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Exhibit 10.6
ORTHOPAEDIC BIOSYSTEMS LTD., INC.
EMPLOYMENT AGREEMENT
(Amended and Restated as of July 6, 1998)
THIS AGREEMENT is made as of the 5th day of January, 1998, by and
between ORTHOPAEDIC BIOSYSTEMS LTD., INC., an Arizona corporation with its
principal place of business at 15990 N. Greenway-Hayden Loop, Suite 100,
Scottsdale, Arizona 85260 (hereinafter the "Company"), and JAMES W. HART
(hereinafter the "Employee").
WHEREAS, the Company is engaged in the business of developing and
marketing medical products, including orthopaedic devices and equipment; and
WHEREAS, the Employee desires to be employed by the Company as its
President and Chief Operating Officer, and the Company desires to employ the
Employee in such capacity in accordance with the terms hereof;
NOW, THEREFORE, in consideration of such employment, and other good and
valuable consideration, it is agreed:
1. Definitions.
As used in this Agreement:
(a) "Company" means Orthopaedic Biosystems Ltd., Inc. and its
successors and assigns, and any of its present or future subsidiaries, or
organizations controlled by, controlling or under common control with it.
(b) "Confidential Information" means information developed by,
disclosed to, or otherwise known by the Employee as a consequence of or through
his employment by the Company which is comprised of or relates in any way to (i)
the processes used and to be used in Company's business; (ii) the methods and
results of Company's research and development activities; (iii) any Invention,
discovery, technological development, manufacturing design or technique,
process, system, machine, device or improvement, computer software program,
composition, or data and information which Employee, alone or jointly with
others, produces, discovers, compiles, fixes in a tangible medium, or reduces to
practice, and (iv) any other technical and non-technical information and data
relating to Company's business, except such items which Employee can prove by
clear and convincing evidence were (x) publicly and openly known prior to the
date of Employee's initial employment by the Company, and therefore in the
public domain, or (y) subsequent to the date of Employee's initial employment by
the Company became publicly and openly known through no fault or wrongful act of
the Employee.
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(c) "Inventions" mean discoveries, concepts, works of
authorship, and ideas, whether or not patentable, copyrightable or subject to
any other form of protection, including but not limited to processes, methods,
formulas, techniques, as well as improvements thereof or know-how related
thereto, concerning any present or prospective activities of the Company with
which the Employee becomes acquainted as a result of his employment by the
Company.
2. Employment.
Commencing on the date hereof, the Company shall employ Employee, and
Employee shall serve as an employee of the Employer upon the terms and
conditions herein set forth.
3. Scope of Employment.
During the term of this Agreement, Employee shall devote such time,
attention and energy to the business of the Company as shall be required for him
to carry out his duties hereunder. He shall serve as President and Chief
Operating Officer of the Company and shall have the authority to perform and
shall perform all of the duties that are customary for the office of President,
subject at all times to the control and direction of the Board of Directors of
the Company, and shall (i) execute the Company's strategic business plan to
maximize opportunities of the Company's technology, (ii) provide leadership to
raise the required equity funding necessary to reach the goals set forth in the
Company's business plan, and (iii) perform such services as typically are
provided by the chief operating officer of a corporation in supervising the
day-to-day conduct of the Company's business, and such other services consistent
therewith as shall be assigned to Employee from time to time by the Board of
Directors of the Company. During the term of this Agreement, Employee shall not
engage in any other business activity which, in the reasonable judgment of the
Company's Board of Directors conflicts with the duties of Employee hereunder,
whether or not such activity is pursued for gain, profit or other pecuniary
advantage; provided, however, that it is understood that this Section 3 shall
not preclude Employee from making passive investments in other business entities
as long as Employee notifies the Board of Directors in advance in the event that
the Employee intends to make a passive investment in the Company's industry.
4. Term.
4.1 The term of this Agreement shall commence on the date hereof and
continue until July 2, 1998. This Agreement shall expire as of the close of
business on July 2, 1998 unless the parties agree in writing to extend the term
for an additional one (1) year period, in which case this Agreement shall expire
as of the close of business on July 1, 1999.
