changes in regulatory requirements; and	
 
·  	      the availability, terms and deployment of capital.	
 
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below and “Risk Factors” and “Business” in our Annual Report on Form 10-K for the year-ended December 31, 2007 for a further discussion of these factors. You are cautioned not to place undue reliance on these forward-looking statements,

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which speak only as of the date hereof. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

Overview:

CONMED Corporation (“CONMED”, the “Company”, “we” or “us”) is a medical technology company with six principal product lines.  These product lines and the percentage of consolidated revenues associated with each, are as follows:

 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Arthroscopy	 	 	38.3	%	 	 	39.7	%	 	 	37.4	%	 	 	39.7	%	
Powered Surgical Instruments	 	 	21.2	 	 	 	20.7	 	 	 	21.6	 	 	 	20.9	 	
Patient Care	 	 	10.3	 	 	 	10.3	 	 	 	11.1	 	 	 	10.5	 	
Electrosurgery	 	 	13.1	 	 	 	13.4	 	 	 	13.5	 	 	 	13.7	 	
Endosurgery	 	 	9.2	 	 	 	9.0	 	 	 	8.6	 	 	 	8.5	 	
Endoscopic Technologies	 	 	7.9	 	 	 	6.9	 	 	 	7.8	 	 	 	6.7	 	
    Consolidated Net Sales	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	

A significant amount of our products are used in surgical procedures with the majority of our revenues derived from the sale of disposable products.  We manufacture substantially all of our products in facilities located in the United States, Mexico, and Finland.  We market our products both domestically and internationally directly to customers and through distributors.  International sales represent a significant portion of our business.  During the three and six months ended June 30, 2008, sales to purchasers outside of the United States approximated 46% of total net sales.

Business Environment and Opportunities

The aging of the worldwide population along with lifestyle changes, continued cost containment pressures on healthcare systems and the desire of clinicians and administrators to use less invasive (or noninvasive) procedures are important trends which are driving the growth in our industry.  We believe that with our broad product offering of high quality surgical and patient care products, we can capitalize on this growth for the benefit of the Company and our shareholders.

In order to further our growth prospects, we have historically used strategic business acquisitions and exclusive distribution relationships to continue to diversify our product offerings, increase our market share and realize economies of scale.  

We have a variety of research and development initiatives focused in each of our principal product lines.  Among the most significant of these efforts is the Endotracheal Cardiac Output Monitor (“ECOM”).  Our ECOM product offering is expected to provide an innovative alternative to catheter monitoring of cardiac output with a specially designed endotracheal tube which utilizes proprietary bio-impedance technology.  Also of significance are our research and development efforts in the area of tissue-sealing for electrosurgery.

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Continued innovation and commercialization of new proprietary products and processes are essential elements of our long-term growth strategy.  In March 2008, we unveiled several new products at the American Academy of Orthopaedic Surgeons Annual Meeting which we believe will further enhance our arthroscopy and powered surgical instrument product offerings.  Our reputation as an innovator is exemplified by these product introductions, which include the following: the Spectrum® MVP™ Shoulder Suture Passer, an innovative suture passing device for arthroscopic shoulder repair; the Sentinel™ Drill Bits which allows for safe and accurate drilling into the femoral tunnels during anterior cruciate  ligament, or ACL, surgery; the Shutt® Series 210™ Instruments for Hip Arthroscopy, manual instruments which allow for working in deep joints such as the hip; EL Microfracture Awls and Sterilization Tray which allow for easier access in difficult-to-reach areas and for use in hip arthroscopy; Smart Screw® II, a comprehensive line of bioabsorbable bone fixation implants; ThRevo® with HiFi, a shoulder anchor that incorporates the advantage of the HiFi high strength suture; PRO7020 Cordless Revision Attachment for Battery Handpieces, which are the only cordless revision attachments on the market and are used for cement removal in orthopedic revision surgery; Intrex™ Blade Line, a blade system composed of six blade profiles in seven different thicknesses for a comprehensive system of large bone saw blades; HD Arthroscope, the first high definition, or HD, arthroscope on the market ensures maximized transmission of high contrast light from the arthroscope into the True HD camera head; and the Single Chip Enhanced Definition Camera System, which incorporates a camera and image capture in the same device; and the HD Lightsource.

Business Challenges

Our Endoscopic Technologies operating segment has suffered from sales declines and operating losses since its acquisition from C.R. Bard in September 2004.  We have corrected the operational issues associated with product shortages that resulted following the acquisition of the Endoscopic Technologies business and continue to reduce costs while also investing in new product development in an effort to increase sales and ensure a return to profitability.

Our facilities are subject to periodic inspection by the United States Food and Drug Administration (“FDA”) and foreign regulatory agencies for, among other things, conformance to Quality System Regulation and Current Good Manufacturing Practice (“CGMP”) requirements.  We are committed to the principles and strategies of systems-based quality management for improved CGMP compliance, operational performance and efficiencies through our Company-wide quality systems initiative.  However, there can be no assurance that our actions will ensure that we will not receive a warning letter or other regulatory action which may include consent decrees or fines.

Critical Accounting Estimates

Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year-ended December 31, 2007 describes the significant accounting policies used in preparation of the consolidated financial statements.  The most significant areas involving management judgments and estimates are described below and are considered by management to be critical to understanding the financial condition and results of operations of CONMED Corporation.  There have been no significant changes in our critical accounting estimates during the quarter ended June 30, 2008.

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Revenue Recognition

Revenue is recognized when title has been transferred to the customer which is at the time of shipment.  The following policies apply to our major categories of revenue transactions:

 	·	Sales to customers are evidenced by firm purchase orders. Title and the risks and rewards of ownership are transferred to the customer when product is shipped under our stated shipping terms.  Payment by the customer is due under fixed payment terms.	

 	·	We place certain of our capital equipment with customers in return for commitments to purchase disposable products over time periods generally ranging from one to three years.  In these circumstances, no revenue is recognized upon capital equipment shipment and we recognize revenue upon the disposable product shipment.  The cost of the equipment is amortized over the term of the individual commitment agreements.	

 	·	Product returns are only accepted at the discretion of the Company and in accordance with our “Returned Goods Policy”.  Historically the level of product returns has not been significant.  We accrue for sales returns, rebates and allowances based upon an analysis of historical customer returns and credits, rebates, discounts and current market conditions.	

 	·	Our terms of sale to customers generally do not include any obligations to perform future services.  Limited warranties are provided for capital equipment sales and provisions for warranty are provided at the time of product sale based upon an analysis of historical data.	

 	·	Amounts billed to customers related to shipping and handling have been included in net sales.  Shipping and handling costs are included in selling and administrative expense.	

 	·	We sell to a diversified base of customers around the world and, therefore, believe there is no material concentration of credit risk.	

 	·	We assess the risk of loss on accounts receivable and adjust the allowance for doubtful accounts based on this risk assessment.  Historically, losses on accounts receivable have not been material.  Management believes that the allowance for doubtful accounts of $0.8 million at June 30, 2008 is adequate to provide for probable losses resulting from accounts receivable.	

Inventory Reserves

We maintain reserves for excess and obsolete inventory resulting from the inability to sell our products at prices in excess of current carrying costs.  The markets in which we operate are highly competitive, with new products and surgical procedures introduced on an on-going basis.  Such marketplace changes may result in our products becoming obsolete.  We make estimates regarding the future recoverability of the costs of our products and record a provision for excess and obsolete inventories based on historical experience, expiration of sterilization dates and expected future trends.  If actual product life cycles, product demand or acceptance of new product introductions are less favorable than projected by management, additional inventory write-downs may be required.  We believe that our current inventory reserves are adequate.

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Business Acquisitions

We have a history of growth through acquisitions.  Assets and liabilities of acquired businesses are recorded under the purchase method of accounting at their estimated fair values as of the date of acquisition.  Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses.  Other intangible assets primarily represent allocations of purchase price to identifiable intangible assets of acquired businesses.  We have accumulated goodwill of $289.8 million and other intangible assets of $198.0 million as of June 30, 2008.

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” (“SFAS 142”), goodwill and intangible assets deemed to have indefinite lives are not amortized, but are subject to at least annual impairment testing.  The identification and measurement of goodwill impairment involves the estimation of the fair value of our business.  Estimates of fair value are based on the best information available as of the date of the assessment, which primarily incorporate management assumptions about expected future cash flows and contemplate other valuation techniques.  Future cash flows may be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized with newly acquired entities.

On an annual basis, we perform an assessment of the useful life and fair value of customer relationships. This assessment includes a comparison of customer activity since the acquisition date and review of customer attrition rates.  Estimates of fair value are based on the best information available as of the date of the assessment, which primarily incorporate management assumptions about expected future cash flows and contemplate other valuation techniques.  Future cash flows may be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized with newly acquired entities.

Intangible assets with a finite life are amortized over the estimated useful life of the asset.  Intangible assets which continue to be subject to amortization are also evaluated to determine whether events and circumstances warrant a revision to the remaining period of amortization.  An intangible asset is determined to be impaired when estimated undiscounted future cash flows indicate that the carrying amount of the asset may not be recoverable.  An impairment loss is recognized by reducing the recorded value to its current fair value.  Although no goodwill or other intangible asset impairment has been recorded in the current year, there can be no assurance that future impairment will not occur.  It is our policy to perform annual impairment tests in the fourth quarter.

Pension Plan

We sponsor a defined benefit pension plan covering substantially all our United States-based employees.  Major assumptions used in accounting for the plan include the discount rate, expected return on plan assets, rate of increase in employee compensation levels and expected mortality.  Assumptions are determined based on Company data and appropriate market indicators, and are evaluated annually as of the plan’s measurement date.  A change in any of these assumptions would have an effect on net periodic pension costs reported in the consolidated financial statements.

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The discount rate was determined by using the Citigroup Pension Liability Index rate which, we believe, is a reasonable indicator of our plan’s future benefit payment stream.  This rate, which increased from 5.90% in 2007 to 6.48% in 2008, is used in determining pension expense.  This change in assumption will result in lower pension expense during 2008.

We have used an expected rate of return on pension plan assets of 8.0% for purposes of determining the net periodic pension benefit cost.  In determining the expected return on pension plan assets, we consider the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance.  In addition, we consult with financial and investment management professionals in developing appropriate targeted rates of return.

We have estimated our rate of increase in employee compensation levels at 3.0% consistent with our internal budgeting.

Based on these and other factors, 2008 pension expense is estimated at approximately $6.7 million compared to $6.9 million in 2007.  Actual expense may vary significantly from this estimate. For the three and six months period ended June 30, 2008 we recorded $1.7 million and $3.4 million, respectively, in pension expense.

Stock Based Compensation

In accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) all share-based payments to employees, including grants of employee stock options, restricted stock units, and stock appreciation rights are recognized in the financial statements based at their fair values.  Compensation expense is recognized using a straight-line method over the vesting period.

Income Taxes

The recorded future tax benefit arising from net deductible temporary differences and tax carryforwards is approximately $24.9 million at June 30, 2008.  Management believes that our earnings during the periods when the temporary differences become deductible will be sufficient to realize the related future income tax benefits.

We operate in multiple taxing jurisdictions, both within and outside the United States.  We face audits from these various tax authorities regarding the amount of taxes due.  Such audits can involve complex issues and may require an extended period of time to resolve.  The Internal Revenue Service (“IRS”) has completed examinations of our United States federal income tax returns through 2006.  Tax years subsequent to 2006 are subject to future examination.

We have established a valuation allowance to reflect the uncertainty of realizing the benefits of certain net operating loss carryforwards recognized in connection with an acquisition.  Any subsequently recognized tax benefits associated with the valuation allowance would be allocated to reduce goodwill.  However, upon adoption of Statement of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”) on January 1, 2009, changes in deferred tax valuation allowances and income tax uncertainties after the acquisition date, including those associated with acquisitions that closed prior to the effective date of SFAS 141R, generally will affect income tax expense. In assessing the need for a

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valuation allowance, we estimate future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards.  Valuation allowances related to deferred tax assets may be impacted by changes to tax laws, changes to statutory tax rates and future taxable income levels.

