Exhibit 7
EMPLOYMENT AGREEMENT
Employment Agreement (the "AGREEMENT") dated as of December 15, 1997,
by and between SPINE-TECH, INC., a Minnesota corporation (the "COMPANY"), and
Richard C. Jansen ("EXECUTIVE").
WHEREAS, SULZER MEDICA LTD., a corporation organized under the laws of
Switzerland ("PARENT"), SULZER MEDICA ORTHOPEDICS ACQUISITION CORP., a Minnesota
corporation and a wholly owned subsidiary of Parent (the "PURCHASER"), and the
Company have entered into an Agreement and Plan of Merger, dated as of the date
hereof (the "MERGER AGREEMENT"), pursuant to which the Purchaser will merge with
and into the Company (the "MERGER"); and
WHEREAS, in connection with the Merger, the parties desire to enter
into this Agreement, to be effective at the Effective Time (as defined in the
Merger Agreement);
NOW, THEREFORE, in consideration of the mutual covenants in this
Agreement, the parties agree as follows:
1. EFFECTIVENESS OF AGREEMENT AND EMPLOYMENT OF EXECUTIVE.
1.1. EFFECTIVENESS OF AGREEMENT. This Agreement shall become
effective as of the Effective Time, at which time it shall supersede the
management agreement dated February 1, 1996 and the employment agreement
between the Company and Executive. In the event that the Merger (as defined
in the Merger Agreement) is not consummated by June 30, 1998, this Agreement
shall be null and void.
1.2. EMPLOYMENT BY THE COMPANY. The Company hereby employs
Executive as Vice President Finance, and Executive hereby accepts such
employment with the Company. Executive shall report to, and perform such
duties and services for the Company, Parent and their respective subsidiaries
and affiliates (Parent and such subsidiaries and affiliates collectively,
"AFFILIATES") as may be designated from time to time by, the President of
Sulzer Orthopedics Inc. or the Board of Directors of Parent (the "BOARD"), or
the designee of either thereof. Executive shall use his diligent efforts to
promote the interests of the Company and the Affiliates, and shall devote
substantially all of his business time and attention to his employment under
this Agreement; PROVIDED, HOWEVER, that nothing in this Agreement shall
preclude Executive from (a) serving as, and receiving compensation for
serving as, a director or member of a committee of any corporation or other
business organization involving no conflict of interest with the interests of
the Company and its Affiliates and, except with respect to directorships held
as of the date hereof, approved by the President of Sulzer Orthopedics Inc.,
(b) engaging in charitable and community activities, or (c) managing his
personal
investments as long as such activities do not materially interfere with the
regular performance of his duties under this Agreement.
1.3. CONFIDENTIALITY. Executive understands and acknowledges that in
the course of his employment, he will have access to and will learn information
proprietary to the Company and its Affiliates that concerns the operation and
methodology of the Company and its Affiliates, including, without limitation,
business plans, financial information, protocols, proposals, manuals, clinical
procedures and guidelines, scientific data, computer source codes, programs,
software, knowhow and specifications, copyrights, trade secrets, market
information, Developments (as hereinafter defined), data and customer
information (collectively, "PROPRIETARY INFORMATION"). Executive agrees that,
at all times (including following termination of the Employment Period (as
hereinafter defined)), he will keep confidential and will not disclose directly
or indirectly any such Proprietary Information to any third party, except as
required to fulfill his duties hereunder, and will not misuse, misappropriate or
exploit such Proprietary Information in any way. The restrictions contained
herein shall not apply (a) to any information which Executive can demonstrate by
written record was already available to the public at the time of disclosure, or
subsequently become available to the public, otherwise than by breach of this
Agreement, or (b) to any disclosures required by law or administrative process
or in the defense of any claim against Executive or in the prosecution of any
claim by Executive against the Company or any of its Affiliates. Upon any
termination of the Employment Period, Executive shall immediately return to the
Company all copies of any Proprietary Information in his possession.