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4.2 Notwithstanding the term of employment provided for in Section 4.1,
this Agreement shall immediately terminate upon Employee's death or Permanent
Disability. For purposes of this Agreement, Permanent Disability shall mean any
physical or mental condition which materially interferes with the performance of
Employee's customary duties in Employee's capacity as President of the Company
where such disability has continued for a period of one hundred eighty (180)
consecutive days. This Agreement may be terminated at any time at the
convenience of either party hereto.
5. Compensation
5.1 Employee shall be paid a base salary at a rate of One Hundred Forty
Thousand Dollars ($140,000.00) per year with respect to periods of his
employment hereunder. Such base salary shall be payable in equal installments
coinciding with the Company's customary pay periods, and shall be subject to
withholding and other deductions as required by law.
5.2 Subject to the provisions of Section 4 hereof, Employee will be
entitled to be paid a bonus by the Company if the Company attains its quarterly
sales goals during calendar year 1998. The bonus amounts and the Company's sales
goals are as follows:
1998 Period Company Sales Bonus
January 1 - March 31 $ 350,000 $ 10,000
April 1 - June 30 $ 835,000 12,500
July 1 - September 30 $1,150,000 15,000
October 1 - December 31 $1,390.000 22,500
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$3,725,000
The Company's sales for this purpose mean gross sales revenues reduced by
returns and products repurchased from distributors for the quarter in question
reflected on the Company's books and records, and shall be determined as soon as
practicable following the close of a calendar quarter. Sales goals will be
determined on a cumulative as well as a quarterly basis so that the goal of one
quarter may be met with excess sales from a subsequent quarter. Consequently, if
the sales goal is not met in the first quarter, but the total sales for the
first and second quarters exceed the sum of the sales goals for both quarters,
the Employee will be entitled to receive payment of his bonus for both the first
quarter and the second quarter, which amount will be payable following the close
of the second quarter. Any bonus payable to Employee will be paid as soon as
practicable following the close of a calendar quarter, and will be paid all in
cash.
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5.3 The Employee is hereby granted options to purchase 150,000 shares
of the Company's common stock at a purchase price of $2.00 per share on the
conditions set forth in this Section 5.3. The options will be issued to Employee
pursuant to the Company's 1998 Incentive Stock Option Plan to the extent such
plan is not inconsistent with the provisions of this Section 5.3. The Employee's
right to such options will vest at a rate of 37,500 shares per year commencing
January 1, 1999. The options may be exercised in whole or in part at any time
following their respective vesting dates. but will expire seven years after each
such date. No option may be exercised by the Employee unless he is employed by
the Company on both the date the option vests and on the date of exercise. All
options granted hereunder are non transferable. If the assets or capital stock
of the Company are acquired by or merged into another corporation, and Employee
is employed by the Company as of the date of such transaction, the Employee's
options granted pursuant to this Section 5.3 shall immediately vest and the
Employee shall have the right to exercise any vested stock options as of the
date of such transaction. All options shall be exercised by written notice to
the Company accompanied by payment in full of the option price. The option price
shall be paid to the Company by cashier's or certified check. The parties agree
to enter into a Stock Option Agreement reflecting the terms of this Section 5.3.
The number of shares of common stock subject to the option will be
proportionately adjusted, as determined by the Board of Directors, in the event
of any extraordinary dividend or other distribution, recapitalization, forward
or reverse split, reorganization, merger, consolidation, spin off, combination,
repurchase, or share exchange, or other similar corporate transaction or event
effecting the Company's common stock.
5.4 Employee will be eligible to participate in any group health plan,
life insurance plan and any other employee benefit or incentive compensation
plan or arrangement now in effect or hereafter adopted by the Company; provided,
however, that the Company reserves the right to modify or discontinue any such
plan or arrangement at any time for any reason it deems appropriate, and the
Company may do so for reasons other than financial necessity. Employee's
participation in any such plan or arrangement shall be commensurate with the
Employee's compensation and position with the Company, and will otherwise be
subject to the provisions of any document setting forth the terms and conditions
of any such plan or arrangement. Notwithstanding any contrary provision hereof,
this Agreement does not modify the provisions of any such plan or arrangement.
5.5 Employee shall be entitled to a number of paid vacation days as
shall be determined by the Company in accordance with its policy or practices
with respect to other senior officers of the Company. Company will reimburse the
Employee. in accordance with its policies in effect from time to time, for
reasonable business expenses incurred by Employee in promoting the business of
the Company upon presentation by Employee of an itemized account of such
expenses. Company will provide Employee with an automobile allowance of Four
Hundred Dollars ($400.00) per month.