Results of Operations

The following table presents, as a percentage of net sales, certain categories included in our consolidated statements of income for the periods indicated:

 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
Cost of sales	 	 	49.3	 	 	 	47.7	 	 	 	49.7	 	 	 	48.2	 	
Gross profit	 	 	50.7	 	 	 	52.3	 	 	 	50.3	 	 	 	51.8	 	
Selling and administrative expense	 	 	34.4	 	 	 	36.0	 	 	 	34.7	 	 	 	36.0	 	
Research and development expense	 	 	4.4	 	 	 	4.5	 	 	 	4.4	 	 	 	4.4	 	
Other expense	 	 	0.7	 	 	 	0.0	 	 	 	(1.2	)	 	 	0.0	 	
   Income from operations	 	 	11.2	 	 	 	11.8	 	 	 	12.4	 	 	 	11.4	 	
Interest expense	 	 	2.6	 	 	 	1.3	 	 	 	2.6	 	 	 	1.5	 	
Income before income taxes	 	 	8.6	 	 	 	10.5	 	 	 	9.8	 	 	 	9.9	 	
Provision for income taxes	 	 	3.1	 	 	 	4.0	 	 	 	3.5	 	 	 	3.8	 	
Net income	 	 	5.5	%	 	 	6.5	%	 	 	6.3	%	 	 	6.1	%	

Three months ended June 30, 2008 compared to three months ended June 30, 2007 –

Sales for the quarter ended June 30, 2008 were $192.8 million, an increase of $23.5 million (13.9%) compared to sales of $169.3 million in the same period a year ago.  Favorable foreign currency exchange rates (when compared to the foreign currency exchange rates in the same period a year ago) increased sales by approximately $5.1 million as did the purchase of our Italian distributor by $3.7 million (see Note 14 to the Consolidated Condensed Financial Statements).

Cost of sales increased to $91.9 million in the quarter ended June 30, 2008 compared to $83.4 million in the same period a year ago on overall increases in sales volumes as described above.  Gross profit margins increased to 52.3% in the quarter ended June 30, 2008 as compared to 50.7% in the same period a year ago.  The increase of 1.6 percentage points is comprised of favorable foreign exchange rates (1.3 percentage points) and the newly acquired direct sales operation in Italy (0.9 percentage points) offset by product mix (0.2 percentage points) and lower gross margins in our Endoscopic Technologies business (0.4 percentage points) due to pricing pressures and lower production volumes.

Selling and administrative expense increased to $69.5 million in the quarter ended June 30, 2008 as compared to $58.2 million in the same period a year ago.  Selling and administrative expense as a percentage of net sales increased 1.6 percentage points to 36.0% in the quarter ended June 30, 2008 as compared to 34.4% in the same period a year ago.  The increase of 1.6 percentage points is primarily attributable to higher selling and administrative expense associated with our newly acquired direct sales operation in Italy.

Research and development expense increased to $8.7 million in the quarter ended June 30, 2008 compared to $7.5 million in the same period a year ago. As a percentage of net sales, research and development expense increased to 4.5% in the quarter ended June 30, 2008, as compared to 4.4% in the same period a year ago.  

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The 0.1 percentage point increase in research and development expense is due to continued effort on our Endotracheal Cardiac Output Monitor (“ECOM”).

As discussed in Note 10 to the Consolidated Condensed Financial Statements, other expense (income) in the quarter ended June 30, 2007 consisted of $1.3 million in costs related to the closing of our Endoscopic Technologies sales office in France and $0.1 million in charges related to the termination of a product line.

Interest expense in the quarter ended June 30, 2008 was $2.4 million compared to $4.3 million in the same period a year ago.  The decrease in interest expense is due to lower weighted average borrowings outstanding and lower market interest rates on our variable rate debt in the quarter ended June 30, 2008 as compared to the same period a year ago.  The weighted average interest rates on our borrowings (inclusive of the finance charge on our accounts receivable sale facility) declined to 3.44% in the quarter ended June 30, 2008 as compared to 5.87% in the same period a year ago.

A provision for income taxes has been recorded at an effective tax rate of 38.4% for the quarter ended June 30, 2008, an increase from 35.8% recorded in the same period a year ago.  The increase in the effective rate is primarily a result of the expiration of the research and development tax credit on December 31, 2007.  A reconciliation of the United States statutory income tax rate to our effective tax rate is included in our Annual Report on Form 10-K for the year-ended December 31, 2007, Note 7 to the Consolidated Financial Statements.

Six months ended June 30, 2008 compared to six months ended June 30, 2007
 
Sales for the six months ended June 30, 2008 were $383.5 million, an increase of $43.2 million (12.7%) compared to sales of $340.3 million in the same period a year ago.  Favorable foreign currency exchange rates (when compared to the foreign currency exchange rates in the same period a year ago) increased sales by approximately $11.3 million as did the purchase of our Italian distributor by $6.9 million (see Note 14 to the Consolidated Condensed Financial Statements).

Cost of sales increased $15.7 million in the six months ended 2008 to $184.9 million from $169.2 million in the same period a year ago on overall increased sales volumes.  Gross profit margins increased to 51.8% in the six months ended June 30, 2008 from 50.3% in the same period a year ago.  The increase of 1.5 percentage points is comprised of favorable foreign exchange rates (1.5 percentage points) and the newly acquired direct sales operation in Italy (0.9 percentage points) offset by product mix (0.4 percentage points) and lower gross margins in our Endoscopic Technologies business (0.5 percentage points) due to pricing pressures and lower production volumes.

Selling and administrative expense increased $20.2 million in the six months ended June 30, 2008 to $138.2 million from $118.0 million in the same period a year ago.  As a percentage of sales, selling and administrative expense increased to 36.0% in the six months ended June 30, 2008 as compared to 34.7% in the same period a year ago.  The increase of 1.3 percentage points is primarily attributable to higher selling and administrative expense associated with our newly acquired direct sales operation in Italy.

Research and development expense totaled $16.8 million in the six months ended June 30, 2008 as compared to $15.0 million in the same period a year ago.  As a percentage of net sales, research and development expense remained flat at 4.4% in the six months ended June 30, 2008, as compared to the same period a year ago.

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As discussed in Note 10 to the Consolidated Condensed Financial Statements, other expense (income) in the six months ended June 30, 2007 consisted of a $1.8 million charge related to the closing of a manufacturing facility in Montreal, Canada and a sales office in France, a $0.1 million charge related to the termination of our surgical lights product offering, and $6.1 million in income related to the settlement of the antitrust case with Johnson & Johnson.

Interest expense in the six months ended June 30, 2008 was $5.6 million compared to $8.8 million in the same period a year ago.  The decrease in interest expense is due to lower weighted average borrowings outstanding and lower market interest rates on our variable rate debt in the six months ended June 30, 2008 as compared to the same period a year ago.  The weighted average interest rates on our borrowings (inclusive of the finance charge on our accounts receivable sale facility) declined to 3.95% in the six months ended June 30, 2008 as compared to 5.60% in the same period a year ago.

A provision for income taxes has been recorded at an effective tax rate of 38.4% for the six months ended June 30, 2008 as compared to 36.1% for the same period a year ago.  The effective tax rate for the six month period ended June 30, 2008 is higher than that recorded in the same period a year ago as a result of the expiration of the research and development tax credit on December 31, 2007.  A reconciliation of the United States statutory income tax rate to our effective tax rate is included in our Annual Report on Form 10-K for the year-ended December 31, 2007, Note 7 to the Consolidated Financial Statements.

Operating Segment Results:

Segment information is prepared on the same basis that we review financial information for operational decision-making purposes.  We conduct our business through five principal operating units: CONMED Endoscopic Technologies, CONMED Endosurgery, CONMED Electrosurgery, CONMED Linvatec and CONMED Patient Care.  Based upon the aggregation criteria for segment reporting under Statement of Financial Accounting Standards No. 131 “Disclosures about Segments of an Enterprise and Related Information” (SFAS 131”), we have grouped our CONMED Endosurgery, CONMED Electrosurgery and CONMED Linvatec operating units into a single segment.  The economic characteristics of CONMED Patient Care and CONMED Endoscopic Technologies do not meet the criteria for aggregation due to the lower overall operating loss of these segments.

The following tables summarize the Company’s results of operations by segment for the three and six month periods ended June 30, 2007 and 2008.

CONMED Linvatec, CONMED Electrosurgery and CONMED Endosurgery
 
 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Net sales	 	$	138,530	 	 	$	159,633	 	 	$	275,924	 	 	$	317,598	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Income from	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
          operations	 	 	24,916	 	 	 	27,678	 	 	 	43,709	 	 	 	55,175	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Operating Margin	 	 	18.0	%	 	 	17.3	%	 	 	15.8	%	 	 	17.4	%	

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Product offerings include a complete line of endo-mechanical instrumentation for minimally invasive laparoscopic procedures, electrosurgical generators and related surgical instruments, arthroscopic instrumentation for use in orthopedic surgery and small bone, large bone and specialty powered surgical instruments.

 	·	Arthroscopy sales increased $11.9 million (18.2%) in the quarter ended June 30, 2008 to $76.8 million from $64.9 million in the same period a year ago. Arthroscopy sales increased $25.2 million (19.8%) in the six months ended June 30, 2008 to $152.3 million from $127.1 million in the same period a year ago. These increases are principally a result of increased sales of our procedure specific, resection and video imaging products for arthroscopy and general surgery.	

 	·	Powered surgical instrument sales increased $3.7 million (10.3%) in the quarter ended June 30, 2008 to $39.7 million from $36.0 million in the same period a year ago.  Powered surgical instrument sales increased $6.6 million (9.0%) in the six months ended June 30, 2008 to $80.2 million from $73.6 million in the same period a year ago.  These increases are principally a result of increased sales of our small bone and large bone powered instrument products.	

 	·	Electrosurgery sales increased $3.7 million (16.7%) in the quarter ended June 30, 2008 to $25.8 million from $22.1 million in the same period a year ago.  Electrosurgery sales increased $6.5 million (14.1%) in the six months ended June 30, 2008 to $52.6 million from $46.1 million in the same period a year ago.  These increases were principally a result of increased sales of our System 5000™ electrosurgical generator and ground pads.	

 	·	Endosurgery sales increased $1.8 million (11.6%) in the quarter ended June 30, 2008 to $17.3 million from $15.5 million in the same period a year ago.  Endosurgery sales increased $3.4 million (11.7%) in the six months ended June 30, 2008 to $32.5 million from $29.1 million in the same period a year ago.  These increases are principally a result of increased sales of our ligation and suction irrigation products.	

 	·	Operating margins as a percentage of net sales decreased 0.7 percentage points to 17.3% in the quarter ended June 30, 2008 compared to 18.0% in 2007 while operating margins increased 1.6 percentage points to 17.4% in the six months ended June 30, 2008 compared to 15.8% in the same period a year ago.  The decrease in operating margins in the quarter ended June 30, 2008 is mainly due to higher sales force and marketing expenses in the current quarter.  The increase in operating margins in the six months ended June 30, 2008 is as a result of higher gross margins due to favorable foreign currency exchanges rates, higher selling prices and lower production variances.	

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CONMED Patient Care

 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Net sales	 	$	17,315	 	 	$	19,807	 	 	$	37,676	 	 	$	40,118	 	
     Income/(loss) from	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
          operations	 	 	(1,265	)	 	 	589	 	 	 	(238	)	 	 	1,143	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Operating Margin	 	 	(7.3	%)	 	 	3.0	%	 	 	(0.6	%)	 	 	2.8	%	

Product offerings include a line of vital signs and cardiac monitoring products including pulse oximetry equipment and sensors, ECG electrodes and cables, cardiac defibrillation and pacing pads and blood pressure cuffs.  We also offer a complete line of reusable surgical patient positioners and suction instruments and tubing for use in the operating room, as well as a line of IV products.

 	·	Patient care sales increased $2.4 million (13.8%) in the quarter ended June 30, 2008 to $19.8 million from $17.4 million in the same period a year ago.  Patient care sales increased $2.3 million (6.5%) in the six months ended June 30, 2008 to $40.1 million from $37.8 million in the same period a year ago. These increases are principally a result of increased sales of our defibrillator pads and ECG electrodes.	

 	·	Operating margins as a percentage of net sales increased 10.3 percentage points to 3.0% for the quarter ended June 30, 2008 compared to -7.3% in 2007 while operating margins increased 3.4 percentage points to 2.8% for the six months ended June 30, 2008 compared to -0.6% in the same period a year ago.  The increase in operating margins in the quarter and six months ended June 30, 2008 is primarily due to the increases in gross margins of 9.1 and 4.1 percentage points, respectively, compared to the same period a year ago as a result of higher selling prices and lower production variances.  Lower distribution, selling and administrative costs (3.2 and 1.1 percentage points, respectively) accounted for the remaining increase and were offset by increased research and development spending (2.0 and 1.8 percentage points, respectively) mainly due to our Endotracheal Cardiac Output Monitor (“ECOM”) project.	

CONMED Endoscopic Technologies

 	 	Three months ended
June 30,	 	 	Six months ended
June 30,	 	
 	 	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
     Net sales	 	$	13,413	 	 	$	13,315	 	 	$	26,672	 	 	$	25,812	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Loss from	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
          operations	 	 	(2,432	)	 	 	(2,366	)	 	 	(3,643	)	 	 	(4,845	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
     Operating Margin	 	 	(18.1	%)	 	 	(17.8	%)	 	 	(13.7	%)	 	 	(18.8	%)	

Product offerings include a comprehensive line of minimally invasive endoscopic diagnostic and therapeutic instruments used in procedures which require examination of the digestive tract.

 	·	Endoscopic Technologies sales remained flat in the quarter ended June 30, 2008 compared to the same period a year ago. Endoscopic Technologies sales decreased $0.8 million (3.2%) in the six months ended June 30, 2008 to $25.8 million from $26.6 million in the same period a year ago.  These decreases are principally a result of decreased sales of forceps and pulmonary products as a result of strong competition and pricing pressures.	