1.4. RESTRICTIONS ON SOLICITATION. During the period (the "RESTRICTED
PERIOD") beginning on the Effective Time and ending on the earlier of (a) the
fourth anniversary of the Effective Time and (b) the second anniversary of the
date of cessation of the Employment Period for any reason whatsoever, Executive
shall not, directly or indirectly, solicit or contact any customer of the
Company or any of the Affiliates for any commercial pursuit that is in
competition with the Company or any of the Affiliates, or that is contained from
time to time by the Company's business plan, or take away or interfere or
attempt to interfere with any custom, trade, business or patronage of the
Company or any of the Affiliates, or induce, or attempt to induce, any
employees, agents or consultants of or to the Company or any of the Affiliates
to do anything from which Executive is restricted by reason of this Agreement
nor shall Executive, directly or indirectly, offer or aid others to offer
employment to or interfere or attempt to interfere with any employees, agents or
consultants of the Company or any of the Affiliates.
1.5. RESTRICTIONS ON COMPETITIVE EMPLOYMENT. During the Restricted
Period, Executive shall not (as principal, agent, employee, consultant or
otherwise), directly or indirectly, engage in activities for, or render services
to, any firm or business (other than the Company, Parent or any Affiliates of
Parent) engaged or about to become engaged in any orthopedics products business
competitive with the Company or any affiliated orthopedic business of Parent (a
"COMPETITIVE BUSINESS"). Notwithstanding the foregoing, Executive may have an
interest consisting of publicly traded securities constituting less than 1
percent of any class of publicly traded securities in any public company engaged
in a Competitive Business so
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long as he is not employed by and does not consult with, or become a director of
or otherwise engage in any activities for, such company.
1.6. ASSIGNMENT OF DEVELOPMENTS. All Developments that are at any
time made, conceived or suggested by Executive, whether acting alone or in
conjunction with others, during or as a result of Executive's employment under
this Agreement or any prior employment with the Company or the Affiliates, shall
be the sole and absolute property of the Company and the Affiliates, free of any
reserved or other rights of any kind on Executive's part. During Executive's
employment and, if such Developments were made, conceived or suggested by
Executive during or as a result of Executive's employment under this Agreement
or any prior employment with the Company or the Affiliates, thereafter,
Executive shall promptly make full disclosure of any such Developments to the
Company and, at the Company's cost and expense, do all acts and things
(including, among others, the execution and delivery under oath of patent and
copyright applications and instruments of assignment) deemed by the Company to
be necessary or desirable at any time in order to effect the full assignment to
the Company and the Affiliates of Executive's right and title, if any, to such
Developments. For purposes of this Agreement, the term "DEVELOPMENTS" shall
mean all data, discoveries, findings, reports, designs, inventions,
improvements, methods, practices, techniques, developments, programs, concepts,
and ideas, whether or not patentable, relating to the present or planned
activities, or future activities of which Executive is aware, or the products
and services of the Company or any of the Affiliates; PROVIDED, HOWEVER, that
the term "Developments" does not include any invention for which no equipment,
supplies, facility or Proprietary Information of the Company was used and that
was developed entirely on Executive's own time and (i) that does not relate (A)
directly to the business of the Company or (B) to the Company's actual or
demonstrably anticipated research or development or (ii) that does not result
from any work performed by Executive for the Company.
1.7. REMEDIES. Executive acknowledges and agrees that damages for a
breach or threatened breach of any of the covenants set forth in Section 1.3,
1.4 or 1.5 will be difficult to determine and will not afford a full and
adequate remedy, and therefore agrees that the Company, in addition to seeking
actual damages in connection therewith, may seek specific enforcement of any
such covenant in any court of competent jurisdiction, including, without
limitation, by the issuance of a temporary or permanent injunction, without the
necessity of a bond.
2. COMPENSATION AND BENEFITS.
2.1. SALARY. The Company shall pay Executive for services during the
Employment Period a base salary at the annual rate of $150,000, or such higher
amount as may be established as provided herein. Any and all increases to
Executive's base salary shall be determined by the President of Sulzer
Orthopedics Inc. and the Group Vice President Human Resources of Sulzer Medica
USA, it being understood and agreed that the first review of such salary shall
occur on or around December 15, 1998 and any increase would be effective January
1, 1999. Such base salary shall be payable in equal installments, no less
frequently than monthly, pursuant to the Company's customary payroll policies in
force at the
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time of payment, less any required or authorized payroll deductions. In no
event shall Executive's base salary for any year be reduced below the greater of
the dollar amount specified in the first sentence of this Section 2.1 or the
amount of base salary paid by the Company to Executive for the immediately
preceding annual period.