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5.6 The Company will reimburse Employee for the reasonable expenses of
moving his family from Warsaw, Indiana to the Phoenix, Arizona metropolitan area
upon presentation of suitable evidence of such expenses. Further, the Company
will pay Employee an allowance for temporary living expenses in the Phoenix area
in the amount of $370 per week for up to 26 weeks, and will reimburse Employee
for transportation expenses of up to $1,000 for each of two trips by his wife
for visits to the Phoenix area prior to her move.
6. Discharge by Company.
The Company shall be entitled to terminate this Agreement and to
discharge the Employee at any time, but only for "cause." The term "cause" shall
be limited to the following grounds:
(a) The Employee's failure (for reasons other than disability)
or refusal to perform the Employee's duties and responsibilities as set
forth in Section 3 hereof, continuing after written warning from the
Company;
(b) Dishonesty affecting the Company;
(c) Excessive use of illegal drugs, or excessive use of
alcohol that is not being medically treated as alcoholism, which
materially interferes with performance of the Employee's obligations
under this Agreement and which continues after written warning from the
Company;
(d) Conviction of a felony or of any crime involving moral
turpitude, fraud or misrepresentation;
(e) The commission by the Employee of any willful or
intentional act which could reasonably be expected to materially injure
the reputation, business or business relationships of the Company; and
(f) Any material breach (not covered by any of the clauses (a)
through (e)) of any of the provisions of this Agreement, if such breach
is not cured within ten (10) days after written notice thereof to the
Employee by the Company.
7. Severance Pay.
In the event that the Board of Directors shall terminate this Agreement
pursuant to Section 4.2 (unless such termination is for cause), Employee shall
be paid a Severance Payment equal to
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twelve (12) months base salary set forth in Section 5.2 hereof. Such Severance
Payment shall be paid in equal monthly installments commencing on the first day
of the month following the date of termination. Notwithstanding the foregoing
provisions of this Section 7, (i) in the event the assets or capital stock of
the Company are acquired by or merged into another corporation, and Employee is
not offered a position with the Company's successor that is reasonably
commensurate with his employment hereunder, then Employee shall be entitled to
receive the Severance Payment provided by this Section 7, and (ii) in the event
Employee's employment expires or terminates prior to July 3, 1998 for any
reason, no Severance Payment shall be made by the Company.
8. Employee's Representations and Warranties.
Employee covenants, represents and warrants to the Company that (i)
Employee has not entered into, and will not enter into, any agreement or
obligation that may interfere with Employee's full compliance with the terms of
this Agreement, and (ii) Employee currently has no property rights or claims
relating to any invention, discovery, concept or idea, or any improvement
thereof, or know-how related thereto, acquired at any time which has not been
disclosed to the Company in writing by the Employee prior to the date hereof.
9. Inventions.
With respect to Inventions made or conceived by the Employee, whether
or not during the hours of his employment or with the use of the Company
facilities, materials, or personnel, either solely or jointly with others during
his employment by the Company, or within two (2) years after termination of such
employment if based on or related to Confidential Information:
(a) The Employee shall inform the Company promptly and fully
of such Inventions by a written report, setting forth in detail a description of
the invention and any processes associated with its promotion. A detailed
written report also will be submitted by the Employee upon completion of any
studies or research projects undertaken on the Company's behalf, whether or not
in the Employee's opinion a given project has resulted in an Invention.
(b) The Employee shall apply, at the Company's request and
expense, for United States and foreign letters patent either in the Employee's
name or otherwise as the Company shall desire.
(c) The Employee hereby assigns and agrees to assign to the
Company or its nominee, without further consideration, all of Employee's rights
to such Inventions, and to applications for United States and/or foreign letters
patent and to United States and/or foreign letters patent granted upon such
Inventions. Any copyrightable works involving Employee
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(including separate contributions by Employee to collective works) will be
deemed to be "works for hire" under the copyright laws of the Unites States.
(d) The Employee shall acknowledge and deliver promptly to the
Company, without charge to the Company but at its expense, such written
instruments and do such other acts, such as giving testimony in support of any
patent application, as may be necessary in the opinion of the Company to obtain
and maintain United States and/or foreign letters patent and to vest the entire
right and title thereto in the Company.