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 	·	Operating margins as a percentage of net sales increased 0.3 percentage points to -17.8% in the quarter ended June 30, 2008 compared to -18.1% in the same period a year ago while operating margins decreased 5.1 percentage points to -18.8% for the six months ended June 30, 2008 compared to -13.7% in the same period a year ago.  The increase in operating margin in the quarter is primarily due to the charge in the quarter ended June 30, 2007 associated with the closure of a sales office in France (9.3 percentage points).  This is offset by decreased gross margins (6.6 percentage points) due to competition and pricing pressures as well as higher selling and administrative expenses as a percentage of sales (2.4 percentage points). The decreased operating margin in the six months ended June 30, 2008 is primarily due to decreased gross margins (8.2 percentage points) due to competition and pricing pressures as well as higher selling, administrative and research and development expenses as a percentage of sales (2.6 percentage points) offset by the charge in the six months ended June 30, 2007 associated with the closure of a sales office in France (5.7 percentage points).	

Liquidity and Capital Resources

Our liquidity needs arise primarily from capital investments, working capital requirements and payments on indebtedness under the senior credit agreement.  We have historically met these liquidity requirements with funds generated from operations, including sales of accounts receivable and borrowings under our revolving credit facility.  In addition, we use term borrowings, including borrowings under our senior credit agreement and borrowings under separate loan facilities, in the case of real property purchases, to finance our acquisitions.  We also have the ability to raise funds through the sale of stock or we may issue debt through a private placement or public offering.

Cash provided by operations

Our net working capital position was $230.8 million at June 30, 2008.  Net cash provided by operating activities was $35.1 million in the six months ended June 30, 2008 and $25.8 million in the same period a year ago.

                Net cash provided by operating activities increased by $9.3 million in 2008 as compared to 2007 as improved working capital management resulted in lower growth in inventories as compared to the same period a year ago as we expand our lean manufacturing initiatives.

Investing cash flows

Net cash used in investing activities in the six month period ended June 30, 2008 consisted of capital expenditures and $21.6 million paid in connection with the purchase of our Italian distributor (the “Italy acquisition”).  See Note 14 to the Consolidated Condensed Financial Statements for further discussion of the Italy acquisition.  Capital expenditures were $9.6 million and $15.2 million for the six month period ended June 30, 2007 and 2008, respectively.  The increase in capital expenditures in the six month period ended June 30, 2008 as compared to the same period a year ago is primarily due to the ongoing implementation of an enterprise business software application as well various other infrastructure improvements.

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Index

Financing cash flows

Net cash provided by financing activities in the six months ended June 30, 2008 consisted primarily of the following:  $7.0 million in borrowings on our revolver under our senior credit agreement, $0.6 million in proceeds from the issuance of common stock under our stock option plans and employee stock purchase plan, $0.7 million in payments on our term loan under our senior credit agreement and $0.5 million in payments on our mortgage loan.

               Our $235.0 million senior credit agreement (the "senior credit agreement") consists of a $100.0 million revolving credit facility and a $135.0 million term loan.  There was $7.0 million outstanding on the revolving credit facility as of June 30, 2008.  Our available borrowings on the revolving credit facility at June 30, 2008 were $87.0 million with approximately $6.0 million of the facility set aside for outstanding letters of credit.  There were $58.3 million in borrowings outstanding on the term loan at June 30, 2008.

The scheduled principal payments on the term loan portion of the senior credit agreement are $1.4 million annually through December 2011, increasing to $53.6 million in 2012 with the remaining balance outstanding due and payable on April 12, 2013.  We may also be required, under certain circumstances, to make additional principal payments based on excess cash flow as defined in the senior credit agreement.  Interest rates on the term loan portion of the senior credit agreement are at LIBOR plus 1.50% (3.98% at June 30, 2008) or an alternative base rate; interest rates on the revolving credit facility portion of the senior credit agreement are at LIBOR plus 1.375% or an alternative base rate.  For those borrowings where the Company elects to use the alternative base rate, the base rate is the greater of the Prime Rate or the Federal Funds Rate in effect on such date plus 0.50%, plus a margin of 0.50% for term loan borrowings or 0.25% for borrowings under the revolving credit facility.

The senior credit agreement is collateralized by substantially all of our personal property and assets, except for our accounts receivable and related rights which are pledged in connection with our accounts receivable sales agreement.  The senior credit agreement contains covenants and restrictions which, among other things, require the maintenance of certain financial ratios, and restrict dividend payments and the incurrence of certain indebtedness and other activities, including acquisitions and dispositions.  We were in full compliance with these covenants and restrictions as of June 30, 2008. We are also required, under certain circumstances, to make mandatory prepayments from net cash proceeds from any issue of equity and asset sales.

Mortgage notes outstanding in connection with the property and facilities utilized by our CONMED Linvatec subsidiary consist of a note bearing interest at 7.50% per annum with semiannual payments of principal and interest through June 2009 (the "Class A note"); and a note bearing interest at 8.25% per annum compounded semiannually through June 2009, after which semiannual payments of principal and interest will commence, continuing through June 2019 (the "Class C note").  The principal balances outstanding on the Class A note and Class C note aggregated $2.5 million and $10.8 million, respectively, at June 30, 2008.  These mortgage notes are secured by the CONMED Linvatec property and facilities.

We have outstanding $150.0 million in 2.50% convertible senior subordinated notes (the “Notes”) due 2024.  The Notes represent subordinated unsecured obligations and are convertible under certain circumstances, as defined in the bond indenture, into a combination of cash and CONMED common stock.  Upon conversion, the holder of each Note will receive the conversion value of the Note payable in cash up

27

Index

to the principal amount of the Note and CONMED common stock for the Note’s conversion value in excess of such principal amount.  Amounts in excess of the principal amount are at an initial conversion rate, subject to adjustment, of 26.1849 shares per $1,000 principal amount of the Note (which represents an initial conversion price of $38.19 per share).  The Notes mature on November 15, 2024 and are not redeemable by us prior to November 15, 2011.  Holders of the Notes will be able to require that we repurchase some or all of the Notes on November 15, 2011, 2014 and 2019.

Our Board of Directors has authorized a share repurchase program under which we may repurchase up to $50.0 million of our common stock in any calendar year.  We did not repurchase any shares during the first six months of 2008.  We have financed the repurchases and may finance additional repurchases through the proceeds from the issuance of common stock under our stock option plans, from operating cash flow and from available borrowings under our revolving credit facility.

Management believes that cash flow from operations, including accounts receivable sales, cash and cash equivalents on hand and available borrowing capacity under our senior credit agreement will be adequate to meet our anticipated operating working capital requirements, debt service, funding of capital expenditures and common stock repurchases in the foreseeable future.

Off-balance sheet arrangements

We have an accounts receivable sales agreement pursuant to which we and certain of our subsidiaries sell on an ongoing basis certain accounts receivable to CONMED Receivables Corporation (“CRC”), a wholly-owned, bankruptcy-remote, special-purpose subsidiary of CONMED Corporation.  CRC may in turn sell up to an aggregate $50.0 million undivided percentage ownership interest in such receivables (the “asset interest”) to a bank (the “purchaser”).  The purchaser’s share of collections on accounts receivable are calculated as defined in the accounts receivable sales agreement, as amended.  Effectively, collections on the pool of receivables flow first to the purchaser and then to CRC, but to the extent that the purchaser’s share of collections may be less than the amount of the purchaser’s asset interest, there is no recourse to CONMED or CRC for such shortfall.  For receivables which have been sold, CONMED Corporation and its subsidiaries retain collection and administrative responsibilities as agent for the purchaser.  As of June 30, 2008, the undivided percentage ownership interest in receivables sold by CRC to the purchaser aggregated $42.0 million, which has been accounted for as a sale and reflected in the balance sheet as a reduction in accounts receivable.  Expenses associated with the sale of accounts receivable, including the purchaser’s financing costs to purchase the accounts receivable were $1.0 million in the six months ended June 30, 2008 and are included in interest expense.

There are certain statistical ratios, primarily related to sales dilution and losses on accounts receivable, which must be calculated and maintained on the pool of receivables in order to continue selling to the purchaser.  The pool of receivables is in full compliance with these ratios.  Management believes that additional accounts receivable arising in the normal course of business will be of sufficient quality and quantity to meet the requirements for sale under the accounts receivables sales agreement.  In the event that new accounts receivable arising in the normal course of business do not qualify for sale, then collections on sold receivables will flow to the purchaser rather than being used to fund new receivable purchases.  To the extent that such collections would not be available to CONMED in the form of new receivables purchases, we would need to access an alternate source

28

Index

of working capital, such as our $100 million revolving credit facility.  Our accounts receivable sales agreement, as amended, also requires us to obtain a commitment (the “purchaser commitment”) from the purchaser to fund the purchase of our accounts receivable.  The purchaser commitment was amended effective December 28, 2007 whereby it was extended through October 31, 2009 under substantially the same terms and conditions.

Restructuring

During the second quarter of 2008, we announced a plan to restructure certain of our operations.  The restructuring plan includes the closure of two manufacturing facilities totaling approximately 200,000 square feet and located in the Utica, New York area with manufacturing to be transferred either into our Corporate headquarters location in Utica, New York or into a newly constructed leased manufacturing facility in Chihuahua, Mexico.  In addition, manufacturing presently done by a contract manufacturing facility in Juarez, Mexico will be transferred in-house to the Chihuahua facility.  Finally, certain domestic distribution activities will be centralized in a new consolidated distribution center to be leased in Atlanta, Georgia.  We believe our restructuring plan will reduce our cost base by consolidating our Utica, New York operations into a single facility as well as expanding our lower cost Mexican operations, and improve service to our customers by shipping orders from more centralized distribution centers.  The transition of manufacturing operations and consolidation of distribution activities is scheduled to begin in the fourth quarter of 2008 and is expected to be largely completed by the fourth quarter of 2009.

In conjunction with our restructuring plan, we considered Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").  SFAS 144 requires that long-lived assets be tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Based on the announced restructuring plan, our current expectation is that it is more likely than not, that the two manufacturing facilities located in the Utica, New York area scheduled to be closed as a result of the restructuring plan, will be sold prior to the end of their previously estimated useful lives.  Even though we expect to sell these facilities prior to the end of their useful lives, we do not believe that at present we meet the criteria contained within SFAS 144 to designate these assets as held for sale and accordingly we have tested them for impairment under the guidance for long-lived assets to be held and used.  We performed our impairment testing on the two manufacturing facilities scheduled to close under the restructuring plan by comparing future cash flows expected to be generated by these facilities (undiscounted and without interest charges) against their carrying amounts ($2.3 million and $2.9 million, respectively, as of June 30, 2008).  Since future cash flows expected to be generated by these facilities exceeds their carrying amounts, we do not believe any impairment exists at this time.  However, we cannot be certain an impairment charge will not be taken in the future when the facilities are no longer in use.

We cannot currently estimate the costs of the restructuring plan as details of the plan are still being finalized, however we do not believe such costs will have a material impact on our financial condition, results of operations or cash flows.  During the execution of our restructuring plan, we will incur certain charges, including employee termination and other exit costs.  However, based on the criteria contained within Statement of Financial Accounting Standards No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), no accrual for such costs has been made at this time.  The restructuring plan impacts Corporate

29

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manufacturing and distribution facilities which support multiple reporting segments.  As a result, any costs associated with the restructuring plan will be reflected in the Corporate line within our business segment reporting.

New accounting pronouncements

See Note 13 to the Consolidated Condensed Financial Statements for a discussion of new accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no significant changes in our primary market risk exposures or in how these exposures are managed during the three and six month periods ended June 30, 2008.  Reference is made to Item 7A. of our Annual Report on Form 10-K for the year-ended December 31, 2007 for a description of Qualitative and Quantitative Disclosures About Market Risk.

Item 4.  Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) was carried out under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Vice President-Finance and Chief Financial Officer (“the Certifying Officers”) as of June 30, 2008.  Based on that evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures are effective.  There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

Reference is made to Item 3 of the Company’s Annual Report on Form 10-K for the year-ended December 31, 2007 and to Note 12 of the Notes to Consolidated Condensed Financial Statements included in Part I of this Report for a description of certain legal matters.

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of stockholders of CONMED Corporation was held on May 15, 2008 (the “Annual Meeting”).  Holders of Common Stock were entitled to elect seven directors.  On all matters which came before the Annual Meeting, holders of Common Stock were entitled to one vote for each share held.  Proxies for 27,098,537 of the 28,627,208 shares of Common Stock entitled to vote were received in connection with the Annual Meeting.

The following table sets forth the names of the seven persons elected at the Annual Meeting to serve as directors until the first annual meeting of stockholders following the end of the Company’s fiscal year ending December 31, 2008 and the

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Index

number of votes cast for, against or withheld with respect to each person.