2.2 ANNUAL BONUS. Executive shall participate in an annual bonus plan
for each of 1998 and 1999 under which bonuses shall be based on the attainment
of annual sales and operating income objectives, as follows:
(1) Actual sales and actual operating income for each year shall be
expressed as a percentage of the respective objectives for such
year;
(2) The percentage determined for sales shall be multiplied by .25
and the percentage determined for operating income shall be
multiplied by .75; and
(3) The two products so determined shall be added together (the
"FINAL ANNUAL PERCENTAGE").
If the Final Annual Percentage equals or exceeds 100%, an annual bonus shall be
paid, such annual bonus to be in an amount equal to 50% of Executive's then base
salary (annualized for any partial calendar year) plus 2.5% of such base salary
for every 1% by which the Final Annual Percentage exceeds 100% (but the total
annual bonus payable under this Section 2.2 shall not exceed 100% of such base
salary). The sales and operating income objectives for 1998 are set forth on
Exhibit A hereto and such objectives for 1999 shall be established by the Board
in good faith. Subject to Executive's employment by the Company on December 31,
1998, the annual bonus with respect to 1998 shall be paid to Executive no later
than March 15, 1999; subject to Executive's employment by the Company on
December 31, 1999, the annual bonus with respect to 1999 shall be paid to
Executive no later than March 15, 2000.
2.3 LONG TERM INCENTIVE PLAN. Executive shall participate in a
long-term bonus plan based on the attainment of sales and operating income
objectives for the two-year period ending on December 31, 1999, as follows:
(1) Actual sales and actual operating income for such period shall be
expressed as a percentage of the respective objectives for such
period;
(2) The percentage determined for sales shall be multiplied by .25
and the percentage determined for operating income shall be
multiplied by .75; and
(3) The two products so determined shall be added together (the
"Final Long-Term Percentage").
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If the Final Long-Term Percentage equals or exceeds 100%, a long-term bonus
shall be paid, such long-term bonus to be in an amount equal to 150% of
Executive's average base salary for 1998 and 1999 (annualized for any partial
calendar year) plus 7.5% of such average base salary for every 1% by which the
Final Long-Term Percentage exceeds 100% (but the total long-term bonus payable
under this Section 2.3 shall not exceed 300% of such average base salary). The
sales and earnings objectives for the two-year period are set forth on Exhibit B
hereto. Subject to Executive's continuous employment through December 31, 1999,
any long-term bonus due to him shall be paid no later than March 15, 2000.
2.4. BENEFITS. During the Employment Period, Executive shall be
entitled to participate, on the same basis and at the same level as other senior
executives of the Company, in any group insurance, hospitalization, medical,
health and accident, disability, fringe benefit and tax-qualified retirement
plans or programs of the Company now existing or hereafter established to the
extent that he is eligible under the general provisions thereof; PROVIDED,
HOWEVER, that the benefits provided to the Executive and his dependents
hereunder shall in no event be less favorable to them, as a whole, than the
benefits provided by the Company to its senior executives and their dependents
on the date hereof.
2.5. EXPENSES. Pursuant to the Company's customary policies in force
at the time of payment, Executive shall be promptly reimbursed, against
presentation of vouchers or receipts therefor, for all authorized expenses
properly and reasonably incurred by him on behalf of the Company or its
Affiliates in the performance of his duties hereunder.
3. EMPLOYMENT PERIOD.
Executive's employment under this Agreement shall commence as of the
Effective Time, and shall terminate on the second anniversary thereof (the
"EMPLOYMENT PERIOD"), unless terminated earlier pursuant to Section 4.
4. TERMINATION. The Employment Period may be terminated at any time by
the Company or Executive.
4.1. TERMINATION BY THE COMPANY FOR CAUSE; RESIGNATION WITHOUT
CONSTRUCTIVE DISCHARGE. Upon a termination of the Employment Period by the
Company for Cause or a resignation by Executive without Constructive Discharge
(as defined below), the Company shall have no obligation to Executive other than
the payment of Executive's earned and unpaid base salary (and bonus with respect
to any completed fiscal year or other completed fiscal period) to the effective
date of such termination.
For purposes of this Agreement, the term "CAUSE" shall mean and be
limited to, (i) gross neglect of duties by the Executive resulting in a material
adverse effect on the Company's business, (ii) Executive's unauthorized
appropriation of material property of the Company, or (iii) an act or acts
committed by the Executive constituting a felony and detrimental to the Company
or its reputation.