(e) The Company shall also have the royalty-free right to use
in its business, and to make, use and sell products, processes and/or services
derived from any inventions, discoveries, concepts, and ideas, whether or not
patentable, including but not limited to processes, methods, formulas, and
techniques, as well as improvements thereof or know-how related thereto, which
are not within the scope of Inventions as defined herein but which are conceived
or made by the Employee during the hours which he is employed by the Company or
with the use or assistance of the Company's facilities, materials or personnel.
10. Restrictive Covenants.
10.1 Employee agrees that he will not, either during his employment or
at any time after cessation of such employment, impart or disclose any of the
Confidential Information to any person, firm or corporation other than Company,
or use any of such Confidential Information, directly or indirectly for the
Employee's own benefit or for the benefit of any person, firm or corporation
other than Company or its affiliates. Employee's obligations under this Section
10.1 shall cease with respect to any such Confidential Information if such
information (i) was already known to Employee at the time of disclosure, free of
any obligation to keep it confidential, or (ii) was subsequently disclosed to
Employee without breach of this Agreement by a third person who rightfully
received and disclosed it without breaching any confidentiality obligation to
the Company. It is also understood by the parties that Employee may be required
to disclose Confidential Information (a) pursuant to subpoena or other court
process, (b) at the express direction of any other authorized government agency
or (c) otherwise as required by law or regulation. Disclosure of Confidential
Information or any part thereof in such circumstances will not constitute a
breach of the confidentiality provisions set forth in this Agreement, provided
that Employee notifies Company in advance of any such disclosure and cooperates
with Company in any efforts that Company may make to seek a protective order
with respect to such disclosure.
10.2 In addition to the foregoing agreements relating to the Company's
Confidential Information, during the term of this Agreement (including any
renewals thereof) and during the term of the "Post-Employment Period" (as
defined herein), Employee will not, without the
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Company's prior written consent, (i) solicit any of the employees of Company for
the purpose of hiring or retaining any such employees, (ii) hire or retain or
cause to be hired or retained any of the employees of Company or (iii) become
involved in any manner, including without limitation as an officer, director,
employee. consultant, representative, partner, owner or shareholder (except as a
holder of less than a two percent (2%) equity interest in a public entity) in
any business located in the United States which is in the business of inventing,
developing, manufacturing, marketing, providing or selling products competitive
with the products that the Company has developed, manufactured, marketed,
produced or sold, or is in the process of developing (and reasonably expect to
bring to market within one (1) year after the expiration of the Post-Employment
Period or longer if required by the U.S. Food and Drug Administration clearance
or approval process), manufacturing, marketing, producing or selling as of the
date that Employee's employment terminates. For purposes of this Agreement, the
term "PostEmployment Period" shall mean. the period commencing on the date that
this Agreement is terminated for any reason and ending one (1) year from the
date of such termination; provided, however, that in the event this Agreement
expires or terminates for any reason prior to July 3, 1998, the restrictive
provisions of this Section 10.9 shall not apply and there will be no
"Post-Employment Period."
10.3 Employee agrees that all memoranda, lab books, notes, records,
charts, formulae, specifications, lists and other documents made, compiled,
received, held or used by Employee while employed by Company, concerning any
phase of Company's business or its Confidential Information, shall be Company's
property and shall be delivered by Employee to Company upon termination of
Employee's employment or at any earlier time on the request of Company.
10.4 Employee acknowledges that given his access to information
regarding Company, the provisions of this Section 10 are reasonable and
necessary to protect Company's business. Employee further acknowledges that
Employee has carefully reviewed the provisions of this Section 10, that Employee
fully understands the economic consequences thereof, that Employee has assessed
the respective advantages and disadvantages to Employee of entering into this
Agreement and Employee has concluded that. in light of Employee's education,
skills and abilities, the restrictions set forth in this Section 10 will not
prevent Employee from earning a living after the termination of this Agreement.
Employee agrees that each of the provisions of this Section 10, including,
without limitation, the period of time, geographical area and types and scope of
the restrictions on Employee's activities specified herein, are intended to be
and shall be divisible. Employee further acknowledges that reasonableness of
these provisions as an integral part of the terms of Employee's employment. If
any provision of this Section 10 (including any sentence, clause or part
thereof) shall be adjudicated to be invalid or unenforceable, such provision
shall be deemed amended to delete therefrom the portion thus adjudicated to be
invalid or unenforceable, such deletion to apply only with respect to the
operation of such provision in the particular jurisdiction in which such
adjudication is made. In addition, if any particular
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provision contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting and reducing such provision as to such
characteristic so that the provision is enforceable to the fullest extent
compatible with the applicable law as it shall then appear.