Election of Directors

Director	Votes Received	Votes Withheld	
 	 	 	
Eugene R. Corasanti	26,649,660	448,877	
Joseph J. Corasanti	26,651,573	446,964	
Bruce F. Daniels	26,563,880	534,657	
Jo Ann Golden	26,813,776	284,761	
Stephen M. Mandia	24,628,150	2,470,387   	
Stuart J. Schwartz	26,709,256	389,281	
Mark E. Tryniski	26,796,975	301,562	

Management Proposals	For	Against	Abstain	Broker
Non-votes	
Approval of PricewaterhouseCoopers LLP as independent registered public accounting firm for the Company for the fiscal year ending December 31, 2008;	26,836,808	256,356	5,373	-	

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Item 6. Exhibits

Exhibits

Exhibit No.	 	Description of Exhibit	

10.1	 	Amended and Restated Change in Control Severance Agreement for Joseph J. Corasanti	

10.2	 	Amended and Restated Change in Control Severance Agreement for Robert D. Shallish, Jr.	

10.3	 	Change in Control Severance Agreement for David A. Johnson	

10.4	 	Amended and Restated Change in Control Severance Agreement for Daniel S. Jonas	

10.5	 	Amended and Restated Change in Control Severance Agreement for Luke A. Pomilio	

31.1	 	Certification of Joseph J. Corasanti pursuant to Rule 13a-14(a) or Rule 15d-14(a), of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	

31.2	 	Certification of Robert D. Shallish, Jr. pursuant to Rule 13a-14(a) or Rule 15d-14(a), of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	

32.1	 	Certification of Joseph J. Corasanti and Robert D. Shallish, Jr. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	

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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.

 	CONMED CORPORATION	
 	             (Registrant)	

 	 	
 	 	
Date:  August 1, 2008	 	

 	 	
 	/s/ Robert D. Shallish, Jr.	
 	Robert D. Shallish, Jr.	
 	Vice President – Finance and	
 	Chief Financial Officer	

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Exhibit Index

 	 	Sequential Page	
Exhibit	 	Number	

 	 	 	
10.1	Amended and Restated Change in Control Severance Agreement for Joseph J. Corasanti	E-1	

 	 	 	
10.2	Amended and Restated Change in Control Severance Agreement for Robert D. Shallish, Jr.	E-15	

 	 	 	
10.3	Change in Control Severance Agreement for David A. Johnson.	E-29	

 	 	 	
10.4	Amended and Restated Change in Control Severance Agreement for Daniel S. Jonas	E-43	

 	 	 	
10.5	Amended and Restated Change in Control Severance Agreement for Luke A. Pomilio	E-57	

 	 	 	
31.1	Certification of Joseph J. Corasanti pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	E-71	

 	 	 	
31.2	Certification of Robert D. Shallish, Jr. pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	E-72	

 	 	 	
32.1	Certification of Joseph J. Corasanti and Robert D. Shallish, Jr. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	E-73	

34

 

Exhibit 10.1

AMENDED AND RESTATED
 
CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of the 1st day of August, 2008 (the “Effective Date”) by and between CONMED Corporation, a New York corporation (the  “ Company ” ), and Joseph J. Corasanti, 101 Winship Road, New Hartford, New York 13413 ( “ Executive ” ).
 
W I T N E S S E T H
 
WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and
 
WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and
 
WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure Executive ’ s continued services and to ensure Executive ’ s continued dedication to his duties in the event of any threat or occurrence of a Change in Control (as defined in Section 1) of the Company; and
 
WHEREAS, the Company and Executive have previously entered into a Change in Control Severance Agreement, dated as of May 3, 2000, which is hereby amended and restated; and
 
WHEREAS, the Company and Executive have also entered in an Employment Agreement dated as of November 12, 2004 and as subsequently amended ;
 
WHEREAS, the Company and Executive wish for this Agreement to be in addition to the provisions of Executive’s Employment Agreement; and
 
WHEREAS, the Board has authorized the Company to enter into this Agreement.
 
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:
 
1.      Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:
 
(a)         “Board” means the Board of Directors of the Company.
 
(b)         “Bonus Amount” means the highest annual incentive bonus earned by Executive from the Company (or its affiliates) during the last

 
E-1

 

three (3) completed fiscal years of the Company immediately preceding Executive’s Date of Termination (annualized in the event Executive was not employed by the Company (or its affiliates) for the whole of any such fiscal year).
 
(c)         “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive ’ s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive ’ s duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its affiliates.  For purpose of this paragraph (b), no act or failure to act by Executive shall be considered  “ willful ”  unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive ’ s action or omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company or upon the instructions of the Company ’ s chief executive officer or another senior officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail.
 
(d)         “Change in Control” means the occurrence of any one of the following events:
 
(i)           individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors ” ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
 
(ii)           any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the  “ Exchange Act ” ) and as used

 
E-2

 

in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company ’ s then outstanding securities eligible to vote for the election of the Board (the  “ Company Voting Securities ” ); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);
 
(iii)           the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company ’ s stockholders, whether for such transaction or the issuance of securities in the transaction (a  “ Business Combination ” ), unless immediately following such Business Combination:  (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the  “ Surviving Corporation ” ), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the  “ Parent Corporation ” ), is represented by Company Voting Securities that were 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 proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) 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) following the consummation of the Business Combination were Incumbent Directors at the time of the Board ’ s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a  “ Non-Qualifying Transaction ” ); or
 
(iv)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company ’ s assets.

 
E-3

 

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 25% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
 
(e)         “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive ’ s employment by the Company terminates by reason of death, the date of death of Executive.
 
(f)         “Disability” means termination of Executive’s employment by the Company due to Executive ’ s absence from Executive ’ s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive ’ s incapacity due to physical or mental illness.
 
(g)         “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:
 
        (i)           (A) any change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive ’ s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (g) or (B) a material and adverse change in Executive ’ s titles or offices with the Company as in effect immediately prior to such Change in Control;
        (ii)           a material reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity (including any material and adverse change in the formula for such annual bonus target), as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
        (iii)          any requirement of the Company that Executive (A) be based anywhere more than fifty (50) miles from the office where Executive is located at the time of the Change in Control or (B) travel on Company business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;
        (iv)          the failure of the Company to continue in effect any material employee benefit, compensation, welfare benefit or fringe benefit plan in which Executive is eligible to participate in immediately prior to such Change in Control or the taking of any action by the Company which would materially

E-4

 

adversely affect Executive’s contribution level or ability to participate in or materially reduce Executive’s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent Executive contribution  with respect to welfare benefit plans); or
  (v) the failure of the Company to obtain the assumption of this Agreement from any successor as contemplated in Section 9(b).
 
An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason.  Executive ’ s right to terminate employment for Good Reason shall not be affected by Executive ’ s incapacities due to mental or physical illness and Executive ’ s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that such event shall not constitute Good Reason under this Agreement unless (i) Executive provides notice to the Company within the ninety (90)   days following the initial existence of an event constituting Good Reason, (ii) the Company does not remedy such event (if remediation is possible) within thirty (30) days following the Company’s receipt of notice of such event, and (iii) Executive separates from service with the Company within two (2) years following the initial existence of such an event constituting Good Reason .
 
(h)         “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive ’ s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.
 
(i)         “Retirement” means Executive’s mandatory retirement (not including any mandatory early retirement) in accordance with the Company ’ s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive ’ s written consent.
 
(j)         “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% of the assets or liquidation or dissolution.
 
(k)         “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years and six (6) months following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive ’ s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of

 
E-5

 

employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive ’ s Date of Termination under Section 1(e).
 
2.      Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.
 
3.      Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years ’  written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive ’ s employment prior to a Change in Control except as provided in Section 1(k).
 
4.      Payments Upon Termination of Employment.
 
(a)         Qualifying Termination.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive:
 
(i)           within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive ’ s annual bonus for the fiscal year in which Executive ’ s Date of Termination occurs in an amount at least equal to (1) Executive ’ s Bonus Amount, multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and reduced by (3) any amounts paid from the Company ’ s annual incentive plan for the fiscal year in which Executive ’ s Date of Termination occurs and (C), any compensation previously deferred by Executive other than pursuant to a tax-qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus
 
(ii)           within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive ’ s highest annual rate of base salary during the 12-month period immediately prior to Executive ’ s Date of Termination, plus (ii) three (3) times Executive ’ s Bonus Amount.

 
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(b)           If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to offer, for a period of (3) years following Executive ’ s Date of Termination, Executive (and Executive ’ s dependents, if applicable) with the same level of medical, dental, accident, disability, long-term care and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive ’ s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); such medical and dental insurance benefits shall be provided in the form of continued group health coverage under COBRA for the 18 months following Executive’s termination of employment, and thereafter, at the Company’s sole discretion, either (i) under a fully insured Company health benefit plan, (ii) as reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase comparable health coverage or (iii) as reimbursement (on an after tax basis) of the actual out-of-pocket health expenses Executive incurs, and such accident, disability, long-term care and life insurance benefits shall be provided as a reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase such accident, disability, long-term care and life insurance benefits .   Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive ’ s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder.
 
In addition, the Company shall continue to make payments to or on behalf of the Executive with respect to the expenses set forth on Exhibit A for a period of three (3) years from such Date of Termination.
 
(c)         If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of (1) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and (2) any accrued vacation pay to the extent not theretofore paid.  The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing.
 
5.      Certain Additional Payments by the Company.
 
(a)         Anything in this Agreement to the contrary, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (the  “ Payments ” ) would be subject to the excise tax (the  “ Excise Tax ” ) under Section 4999 of the Internal Revenue Code of 1986, as amended (the  “ Code ” ), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest

 
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and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Company shall pay to Executive an additional payment (a  “ Gross-Up Payment ” ) in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive ’ s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made.  For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes and (iii) have otherwise allowable deductions for federal income tax purposes at least equal to those which could be disallowed because of the inclusion of the Gross-up Payment in the Executive ’ s adjusted gross income.  Notwithstanding the foregoing provisions of this Section 5(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10% of the portion of the Payments that would be treated as  “ parachute payments ”  under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the  “ Safe Harbor Cap ” ), and no Gross-Up Payment shall be made to Executive.  The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing payments under Section 4(a)(ii), second reducing the payments under Section 4(a)(i) and last reducing benefits under Section 4(b)(iii) .   For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
 
(b)         Subject to the provisions of Section 5(a), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “ Accounting Firm ” ) which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the  “ Determination ” ).  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with

 
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the performance of the services hereunder.  The Gross-up Payment under this Section 5 with respect to any Payments shall be made no later than thirty (30) days following such Payment.  If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive ’ s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect.  The Determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ( “ Underpayment ” ) or Gross-up Payments are made by the Company which should not have been made ( “ Overpayment ” ), consistent with the calculations required to be made hereunder.  In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive.  In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company.  Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
 
6.      Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.
 
7.      Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive ’ s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chase Manhattan Bank, N.A. from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive ’ s statement for such fees and expenses through the date of payment thereof, regardless of whether or not Executive ’ s claim is upheld by a court of competent jurisdiction.
 
8.      Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive ’ s employment with the Company shall terminate

 
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prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any termination of Executive ’ s employment during the Termination Period shall be subject to all of the provisions of this Agreement.
 
9.      Successors; Binding Agreement.
 
(a)         This Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.
 
(b)         The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any Parent Corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive ’ s employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.
 
(c)         This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive ’ s estate.
 
10.         Notice.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:
 
If to the Executive:
 
Joseph J. Corasanti
101 Winship Road
New Hartford, NY 13413

 
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If to the Company:
 
CONMED Corporation
525 French Road
Utica, New York 13502
Attention:  Chairman of the Board of Directors

With a copy to:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
 
(b)         A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive ’ s employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive ’ s or the Company ’ s rights hereunder.
 
11.         Full Settlement; Prior Agreement; Resolution of Disputes.  The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance agreement between Executive and the Company and any severance plan of the Company (including, for the avoidance of doubt, the Change in Control Severance Agreement between the Company and Executive dated as of May 3, 2000, which is hereby superseded and replaced in its entirety by this Agreement).  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.
 
12.         Employment with Subsidiaries.  Employment with the Company for purposes of this Agreement shall include employment with any Subsidiary.
 
13.         Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.

 
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14.         GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
 
15.         Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
 
16.         Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.
 