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4.2. DEATH; PERMANENT DISABILITY; TERMINATION BY THE COMPANY WITHOUT
CAUSE; RESIGNATION FOR CONSTRUCTIVE DISCHARGE. In the event of Executive's
death or Permanent Disability, the Company's termination of the Employment
Period for any reason other than for Cause or Executive's resignation for
Constructive Discharge, the Company shall have no obligation to Executive other
than (i) a continuation of his base salary through the second anniversary of the
Effective Time, and (ii) the payment of a portion of the awards which would have
been payable to the Executive as annual and long-term bonuses as follows:
(a) with respect to the annual bonus (x) Executive shall be entitled
to receive the full amount of any bonus with respect to any
completed fiscal year, payable on the date such bonus would have
been paid had Executive's employment with the Company not
terminated, and (y) with respect to the annual bonus payable with
respect to any fiscal year of the Company in which Executive's
employment terminates, Executive shall be paid a pro rata amount
equal to the amount he would have received had he been employed
by the Company on December 31 of such fiscal year times a
fraction, the numerator of which is the number of days which
Executive was employed by the Company in such fiscal year and the
denominator of which is 365, which payment shall be made no later
than the date such bonus would have been paid had Executive's
employment not terminated;
(b) with respect to the long-term bonus, Executive shall not be
entitled to any portion thereof if his employment has terminated
prior to December 31, 1998; if his employment terminates after
such date, he shall be paid a pro rata amount equal to the amount
he would have received had he been employed by the Company on
December 31, 1999 times a fraction, the numerator of which is the
total number of days which Executive was employed by the Company
from the date of this Agreement through the date of termination
and the denominator of which is 730, which payment shall be made
no later than the date such bonus would have been paid had
Executive's employment not terminated.
Notwithstanding the foregoing, such salary continuation (a) shall be subject to
Executive's compliance with the restrictive covenants contained in Section 1
hereof and (b) may be reduced by any disability benefits received by Executive
in the event of his Permanent Disability.
As used herein, "CONSTRUCTIVE DISCHARGE" means:
(i) the assignment to Executive of any duties inconsistent in any
respect with Executive's position (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated hereunder, or any other action
by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent
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action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Executive;
(ii) any material reduction by the Company of Executive's base salary
or fringe benefits, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by Executive;
(iii) the Company's requiring Executive to be based at any office or
location other than as has been the custom immediately prior to
the date of this Agreement; or
(iv) a substantial breach of this Agreement by the Company that
results in material economic harm to Executive.
For purpose of this Section 4.2, any good faith determination of "Constructive
Discharge" made by Executive shall be conclusive.
"PERMANENT DISABILITY" means a disability entitling Executive to
long-term disability benefits under the long-term disability plan applicable to
Executive.
4.3. LIQUIDATED DAMAGES. Executive acknowledges that any payments
under this Section 4 resulting from any termination of the Employment Period are
in lieu of any and all claims that the Executive may have against the Company,
and represent liquidated damages (and not a penalty).
5. OPTIONS. During the Employment Period, Executive shall be
eligible to participate in the Parent's Management Stock Option Plan. The
amount of annual grants of stock options to be made to Executive under such plan
(based on the fair market value of the stock subject to the options as of the
date of grant) shall be 1.5 times Executive's base salary. Such options shall
be non-qualified stock options and shall vest in four equal installments on the
first through fourth anniversaries of the relevant data of grant.
6. LIMITATION ON PAYMENTS. In the event that any payments or
benefits hereunder would, absent the application of this Section 6, be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended, then the Company shall reduce the payments and benefits due
hereunder to the smallest extent necessary such that no such excise tax shall
apply.
7. NOTICES. Any notice or communication given by either party
hereto to the other shall be in writing and personally delivered or mailed by
registered or certified mail, return receipt requested, postage prepaid, to the
following addresses:
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(a) if to the Company:
Sulzer Medica USA Inc.
4000 Technology Drive
Angleton, Texas 77515
Attn: T.C. Selman II,
Group Vice President
with a copy to:
Sulzer Medica USA Inc.
4000 Technology Drive
Angleton, Texas 77515
Attn: Lawrence Panitz
General Counsel
(b) if to the Executive:
Spine-Tech, Inc.