10.5 As it would be very difficult to measure the damages which would
result to Employer from a breach of any of the covenants contained in this
Section 10 in the event of such a breach, Company shall have the right to have
such covenants specifically enforced by a court of competent jurisdiction.
Employee hereby recognizes and acknowledges that irreparable injury or damage
shall result to the business of Company in the event of a breach or threatened
breach by Employee of the terms and provisions of this Section 10. Therefore,
Employee agrees that Company shall be entitled to an injunction restraining
Employee from engaging in any activity constituting such breach or threatened
breach. Nothing contained herein shall be construed as prohibiting Company from
pursuing any other remedies available to Company at law or in equity for such
breach or threatened breach, including, but not limited to, recovery of damages
from Employee and, if Employee is still employed by Company, terminating the
employment of Employee in accordance with the terms and provisions hereof.
10.6 Employee agrees that during his employment hereunder and for six
(6) months thereafter, Employee will not attempt to solicit or induce any other
employee of the Company to leave his or her employment with the Company or
interfere with the business relationship between the Company and its suppliers
or customers.
11. Notices.
For the purposes of this Agreement, notices and all other
communications provided for or relating to the Agreement shall be in writing and
shall be deemed to have been duly given when personally delivered, sent by
facsimile with a facsimile confirmation of transmission, delivered by overnight
courier, or mailed by United States certified or express mail, return receipt
requested, postage prepaid, addressed as follows:
If to Employee: At the Employee's most recent residence
address reflected on the Company's records.
If to the Company: Orthopaedic Biosystems Ltd., Inc.
15990 N. Greenway-Hayden Loop
Suite 100
Scottsdale, Arizona 85260
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with a copy to: Steven P. Davis
Aronberg Goldgehn Davis & Garmisa
One IBM Plaza, Suite 3000
Chicago, Illinois 60611
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.
12. General.
12.1 No modification, amendment, extension or waiver of this Agreement
shall be binding upon the Company or Employee unless made in a writing signed by
an officer of the Company and Employee which expressly purports to modify this
Agreement.
12.2 This Agreement is the entire agreement between the parties
involving the subject hereof and supersedes any discussion, negotiations,
representations or prior or similar agreements upon the same subject. Company
has offered Employee no inducements to enter into this Agreement other than as
fully disclosed herein.
12.3 This Agreement is personal to and not assignable by Employee
without the Company's advance written consent. This Agreement shall inure to the
benefit of, be binding upon and be enforceable by the Company, its successors
and assigns, and shall be binding upon Employee and Employee's heirs, permitted
assigns and legal representatives.
12.4 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Arizona, without reference to principles
of conflicts of law.
12.5 The language set forth in this Agreement shall be deemed to be the
language chosen by both parties to express their mutual intent, and no rule of
strict construction shall be applied against either party hereto.
12.6 If a court of competent jurisdiction determines that any specific
provision hereof is invalid and unenforceable and refuses to any reason to
reform such provision as contemplated by the parties, the validity and
enforceability of the remaining provisions of this Agreement shall not be
affected, and the Agreement shall thereafter be construed as if the invalid
provision had not been included in the Agreement, unless the elimination of such
provision destroys the underlying business purpose of this Agreement.
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12.7 Any claims to enforce any right of either party arising out of the
employment relationship or seeking damages pertaining thereto or to an alleged
breach hereof shall be filed in a court of competent jurisdiction within twelve
(12) months after the claim arises or the breach occurs, or such claim shall
thereafter be barred from adjudication. In the event a dispute relating to this
Agreement is litigated, the prevailing party shall be entitled to recover the
costs and fees incurred in prosecuting such action, including, but not limited
to, reasonable attorneys fees and the fees of any expert witnesses.
12.8 This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
ORTHOPAEDIC BIOSYSTEMS LTD., INC.
By: /s/ D. Ronald Yagoda
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ATTEST:
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Secretary
EMPLOYEE:
/s/ James W. Hart
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Signature
/s/ James W. Hart
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Printed Name