17.         Compliance with Section 409A of the Code.  It is the parties’ intent that the payments and benefits provided under this Agreement be exempt from the definition of “non-qualified deferred compensation” within the meaning of Section 409A of the Code, and the Agreement shall be interpreted accordingly.  In this regard each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  To the extent that any payment or benefit under this Agreement constitutes “non-qualified deferred compensation” then this Agreement is intended to comply with Section 409A of the Code and the Agreement shall be interpreted accordingly.  If and to the extent that any payment or benefit is determined by the Company (a) to constitute “non-qualified deferred compensation” subject to Section 409A of the Code, (b) such payment or benefit is provided to Executive and Executive is a “specified employee” (within the meaning of Section 409A of the Code and as determined pursuant to procedures established by the Company) and (c) such payment or benefit must be delayed for six months from Executive’s Date of Termination (or an earlier date) in order to comply with Section 409A(a)(2)(B)(i) of the Code and not cause Executive to incur any additional tax under Section 409A of the Code, then the Company will delay making any such payment or providing such benefit until the expiration of such six month period (or, if earlier, Executive’s death, “disability” or a “change in control event”, as such terms are defined in Section 1.409A-3(i)(4) and (5) of the Code).  In addition, any expense reimbursements provided under this Agreement, including but not limited to those reimbursements provided pursuant to

 
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Sections 4, 5 and 7 of this Agreement, shall be paid to Executive as soon as practicable, but in any event no later than the end of Executive’s taxable year following the taxable year in which Executive incurs such reimbursable expense or remits in reimbursable tax payment, as appropriate.
 
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.
 
 	 	 	CONMED Corporation	
 	 	 	 	 	
 	 	 	By:	  /s/ Andrew W. Beakman	
Witness:	  /s/ Heather L. Cohen	 	Name:	 Andrew W. Beakman	
 	 	 	Title:	  Assistant General Counsel – Assistant Secretary	

 	 	 	 	 	
 	 	 	Executive	
 	 	 	By:	/s/ Joseph J. Corasanti 	
Witness:	  /s/ Terence M. Berge	 	Name:	Joseph J. Corasanti	
 	 	 	Title:	President and Chief Executive Officer	

 

 
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Joseph J. Corasanti
Change in Control Severance Agreement
Exhibit A

 	1.	Car Allowance	

 	2.	Club Memberships	

 	3.	Internet Reimbursement	

 	4.	Cell Phone Reimbursement	

 	5.	Car Phone Reimbursement	

 	6.	Home phone line for computer	

 	7.	Airline Club Membership	

 
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Exhibit 10.2
 
AMENDED and RESTATED
 
CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of the 1st day of August, 2008 (the “Effective Date”) by and between CONMED Corporation, a New York corporation (the “Company”), and Robert D. Shallish, Jr., residing at 4375 Olympus Heights, Syracuse, New York 13215
 
W I T N E S S E T H
 
WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and
 
WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and
 
WHEREAS, the Company and Executive have previously entered into a Change in Control Severance Agreement, dated as of May 16, 2000, which is hereby amended and restated; and
 
WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure Executive ’ s continued services and to ensure Executive ’ s continued dedication to his duties in the event of any threat or occurrence of a Change in Control (as defined in Section 1) of the Company; and
 
WHEREAS, the Company wishes Executive to enter into a confidentiality agreement, which Executive is willing to do, as a condition of entering into this Agreement; and
 
WHEREAS, the Board has authorized the Company to enter into this Agreement.
 
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:
 
1.           Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:
 
(a)         “Board” means the Board of Directors of the Company.
 
(b)         “Bonus Amount” means the highest annual incentive bonus earned by Executive from the Company (or its affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive ’ s Date of Termination (annualized in the event Executive was not employed by the Company (or its affiliates) for the whole of any such fiscal year).

 
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(c)         “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive ’ s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive ’ s duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its affiliates.  For purpose of this paragraph (b), no act or failure to act by Executive shall be considered  “ willful ”  unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive ’ s action or omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company or upon the instructions of the Company ’ s chief executive officer or another senior officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail.
 
(d)         “Change in Control” means the occurrence of any one of the following events:
 
(i)           individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors ” ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
 
(ii)           any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the  “ Exchange Act ” ) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a  “ beneficial owner ”  (as defined in Rule 13d-3 under the Exchange Act),

 
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directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company ’ s then outstanding securities eligible to vote for the election of the Board (the  “ Company Voting Securities ” ); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);
 
(iii)           the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company ’ s stockholders, whether for such transaction or the issuance of securities in the transaction (a  “ Business Combination ” ), unless immediately following such Business Combination:  (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the  “ Surviving Corporation ” ), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the  “ Parent Corporation ” ), is represented by Company Voting Securities that were 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 proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) 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) following the consummation of the Business Combination were Incumbent Directors at the time of the Board ’ s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a  “ Non-Qualifying Transaction ” ); or
 
(iv)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company ’ s assets.
 
Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial

 
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ownership of more than 25% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
 
(e)         “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive ’ s employment by the Company terminates by reason of death, the date of death of Executive.
 
(f)         “Disability” means termination of Executive’s employment by the Company due to Executive ’ s absence from Executive ’ s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive ’ s incapacity due to physical or mental illness.
 
(g)         “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:
 
(i)           (A) any change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive ’ s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (g) or (B) a material and adverse change in Executive ’ s titles or offices with the Company as in effect immediately prior to such Change in Control;
 
(ii)           a material reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity (including any material and adverse change in the formula for such annual bonus target), as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
 
(iii)           any requirement of the Company that Executive (A) be based anywhere more than fifty (50) miles from the office where Executive is located at the time of the Change in Control or (B) travel on Company business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;
 
(iv)           the failure of the Company to continue in effect any material employee benefit compensation welfare benefit or fringe benefit plan in which Executive is eligible to participate in immediately prior to such Change in Control or the taking of any action by the Company which would materially   adversely affect

 
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Executive’s contribution level or ability to participate in or materially reduce Executive’s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent Executive contribution  with respect to welfare benefit plans) or
 
(v)           the failure of the Company to obtain the assumption of this Agreement from any successor as contemplated in Section 9(b).
 
An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason.  Executive ’ s right to terminate employment for Good Reason shall not be affected by Executive ’ s incapacities due to mental or physical illness and Executive ’ s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that such   event shall not constitute Good Reason under this Agreement unless (i) Executive   provides notice to the Company within the ninety (90) days following the initial existence of an event constituting Good Reason ,  (ii) the Company does not remedy such event (if remediation is possible) within thirty (30) days following the Company’s receipt of notice of such event, and (iii) Executive separates from service with the Company within two (2) years following the initial existence of such an event constituting Good Reason.
 
(h)         “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive ’ s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.
 
(i)         “Retirement” means Executive’s mandatory retirement (not including any mandatory early retirement) in accordance with the Company ’ s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive ’ s written consent.
 
(j)         “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% of the assets or liquidation or dissolution.
 
(k)         “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years and six (6) months following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive ’ s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably

 
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calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive ’ s Date of Termination under Section 1(e).
 
2.           Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.
 
3.           Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years ’  written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive ’ s employment prior to a Change in Control except as provided in Section 1(k).
 
4.           Payments Upon Termination of Employment.
 
(a)         Qualifying Termination.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive:
 
(i)           within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive ’ s annual bonus for the fiscal year in which Executive ’ s Date of Termination occurs in an amount at least equal to (1) Executive ’ s Bonus Amount, multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and reduced by (3) any amounts paid from the Company ’ s annual incentive plan for the fiscal year in which Executive ’ s Date of Termination occurs and (C), any compensation previously deferred by Executive other than pursuant to a tax-qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus
 
(ii)           within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive ’ s highest annual rate of base salary during the 12-month period immediately prior to Executive ’ s Date of Termination, plus (ii) three (3) times Executive ’ s Bonus Amount.

 
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(b)         If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to offer, for a period of (3) years following Executive ’ s Date of Termination, Executive (and Executive ’ s dependents, if applicable) with the same level of medical, dental, accident, disability , long-term care and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive ’ s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); such medical and dental insurance benefits shall be provided in the form of continued group health coverage under COBRA for the 18 months following Executive’s termination of employment, and thereafter, at the Company’s sole discretion, either (i) under a fully insured Company health benefit plan, (ii) as reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase comparable health coverage or (iii) as reimbursement (on an after tax basis) of the actual out-of-pocket health expenses Executive incurs, and such accident, disability, long-term care and life insurance benefits shall be provided as a reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase such accident, disability, long-term care and life insurance benefits.  Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive ’ s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder.
 
In addition, the Company shall continue to make payments to or on behalf of the Executive with respect to the expenses set forth on Exhibit A for a period of three (3) years from such Date of Termination.
 
(c)         If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of (1) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and (2) any accrued vacation pay to the extent not theretofore paid.  The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing.
 
5.           Certain Additional Payments by the Company.
 
(a)         Anything in this Agreement to the contrary, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (the  “ Payments ” ) would be subject to the excise tax (the  “ Excise

 
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Tax”) under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the  “ Excise Tax ” ), then the Company shall pay to Executive an additional payment (a  “ Gross-Up Payment ” ) in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive ’ s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made.  For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes and (iii) have otherwise allowable deductions for federal income tax purposes at least equal to those which could be disallowed because of the inclusion of the Gross-up Payment in the Executive ’ s adjusted gross income.  Notwithstanding the foregoing provisions of this Section 5(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10% of the portion of the Payments that would be treated as  “ parachute payments ”  under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the  “ Safe Harbor Cap ” ), and no Gross-Up Payment shall be made to Executive.  The reduction of the amounts payable hereunder, if applicable, shall be made by first   reducing payments under Section 4(a)(ii), second reducing   the payments under Section 4(a)(i) and last reducing benefits under Section 4(b)(iii) .   For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
 
(b)         Subject to the provisions of Section 5(a), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “ Accounting Firm ” ) which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the  “ Determination ” ).  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be

 
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referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder.  The Gross-up Payment under this Section 5 with respect to any Payments shall be made no later than thirty (30) days following such Payment.  If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive ’ s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect.  The Determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ( “ Underpayment ” ) or Gross-up Payments are made by the Company which should not have been made ( “ Overpayment ” ), consistent with the calculations required to be made hereunder.  In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive.  In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company.  Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
 
6.           Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.
 
7.           Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive ’ s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chase Manhattan Bank, N.A. from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive ’ s statement for such fees and expenses through the date of payment thereof, regardless of whether or not Executive ’ s claim is upheld by a court of competent jurisdiction.

 
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8.           Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive ’ s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any termination of Executive ’ s employment during the Termination Period shall be subject to all of the provisions of this Agreement.
 
9.           Successors; Binding Agreement.
 
(a)         This Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.
 
(b)         The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any Parent Corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive ’ s employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.
 
(c)         This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive ’ s estate.
 
10.         Notice.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:
 
If to the Executive:
 
Robert D. Shallish
4375 Olympus Heights
Syracuse, New York 13215

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If to the Company:

CONMED Corporation
525 French Road
Utica, New York 13502

Attention:  President

With a copy to:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
 
(b)         A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive ’ s employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive ’ s or the Company ’ s rights hereunder.
 
11.         Full Settlement; Prior Agreement; Resolution of Disputes.  The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company   (including, for the avoidance of doubt, the Change in Control Severance Agreement between the Company and Executive dated as of May 16, 2000, which is hereby amended and restated in its entirety by this Agreement).  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.
 
12.         Employment with Subsidiaries.  Employment with the Company for purposes of this Agreement shall include employment with any Subsidiary.
 
13.         Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that

 
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occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
 
14.         GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
 
15.         Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
 
16.         Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.
 
17.         Compliance with Section 409A of the Code.  It is the parties’ intent that the payments and benefits provided under this Agreement be exempt from the definition of “non-qualified deferred compensation” within the meaning of Section 409A of the Code, and the Agreement shall be interpreted accordingly.  In this regard each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  To the extent that any payment or benefit under this Agreement constitutes “non-qualified deferred compensation” then this Agreement is intended to comply with Section 409A of the Code and the Agreement shall be interpreted accordingly.  If and to the extent that any payment or benefit is determined by the Company (a) to constitute “non-qualified deferred compensation” subject to Section 409A of the Code, (b) such payment or benefit is provided to Executive and Executive is a “specified employee” (within the meaning of Section 409A of the Code and as determined pursuant to procedures established by the Company) and (c) such payment or benefit must be delayed for six months from Executive’s Date of Termination (or an earlier date) in order to comply with Section 409A(a)(2)(B)(i) of the Code and not cause Executive to incur any additional tax under Section 409A of the Code, then the Company will delay making any such payment or providing such benefit until the expiration of such six month period (or, if earlier, Executive’s death, “disability” or a “change in control event”, as such

 
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terms are defined in Section 1.409A-3(i)(4) and (5) of the Code).  In addition, any expense reimbursements provided under this Agreement, including but not limited to those reimbursements provided pursuant to Sections 4, 5 and 7 of this Agreement, shall be paid to Executive as soon as practicable, but in any event no later than the end of Executive’s taxable year following the taxable year in which Executive incurs such reimbursable expense or remits in reimbursable tax payment, as appropriate.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.