7375 Bush Lake Road
Minneapolis, Minnesota 55439
Telecopier No.: 612-830-6388
Any notice shall be deemed given when actually delivered to such address, or two
days after such notice has been mailed or sent by Federal Express, whichever
comes earliest. Any person entitled to receive notice may designate in writing,
by notice to the other, such other address to which notices to such person shall
thereafter be sent.
8. MISCELLANEOUS.
8.1. ENTIRE AGREEMENT. This Agreement and Exhibits A and B hereto
contain the entire understanding of the parties in respect of their subject
matter and supersede upon their effectiveness all other prior agreements and
understandings between the parties with respect to such subject matter.
8.2. AMENDMENT; WAIVER. This Agreement may not be amended,
supplemented, cancelled or discharged, except by written instrument executed by
the party affected thereby. No failure to exercise, and no delay in exercising,
any right, power or privilege hereunder shall operate as a waiver thereof. No
waiver of any breach of any provision of this Agreement shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision.
8.3. BINDING EFFECT; ASSIGNMENT. The rights and obligations of this
Agreement shall bind and inure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any assignee of all or substantially
all of the
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Company's business and properties. Executive's rights or obligations under this
Agreement may not be assigned by Executive, except that the rights specified in
Section 4.2 shall pass upon the Executive's death to Executive's executor or
administrator.
8.4. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
8.5. GOVERNING LAW; INTERPRETATION. This Agreement shall be construed
in accordance with and governed for all purposes by the laws and public policy
(other than conflict of laws principles) of the State of Minnesota applicable to
contracts executed and to be wholly performed within such State.
8.6. FURTHER ASSURANCES. Each of the parties agrees to execute,
acknowledge, deliver and perform, and cause to be executed, acknowledged,
delivered and performed, at any time and from time to time, as the case may be,
all such further acts, deeds, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably necessary to carry out the
provisions or intent of this Agreement.
8.7. SEVERABILITY; ARBITRATION. (a) The parties have carefully
reviewed the provisions of this Agreement and agree that they are fair and
equitable. However, in light of the possibility of differing interpretations of
law and changes in circumstances, the parties agree that if any one or more of
the provisions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
provisions of this Agreement shall, to the extent permitted by law, remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Moreover, if any of the provisions contained in this Agreement is determined by
a court of competent jurisdiction to be excessively broad as to duration,
activity, geographic application or subject, it shall be construed, by limiting
or reducing it to the extent legally permitted, so as to be enforceable to the
extent compatible with then applicable law.
(b) ARBITRATION. Except for disputes arising under Section 1.3, 1.4
or 1.5 hereof, all disputes arising under this Agreement shall be submitted to
final and binding arbitration in Minneapolis, Minnesota. The arbitrator shall
be selected and the arbitration shall be conducted pursuant to the then most
recent Employment Dispute Resolution Rules of the American Arbitration
Association. The decision of the arbitrator shall be final and binding, and any
court of competent jurisdiction may enter judgment upon the award. All fees and
expenses of the arbitrator shall be shared equally by Executive and the Company.
The arbitrator shall have jurisdiction and authority to interpret and apply the
provisions of this Agreement and relevant federal, state and local laws insofar
as necessary to the determination of the dispute and to remedy any breaches of
this Agreement and/or applicable laws, but shall not have jurisdiction or
authority to award punitive damages or alter in any way the provisions of this
Agreement. The arbitrator shall have the authority to award attorney's fees and
costs to the prevailing party. The party agree that this arbitration provision
shall be in lieu of any claims procedure which may be required under federal
law.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SPINE-TECH INC.
By: /s/ David W. Stassen
--------------------------
Name: David W. Stassen
Title: CEO
EXECUTIVE
By: /s/ Richard C. Jansen
--------------------------
Name: Richard C. Jansen
Title: Vice President Regulatory
Acknowledged this 15 day of December 1997.
SULZER MEDICA LTD.
By: /s/ A. Buchel
---------------------------
Name: Andre P. Buchel
Title: CEO
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EXHIBIT A
ANNUAL BONUS OBJECTIVES
1998
SALES: $119,000,000
EARNINGS(1): $51,000,000
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(1) Operating income
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EXHIBIT B
LONG TERM INCENTIVE OBJECTIVES
1998 & 1999
1998 1999
SALES: $119,000,000 $229,000,000
EARNINGS(2): $51,000,000 $98,000,000
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(2) Operating income
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