 	 	 	CONMED Corporation	
 	 	 	 	 	
 	 	 	By:	/s/ Andrew W. Beakman 	
Witness:	/s/ Terence M. Berge	 	Name:	Andrew W. Beakman 	
 	 	 	Title:	Assistant General Counsel - Assistant Secretary 	

 	 	 	 	 	
 	 	 	Executive	
 	 	 	By:	/s/ Robert D. Shallish Jr. 	
Witness:	/s/ Daniel S. Jonas 	 	Name:	Robert D. Shallish Jr.	
 	 	 	Title:	V.P. Finance – Assistant Secretary	

 
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Executive
Change in Control Severance Agreement
Exhibit A

 	1.	Car Allowance	

 	2.	Annual AICPA Membership Fee	

 	3.	Annual NYSSCPA Membership Fee	

 	4.	Annual NYSCPA License Fee	

 	5.	Cell Phone Reimbursement	

 	6.	Country Club Membership	

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Exhibit 10.3
 
CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of the 1st day of August, 2008 (the “Effective Date”) by and between CONMED Corporation, a New York corporation (the “Company”), and David A. Johnson, residing at 4670 Hartsfield Place, Manlius, NY 13104
 
W I T N E S S E T H
 
WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and
 
WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and
 
WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure Executive ’ s continued services and to ensure Executive ’ s continued dedication to his duties in the event of any threat or occurrence of a Change in Control (as defined in Section 1) of the Company; and
 
WHEREAS, the Company wishes Executive to enter into a confidentiality agreement, which Executive is willing to do, as a condition of entering into this Agreement; and
 
WHEREAS, the Board has authorized the Company to enter into this Agreement.
 
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:
 
1.           Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:
 
(a)         “Board” means the Board of Directors of the Company.
 
(b)         “Bonus Amount” means the highest annual incentive bonus earned by Executive from the Company (or its affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive ’ s Date of Termination (annualized in the event Executive was not employed by the Company (or its affiliates) for the whole of any such fiscal year).
 
(c)         “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive ’ s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a

 
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Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive ’ s duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its affiliates.  For purpose of this paragraph (b), no act or failure to act by Executive shall be considered  “ willful ” unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive ’ s action or omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company or upon the instructions of the Company ’ s chief executive officer or another senior officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail.
 
(d)         “Change in Control” means the occurrence of any one of the following events:
 
(i)           individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors ” ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
 
(ii)           any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the  “ Exchange Act ” ) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a  “ beneficial owner ”  (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company ’ s then outstanding securities eligible to vote for the election of the Board (the  “ Company Voting Securities ” ); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or

 
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related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);
 
(iii)           the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company ’ s stockholders, whether for such transaction or the issuance of securities in the transaction (a  “ Business Combination ” ), unless immediately following such Business Combination:  (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the  “ Surviving Corporation ” ), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the  “ Parent Corporation ” ), is represented by Company Voting Securities that were 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 proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) 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) following the consummation of the Business Combination were Incumbent Directors at the time of the Board ’ s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a  “ Non-Qualifying Transaction ” ); or
 
(iv)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company ’ s assets.
 
Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 25% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

 
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(e)           “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive ’ s employment by the Company terminates by reason of death, the date of death of Executive.
 
(f)         “Disability” means termination of Executive’s employment by the Company due to Executive ’ s absence from Executive ’ s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive ’ s incapacity due to physical or mental illness.
 
(g)         “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:
 
(i)           (A) any change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive ’ s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (g) or (B) a material and adverse change in Executive ’ s titles or offices with the Company as in effect immediately prior to such Change in Control;
 
(ii)           a material reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity (including any material and adverse change in the formula for such annual bonus target), as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
 
(iii)           any requirement of the Company that Executive (A) be based anywhere more than fifty (50) miles from the office where Executive is located at the time of the Change in Control or (B) travel on Company business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;
 
(iv)           the failure of the Company to continue in effect any material employee benefit compensation welfare benefit or fringe benefit plan in which Executive is eligible to participate in immediately prior to such Change in Control or the taking of any action by the Company which would materially   adversely affect Executive ’ s contribution level or ability to participate in or materially   reduce Executive ’ s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent Executive contribution  with respect to welfare benefit plans) or

 
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(v)           the failure of the Company to obtain the assumption of this Agreement from any successor as contemplated in Section 9(b).
 
An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason.  Executive ’ s right to terminate employment for Good Reason shall not be affected by Executive ’ s incapacities due to mental or physical illness and Executive ’ s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that such   event shall not constitute Good Reason under this Agreement unless (i) Executive   provides notice to the Company within the ninety (90) days following the initial existence of an event constituting Good Reason ,  (ii) the Company does not remedy such event (if remediation is possible) within thirty (30) days following the Company’s receipt of notice of such event, and (iii) Executive separates from service with the Company within two (2) years following the initial existence of such an event constituting Good Reason.
 
(h)         “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive ’ s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.
 
(i)         “Retirement” means Executive’s mandatory retirement (not including any mandatory early retirement) in accordance with the Company ’ s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive ’ s written consent.
 
(j)         “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% of the assets or liquidation or dissolution.
 
(k)         “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years and six (6) months following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive ’ s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to

 
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Executive under Section 4, the date of the actual Change in Control shall be treated as Executive’s Date of Termination under Section 1(e).
 
2.           Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.
 
3.           Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years ’  written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive ’ s employment prior to a Change in Control except as provided in Section 1(k).
 
4.           Payments Upon Termination of Employment.
 
(a)         Qualifying Termination.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive:
 
(i)           within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive ’ s annual bonus for the fiscal year in which Executive ’ s Date of Termination occurs in an amount at least equal to (1) Executive ’ s Bonus Amount, multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and reduced by (3) any amounts paid from the Company ’ s annual incentive plan for the fiscal year in which Executive ’ s Date of Termination occurs and (C), any compensation previously deferred by Executive other than pursuant to a tax-qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus
 
(ii)           within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive ’ s highest annual rate of base salary during the 12-month period immediately prior to Executive ’ s Date of Termination, plus (ii) three (3) times Executive ’ s Bonus Amount.
 
(b)         If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to offer, for a period of (3) years following Executive ’ s Date of

 
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Termination, Executive (and Executive’s dependents, if applicable) with the same level of medical, dental, accident, disability and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive ’ s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); such medical and dental insurance benefits shall be provided in the form of continued group health coverage under COBRA for the 18 months following Executive’s termination of employment, and thereafter, at the Company’s sole discretion, either (i) under a fully insured Company health benefit plan, (ii) as reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase comparable health coverage or (iii) as reimbursement (on an after tax basis) of the actual out-of-pocket health expenses Executive incurs, and such accident, disability and life insurance benefits shall be provided as a reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase such accident, disability and life insurance benefits.  Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive ’ s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder.
 
In addition, the Company shall continue to make payments to or on behalf of the Executive with respect to the expenses set forth on Exhibit A for a period of three (3) years from such Date of Termination.
 
(c)         If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of (1) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and (2) any accrued vacation pay to the extent not theretofore paid.  The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing.
 
5.           Certain Additional Payments by the Company.
 
(a)         Anything in this Agreement to the contrary, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (the  “ Payments ” ) would be subject to the excise tax (the  “ Excise Tax ” ) under Section 4999 of the Internal Revenue Code of 1986, as amended (the  “ Code ” ), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the  “ Excise Tax ” ), then the Company shall pay to Executive an additional payment (a  “ Gross-Up Payment ” ) in an amount such that after payment by Executive of all

 
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taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive ’ s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made.  For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes and (iii) have otherwise allowable deductions for federal income tax purposes at least equal to those which could be disallowed because of the inclusion of the Gross-up Payment in the Executive ’ s adjusted gross income.  Notwithstanding the foregoing provisions of this Section 5(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10% of the portion of the Payments that would be treated as  “ parachute payments ”  under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the  “ Safe Harbor Cap ” ), and no Gross-Up Payment shall be made to Executive.  The reduction of the amounts payable hereunder, if applicable, shall be made by first   reducing payments under Section 4(a)(ii), second reducing   the payments under Section 4(a)(i) and last reducing benefits under Section 4(b)(iii) .   For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
 
(b)         Subject to the provisions of Section 5(a), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “ Accounting Firm ” ) which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the  “ Determination ” ).  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder.  The Gross-up Payment under this Section 5 with respect to any Payments shall be made no later than thirty (30) days following such Payment.  If the Accounting Firm determines that no

 
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Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive ’ s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect.  The Determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ( “ Underpayment ” ) or Gross-up Payments are made by the Company which should not have been made ( “ Overpayment ” ), consistent with the calculations required to be made hereunder.  In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive.  In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company.  Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
 
6.           Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.
 
7.           Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive ’ s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chase Manhattan Bank, N.A. from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive ’ s statement for such fees and expenses through the date of payment thereof, regardless of whether or not Executive ’ s claim is upheld by a court of competent jurisdiction.
 
8.           Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive ’ s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however,

 
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that any termination of Executive’s employment during the Termination Period shall be subject to all of the provisions of this Agreement.
 
9.           Successors; Binding Agreement.
 
(a)         This Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.
 
(b)         The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any Parent Corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive ’ s employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.
 
(c)         This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive ’ s estate.
 
10.         Notice.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:
 
If to the Executive:
 
David A. Johnson
4670 Hartsfield Place
Manlius, NY 13104

 
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If to the Company:
 
CONMED Corporation
525 French Road
Utica, New York 13502

Attention:  President

With a copy to:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
 
(b)         A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive ’ s employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive ’ s or the Company ’ s rights hereunder.
 
11.         Full Settlement; Prior Agreement; Resolution of Disputes.  The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company.  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.
 
12.         Employment with Subsidiaries.  Employment with the Company for purposes of this Agreement shall include employment with any Subsidiary.
 
13.         Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
 
14.         GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE

 
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VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
 
15.         Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
 
16.         Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.
 
17.         Compliance with Section 409A of the Code.  It is the parties’ intent that the payments and benefits provided under this Agreement be exempt from the definition of “non-qualified deferred compensation” within the meaning of Section 409A of the Code, and the Agreement shall be interpreted accordingly.  In this regard each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  To the extent that any payment or benefit under this Agreement constitutes “non-qualified deferred compensation” then this Agreement is intended to comply with Section 409A of the Code and the Agreement shall be interpreted accordingly.  If and to the extent that any payment or benefit is determined by the Company (a) to constitute “non-qualified deferred compensation” subject to Section 409A of the Code, (b) such payment or benefit is provided to Executive and Executive is a “specified employee” (within the meaning of Section 409A of the Code and as determined pursuant to procedures established by the Company) and (c) such payment or benefit must be delayed for six months from Executive’s Date of Termination (or an earlier date) in order to comply with Section 409A(a)(2)(B)(i) of the Code and not cause Executive to incur any additional tax under Section 409A of the Code, then the Company will delay making any such payment or providing such benefit until the expiration of such six month period (or, if earlier, Executive’s death, “disability” or a “change in control event”, as such terms are defined in Section 1.409A-3(i)(4) and (5) of the Code).  In addition, any expense reimbursements provided under this Agreement, including but not limited to those reimbursements provided pursuant to Sections 4, 5 and 7 of this Agreement, shall be paid to Executive as soon as practicable, but in any event no later than the end of Executive’s taxable year following the taxable year in which Executive incurs such reimbursable expense or remits in reimbursable tax payment, as appropriate.

 
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.

 	 	 	CONMED Corporation	
 	 	 	 	 	
 	 	 	By:	/s/ Andrew W. Beakman 	
Witness:	/s/ Terence M. Berge 	 	Name:	Andrew W. Beakman 	
 	 	 	Title:	Assistant General Counsel - Assistant Secretary 	

 	 	 	 	 	
 	 	 	Executive	
 	 	 	By:	/s/ David A. Johnson	
Witness:	/s/ Heather L. Cohen 	 	Name:	David A. Johnson	
 	 	 	Title:	V.P. Operations & Global Supply  Chain	

 
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Executive
Change in Control Severance Agreement
Exhibit A

 	1.	Car Allowance	

 	2.	Club Memberships	

 	3.	Cell Phone Reimbursement	

 
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Exhibit 10.4
 
AMENDED and RESTATED
 
CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of the 1st  day of August, 2008 (the “Effective Date”) by and between CONMED Corporation, a New York corporation (the “Company”), and Daniel S. Jonas, residing at 316 Highland Avenue, Syracuse, New York 13203
 
W I T N E S S E T H
 
WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and
 
WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and
 
WHEREAS, the Company and Executive have previously entered into a Change in Control Severance Agreement, dated as of May 2, 2000, which is hereby amended and restated; and
 
WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure Executive ’ s continued services and to ensure Executive ’ s continued dedication to his duties in the event of any threat or occurrence of a Change in Control (as defined in Section 1) of the Company; and
 
WHEREAS, the Company wishes Executive to enter into a confidentiality agreement, which Executive is willing to do, as a condition of entering into this Agreement; and
 
WHEREAS, the Board has authorized the Company to enter into this Agreement.
 
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:
 
1.           Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:
 
(a)         “Board” means the Board of Directors of the Company.
 
(b)         “Bonus Amount” means the highest annual incentive bonus earned by Executive from the Company (or its affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive ’ s Date of Termination (annualized in the event Executive was not employed by the Company (or its affiliates) for the whole of any such fiscal year).

 

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(c)         “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive ’ s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive ’ s duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its affiliates.  For purpose of this paragraph (b), no act or failure to act by Executive shall be considered  “ willful ”  unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive ’ s action or omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company or upon the instructions of the Company ’ s chief executive officer or another senior officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail.
 
(d)         “Change in Control” means the occurrence of any one of the following events:
 
(i)           individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors ” ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
 
(ii)           any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the  “ Exchange Act ” ) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a  “ beneficial owner ”  (as defined in Rule 13d-3 under the Exchange Act),

 
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directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company ’ s then outstanding securities eligible to vote for the election of the Board (the  “ Company Voting Securities ” ); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);
 
(iii)           the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company ’ s stockholders, whether for such transaction or the issuance of securities in the transaction (a  “ Business Combination ” ), unless immediately following such Business Combination:  (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the  “ Surviving Corporation ” ), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the  “ Parent Corporation ” ), is represented by Company Voting Securities that were 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 proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) 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) following the consummation of the Business Combination were Incumbent Directors at the time of the Board ’ s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a  “ Non-Qualifying Transaction ” ); or
 
(iv)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company ’ s assets.
 
Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial

 
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ownership of more than 25% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
 
(e)         “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive ’ s employment by the Company terminates by reason of death, the date of death of Executive.
 
(f)         “Disability” means termination of Executive’s employment by the Company due to Executive ’ s absence from Executive ’ s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive ’ s incapacity due to physical or mental illness.
 
(g)         “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:
 
(i)           (A) any change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive ’ s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (g) or (B) a material and adverse change in Executive ’ s titles or offices with the Company as in effect immediately prior to such Change in Control;
 
(ii)           a material reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity (including any material and adverse change in the formula for such annual bonus target), as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
 
(iii)           any requirement of the Company that Executive (A) be based anywhere more than fifty (50) miles from the office where Executive is located at the time of the Change in Control or (B) travel on Company business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;
 
(iv)           the failure of the Company to continue in effect any material employee benefit compensation welfare benefit or fringe benefit plan in which Executive is eligible to participate in immediately prior to such Change in Control or the taking of any action by the Company which would materially   adversely affect

 
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Executive’s contribution level or ability to participate in or materially reduce Executive’s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent Executive contribution  with respect to welfare benefit plans) or
 
(v)           the failure of the Company to obtain the assumption of this Agreement from any successor as contemplated in Section 9(b).
 
An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason.  Executive ’ s right to terminate employment for Good Reason shall not be affected by Executive ’ s incapacities due to mental or physical illness and Executive ’ s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that such   event shall not constitute Good Reason under this Agreement unless (i) Executive   provides notice to the Company within the ninety (90) days following the initial existence of an event constituting Good Reason ,  (ii) the Company does not remedy such event (if remediation is possible) within thirty (30) days following the Company’s receipt of notice of such event, and (iii) Executive separates from service with the Company within two (2) years following the initial existence of such an event constituting Good Reason.
 
(h)         “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive ’ s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.
 
(i)         “Retirement” means Executive’s mandatory retirement (not including any mandatory early retirement) in accordance with the Company ’ s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive ’ s written consent.
 
(j)         “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% of the assets or liquidation or dissolution.
 
(k)         “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years and six (6) months following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive ’ s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably

 
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calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive ’ s Date of Termination under Section 1(e).
 
2.           Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.
 
3.           Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years ’  written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive ’ s employment prior to a Change in Control except as provided in Section 1(k).
 
4.           Payments Upon Termination of Employment.
 
(a)         Qualifying Termination.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive:
 
(i)           within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive ’ s annual bonus for the fiscal year in which Executive ’ s Date of Termination occurs in an amount at least equal to (1) Executive ’ s Bonus Amount, multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and reduced by (3) any amounts paid from the Company ’ s annual incentive plan for the fiscal year in which Executive ’ s Date of Termination occurs and (C), any compensation previously deferred by Executive other than pursuant to a tax-qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus
 
(ii)           within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive ’ s highest annual rate of base salary during the 12-month period immediately prior to Executive ’ s Date of Termination, plus (ii) three (3) times Executive ’ s Bonus Amount.

 
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(b)         If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to offer, for a period of (3) years following Executive ’ s Date of Termination, Executive (and Executive ’ s dependents, if applicable) with the same level of medical, dental, accident, disability , long-term care and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive ’ s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); such medical and dental insurance benefits shall be provided in the form of continued group health coverage under COBRA for the 18 months following Executive’s termination of employment, and thereafter, at the Company’s sole discretion, either (i) under a fully insured Company health benefit plan, (ii) as reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase comparable health coverage or (iii) as reimbursement (on an after tax basis) of the actual out-of-pocket health expenses Executive incurs, and such accident, disability, long-term care and life insurance benefits shall be provided as a reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase such accident, disability, long-term care and life insurance benefits.  Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive ’ s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder.
 
In addition, the Company shall continue to make payments to or on behalf of the Executive with respect to the expenses set forth on Exhibit A for a period of three (3) years from such Date of Termination.
 
(c)         If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of (1) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and (2) any accrued vacation pay to the extent not theretofore paid.  The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing.
 
5.           Certain Additional Payments by the Company.
 
(a)         Anything in this Agreement to the contrary, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (the  “ Payments ” ) would be subject to the excise tax (the  “ Excise

 
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Tax”) under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the  “ Excise Tax ” ), then the Company shall pay to Executive an additional payment (a  “ Gross-Up Payment ” ) in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive ’ s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made.  For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes and (iii) have otherwise allowable deductions for federal income tax purposes at least equal to those which could be disallowed because of the inclusion of the Gross-up Payment in the Executive ’ s adjusted gross income.  Notwithstanding the foregoing provisions of this Section 5(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10% of the portion of the Payments that would be treated as  “ parachute payments ”  under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the  “ Safe Harbor Cap ” ), and no Gross-Up Payment shall be made to Executive.  The reduction of the amounts payable hereunder, if applicable, shall be made by first   reducing payments under Section 4(a)(ii), second reducing   the payments under Section 4(a)(i) and last reducing benefits under Section 4(b)(iii) .   For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
 
(b)         Subject to the provisions of Section 5(a), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “ Accounting Firm ” ) which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the  “ Determination ” ).  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be

 
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referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder.  The Gross-up Payment under this Section 5 with respect to any Payments shall be made no later than thirty (30) days following such Payment.  If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive ’ s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect.  The Determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ( “ Underpayment ” ) or Gross-up Payments are made by the Company which should not have been made ( “ Overpayment ” ), consistent with the calculations required to be made hereunder.  In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive.  In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company.  Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
 
6.           Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.
 
7.           Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive ’ s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chase Manhattan Bank, N.A. from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive ’ s statement for such fees and expenses through the date of payment thereof, regardless of whether or not Executive ’ s claim is upheld by a court of competent jurisdiction.

 
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8.           Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive ’ s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any termination of Executive ’ s employment during the Termination Period shall be subject to all of the provisions of this Agreement.
 
9.           Successors; Binding Agreement.
 
(a)         This Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.
 
(b)         The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any Parent Corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive ’ s employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.
 
(c)         This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive ’ s estate.
 
10.         Notice.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:
 
If to the Executive:
 
Daniel S. Jonas
316 Highland Avenue
Syracuse, New York 13203

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If to the Company:

CONMED Corporation
525 French Road
Utica, New York 13502

Attention:  President

With a copy to:  Assistant General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
 
(b)         A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive ’ s employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive ’ s or the Company ’ s rights hereunder.
 
11.         Full Settlement; Prior Agreement; Resolution of Disputes.  The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company   (including, for the avoidance of doubt, the Change in Control Severance Agreement between the Company and Executive dated as of May 2, 2000, which is hereby amended and restated in its entirety by this Agreement).  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.
 
12.         Employment with Subsidiaries.  Employment with the Company for purposes of this Agreement shall include employment with any Subsidiary.
 
13.         Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that

 
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occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
 
14.         GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
 
15.         Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
 
16.         Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.
 
17.         Compliance with Section 409A of the Code.  It is the parties’ intent that the payments and benefits provided under this Agreement be exempt from the definition of “non-qualified deferred compensation” within the meaning of Section 409A of the Code, and the Agreement shall be interpreted accordingly.  In this regard each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  To the extent that any payment or benefit under this Agreement constitutes “non-qualified deferred compensation” then this Agreement is intended to comply with Section 409A of the Code and the Agreement shall be interpreted accordingly.  If and to the extent that any payment or benefit is determined by the Company (a) to constitute “non-qualified deferred compensation” subject to Section 409A of the Code, (b) such payment or benefit is provided to Executive and Executive is a “specified employee” (within the meaning of Section 409A of the Code and as determined pursuant to procedures established by the Company) and (c) such payment or benefit must be delayed for six months from Executive’s Date of Termination (or an earlier date) in order to comply with Section 409A(a)(2)(B)(i) of the Code and not cause Executive to incur any additional tax under Section 409A of the Code, then the Company will delay making any such payment or providing such benefit until the expiration of such six month period (or, if earlier, Executive’s death, “disability” or a “change in control event”, as such

 
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terms are defined in Section 1.409A-3(i)(4) and (5) of the Code).  In addition, any expense reimbursements provided under this Agreement, including but not limited to those reimbursements provided pursuant to Sections 4, 5 and 7 of this Agreement, shall be paid to Executive as soon as practicable, but in any event no later than the end of Executive’s taxable year following the taxable year in which Executive incurs such reimbursable expense or remits in reimbursable tax payment, as appropriate.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.

 	 	 	CONMED Corporation	
 	 	 	 	 	
 	 	 	By:	/s/ Andrew W. Beakman 	
Witness:	/s/ Terence M. Berge 	 	Name:	Andrew W. Beakman 	
 	 	 	Title:	Assistant General Counsel - Assistant Secretary 	

 	 	 	 	 	
 	 	 	Executive	
 	 	 	By:	/s/ Daniel S. Jonas	
Witness:	/s/ Heather L. Cohen 	 	Name:	Daniel S. Jonas	
 	 	 	Title:	V.P. Legal Affairs – General Counsel	

 
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Executive
Change in Control Severance Agreement
Exhibit A

 	1.	ABA, NYSBA, ACCA dues, CLE course (with travel expense), and professional license fees	

 	2.	Car Allowance	

 	3.	Airline Club Membership	

 	4.	Club Memberships	

 	5.	Cellular Phone, fax line and internet on-line service reimbursement	

 	6.	Wall Street Journal and other subscriptions	

 	7.	Tax Prep. Fees	

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Exhibit 10.5
 
AMENDED and RESTATED
 
CHANGE IN CONTROL SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of the 1st day of August, 2008 (the “Effective Date”) by and between CONMED Corporation, a New York corporation (the “Company”), and Luke A. Pomilio, residing at 8668 Teugega Point, Rome, New York  13440
 
W I T N E S S E T H
 
WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and
 
WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and
 
WHEREAS, the Company and Executive have previously entered into a Change in Control Severance Agreement, dated as of May 2, 2000, which is hereby amended and restated; and
 
WHEREAS, the Board (as defined in Section 1) has determined that it is in the best interests of the Company and its stockholders to secure Executive ’ s continued services and to ensure Executive ’ s continued dedication to his duties in the event of any threat or occurrence of a Change in Control (as defined in Section 1) of the Company; and
 
WHEREAS, the Company wishes Executive to enter into a confidentiality agreement, which Executive is willing to do, as a condition of entering into this Agreement; and
 
WHEREAS, the Board has authorized the Company to enter into this Agreement.
 
NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:
 
1.           Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:
 
(a)         “Board” means the Board of Directors of the Company.
 
(b)         “Bonus Amount” means the highest annual incentive bonus earned by Executive from the Company (or its affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive ’ s Date of Termination (annualized in the event Executive was not employed by the Company (or its affiliates) for the whole of any such fiscal year).

 
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(c)         “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive ’ s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive ’ s duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its affiliates.  For purpose of this paragraph (b), no act or failure to act by Executive shall be considered  “ willful ”  unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive ’ s action or omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company or upon the instructions of the Company ’ s chief executive officer or another senior officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail.
 
(d)         “Change in Control” means the occurrence of any one of the following events:
 
(i)           individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors ” ) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;
 
(ii)           any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the  “ Exchange Act ” ) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a  “ beneficial owner ”  (as defined in Rule 13d-3 under the Exchange Act),

 
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directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company ’ s then outstanding securities eligible to vote for the election of the Board (the  “ Company Voting Securities ” ); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:  (A) by the Company or any Subsidiary, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), or (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive);
 
(iii)           the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company ’ s stockholders, whether for such transaction or the issuance of securities in the transaction (a  “ Business Combination ” ), unless immediately following such Business Combination:  (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the  “ Surviving Corporation ” ), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the  “ Parent Corporation ” ), is represented by Company Voting Securities that were 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 proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of 25% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) 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) following the consummation of the Business Combination were Incumbent Directors at the time of the Board ’ s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a  “ Non-Qualifying Transaction ” ); or
 
(iv)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company ’ s assets.
 
Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial

 
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ownership of more than 25% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.
 
(e)         “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive ’ s employment by the Company terminates by reason of death, the date of death of Executive.
 
(f)         “Disability” means termination of Executive’s employment by the Company due to Executive ’ s absence from Executive ’ s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive ’ s incapacity due to physical or mental illness.
 
(g)         “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:
 
(i)           (A) any change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive ’ s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (g) or (B) a material and adverse change in Executive ’ s titles or offices with the Company as in effect immediately prior to such Change in Control;
 
(ii)           a material reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity (including any material and adverse change in the formula for such annual bonus target), as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;
 
(iii)           any requirement of the Company that Executive (A) be based anywhere more than fifty (50) miles from the office where Executive is located at the time of the Change in Control or (B) travel on Company business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;
 
(iv)           the failure of the Company to continue in effect any material employee benefit compensation welfare benefit or fringe benefit plan in which Executive is eligible to participate in immediately prior to such Change in Control or the taking of any action by the Company which would materially   adversely affect

 
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Executive’s contribution level or ability to participate in or materially reduce Executive’s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent Executive contribution  with respect to welfare benefit plans) or
 
(v)           the failure of the Company to obtain the assumption of this Agreement from any successor as contemplated in Section 9(b).
 
An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason.  Executive ’ s right to terminate employment for Good Reason shall not be affected by Executive ’ s incapacities due to mental or physical illness and Executive ’ s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that such   event shall not constitute Good Reason under this Agreement unless (i) Executive   provides notice to the Company within the ninety (90) days following the initial existence of an event constituting Good Reason ,  (ii) the Company does not remedy such event (if remediation is possible) within thirty (30) days following the Company’s receipt of notice of such event, and (iii) Executive separates from service with the Company within two (2) years following the initial existence of such an event constituting Good Reason.
 
(h)         “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive ’ s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.
 
(i)         “Retirement” means Executive’s mandatory retirement (not including any mandatory early retirement) in accordance with the Company ’ s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive ’ s written consent.
 
(j)         “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50% or more of the distribution of profits or 50% of the assets or liquidation or dissolution.
 
(k)         “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years and six (6) months following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive ’ s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably

 
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calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive ’ s Date of Termination under Section 1(e).
 
2.           Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.
 
3.           Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years ’  written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive ’ s employment prior to a Change in Control except as provided in Section 1(k).
 
4.           Payments Upon Termination of Employment.
 
(a)         Qualifying Termination.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive:
 
(i)           within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive ’ s annual bonus for the fiscal year in which Executive ’ s Date of Termination occurs in an amount at least equal to (1) Executive ’ s Bonus Amount, multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and reduced by (3) any amounts paid from the Company ’ s annual incentive plan for the fiscal year in which Executive ’ s Date of Termination occurs and (C), any compensation previously deferred by Executive other than pursuant to a tax-qualified plan (together with any interest and earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid; plus
 
(ii)           within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive ’ s highest annual rate of base salary during the 12-month period immediately prior to Executive ’ s Date of Termination, plus (ii) three (3) times Executive ’ s Bonus Amount.

 

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(b)         If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to offer, for a period of (3) years following Executive ’ s Date of Termination, Executive (and Executive ’ s dependents, if applicable) with the same level of medical, dental, accident, disability , long-term care and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive ’ s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); such medical and dental insurance benefits shall be provided in the form of continued group health coverage under COBRA for the 18 months following Executive’s termination of employment, and thereafter, at the Company’s sole discretion, either (i) under a fully insured Company health benefit plan, (ii) as reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase comparable health coverage or (iii) as reimbursement (on an after tax basis) of the actual out-of-pocket health expenses Executive incurs, and such accident, disability, long-term care and life insurance benefits shall be provided as a reimbursement (on an after tax basis) of the premium expense Executive incurs to purchase such accident, disability, long-term care and life insurance benefits.  Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive ’ s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder.
 
In addition, the Company shall continue to make payments to or on behalf of the Executive with respect to the expenses set forth on Exhibit A for a period of three (3) years from such Date of Termination.
 
(c)         If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of (1) Executive ’ s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and (2) any accrued vacation pay to the extent not theretofore paid.  The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing.
 
5.           Certain Additional Payments by the Company.
 
(a)         Anything in this Agreement to the contrary, in the event it shall be determined that any payment, award, benefit or distribution (or any acceleration of any payment, award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity which effectuates a Change in Control (or any of its affiliated entities) to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 5) (the  “ Payments ” ) would be subject to the excise tax (the  “ Excise

 
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Tax”) under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the  “ Excise Tax ” ), then the Company shall pay to Executive an additional payment (a  “ Gross-Up Payment ” ) in an amount such that after payment by Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product of any deductions disallowed because of the inclusion of the Gross-up Payment in Executive ’ s adjusted gross income and the highest applicable marginal rate of federal income taxation for the calendar year in which the Gross-up Payment is to be made.  For purposes of determining the amount of the Gross-up Payment, the Executive shall be deemed to (i) pay federal income taxes at the highest marginal rates of federal income taxation for the calendar year in which the Gross-up Payment is to be made, (ii) pay applicable state and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-up Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes and (iii) have otherwise allowable deductions for federal income tax purposes at least equal to those which could be disallowed because of the inclusion of the Gross-up Payment in the Executive ’ s adjusted gross income.  Notwithstanding the foregoing provisions of this Section 5(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the Excise Tax if the Payments were reduced by an amount that is less than 10% of the portion of the Payments that would be treated as  “ parachute payments ”  under Section 280G of the Code, then the amounts payable to Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that could be paid to Executive without giving rise to the Excise Tax (the  “ Safe Harbor Cap ” ), and no Gross-Up Payment shall be made to Executive.  The reduction of the amounts payable hereunder, if applicable, shall be made by first   reducing payments under Section 4(a)(ii), second reducing   the payments under Section 4(a)(i) and last reducing benefits under Section 4(b)(iii) .   For purposes of reducing the Payments to the Safe Harbor Cap, only amounts payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amounts payable hereunder would not result in a reduction of the Payments to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this provision.
 
(b)         Subject to the provisions of Section 5(a), all determinations required to be made under this Section 5, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be utilized in arriving at such determinations, shall be made by the public accounting firm that is retained by the Company as of the date immediately prior to the Change in Control (the “ Accounting Firm ” ) which shall provide detailed supporting calculations both to the Company and Executive within fifteen (15) business days of the receipt of notice from the Company or the Executive that there has been a Payment, or such earlier time as is requested by the Company (collectively, the  “ Determination ” ).  In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be

 
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referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any agreement requested by the Accounting Firm in connection with the performance of the services hereunder.  The Gross-up Payment under this Section 5 with respect to any Payments shall be made no later than thirty (30) days following such Payment.  If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such effect, and to the effect that failure to report the Excise Tax, if any, on Executive ’ s applicable federal income tax return will not result in the imposition of a negligence or similar penalty.  In the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap, it shall furnish Executive with a written opinion to such effect.  The Determination by the Accounting Firm shall be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ( “ Underpayment ” ) or Gross-up Payments are made by the Company which should not have been made ( “ Overpayment ” ), consistent with the calculations required to be made hereunder.  In the event that the Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the benefit of Executive.  In the event the amount of the Gross-up Payment exceeds the amount necessary to reimburse the Executive for his Excise Tax, the Accounting Firm shall determine the amount of the Overpayment that has been made and any such Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax has been paid to the Internal Revenue Service) to or for the benefit of the Company.  Executive shall cooperate, to the extent his expenses are reimbursed by the Company, with any reasonable requests by the Company in connection with any contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
 
6.           Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.
 
7.           Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive ’ s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an amount equal to the prime rate of Chase Manhattan Bank, N.A. from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive ’ s statement for such fees and expenses through the date of payment thereof, regardless of whether or not Executive ’ s claim is upheld by a court of competent jurisdiction.

 
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8.           Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive ’ s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any termination of Executive ’ s employment during the Termination Period shall be subject to all of the provisions of this Agreement.
 
9.           Successors; Binding Agreement.
 
(a)         This Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.
 
(b)         The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any Parent Corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive ’ s employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.
 
(c)         This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive ’ s estate.
 
10.         Notice.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:
 
If to the Executive:
 
Luke A. Pomilio
8668 Teugega Point
Rome, New York 13440

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If to the Company:

CONMED Corporation
525 French Road
Utica, New York 13502

Attention:  President

With a copy to:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
 
(b)         A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive ’ s employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive ’ s or the Company ’ s rights hereunder.
 
11.         Full Settlement; Prior Agreement; Resolution of Disputes.  The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company   (including, for the avoidance of doubt, the Change in Control Severance Agreement between the Company and Executive dated as of May 2, 2000, which is hereby amended and restated in its entirety by this Agreement).  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.
 
12.         Employment with Subsidiaries.  Employment with the Company for purposes of this Agreement shall include employment with any Subsidiary.
 
13.         Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.

 
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14.         GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.
 
15.         Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
 
16.         Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.
 
17.         Compliance with Section 409A of the Code.  It is the parties’ intent that the payments and benefits provided under this Agreement be exempt from the definition of “non-qualified deferred compensation” within the meaning of Section 409A of the Code, and the Agreement shall be interpreted accordingly.  In this regard each payment under this Agreement shall be treated as a separate payment for purposes of Section 409A of the Code.  To the extent that any payment or benefit under this Agreement constitutes “non-qualified deferred compensation” then this Agreement is intended to comply with Section 409A of the Code and the Agreement shall be interpreted accordingly.  If and to the extent that any payment or benefit is determined by the Company (a) to constitute “non-qualified deferred compensation” subject to Section 409A of the Code, (b) such payment or benefit is provided to Executive and Executive is a “specified employee” (within the meaning of Section 409A of the Code and as determined pursuant to procedures established by the Company) and (c) such payment or benefit must be delayed for six months from Executive’s Date of Termination (or an earlier date) in order to comply with Section 409A(a)(2)(B)(i) of the Code and not cause Executive to incur any additional tax under Section 409A of the Code, then the Company will delay making any such payment or providing such benefit until the expiration of such six month period (or, if earlier, Executive’s death, “disability” or a “change in control event”, as such

 
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terms are defined in Section 1.409A-3(i)(4) and (5) of the Code).  In addition, any expense reimbursements provided under this Agreement, including but not limited to those reimbursements provided pursuant to Sections 4, 5 and 7 of this Agreement, shall be paid to Executive as soon as practicable, but in any event no later than the end of Executive’s taxable year following the taxable year in which Executive incurs such reimbursable expense or remits in reimbursable tax payment, as appropriate.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.

 	 	 	CONMED Corporation	
 	 	 	 	 	
 	 	 	By:	/s/ Andrew W. Beakman 	
Witness:	/s/ Heather L. Cohen 	 	Name:	Andrew W. Beakman 	
 	 	 	Title:	Assistant General Counsel - Assistant Secretary 	

 	 	 	 	 	
 	 	 	Executive	
 	 	 	By:	/s/ Luke A. Pomilio	
Witness:	/s/ Daniel S. Jonas	 	Name:	Luke A. Pomilio	
 	 	 	Title:	V.P. – Corporate Controller	

 
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Executive
Change in Control Severance Agreement
Exhibit A

 	1.	AICPA dues, NYSSCPA dues and professional fees	

 	2.	Car Allowance	

 	3.	Airline Club Membership	

 	4.	Club Memberships	

 	5.	Cellular phone and internet on-line service reimbursement	

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Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph J. Corasanti, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:	

 	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

 	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

August 1, 2008

 	/s/ Joseph J. Corasanti	
 	Joseph J. Corasanti	
 	President and	
 	Chief Executive Officer	
 
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Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert D. Shallish, Jr. certify that:

1.	I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:	

 	a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

 	b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

 	c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

 	d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

 	a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

 	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

August 1, 2008

 	/s/ Robert D. Shallish, Jr.	
 	Robert D. Shallish, Jr.	
 	Vice President – Finance and	
 	Chief Financial Officer	
 
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Exhibit 32.1

CERTIFICATIONS
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of CONMED Corporation, a New York corporation (the “Corporation”), does hereby certify that:

The Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 (the “Form 10-Q”) of the Corporation fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date:  August 1, 2008	/s/Joseph J. Corasanti	 	
 	     Joseph J. Corasanti	 	
 	     President and	 	
 	     Chief Executive Officer	 	

 	 	 	
 	 	 	
Date:  August 1, 2008	/s/Robert D. Shallish, Jr.	 	
 	     Robert D. Shallish, Jr.	 	
 	     Vice President-Finance and	 	
 	     Chief Financial Officer	 	

 
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