EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.14
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 16th day of November, 2007, by and between Inspire Medical Systems, Inc. (“Inspire” or the “Company”), a Delaware corporation, and Xxxxxxx X. Xxxxxxx (“Executive”). This Agreement recognizes the employment of Executive with Inspire Medical Systems, LLC and establishes the hire date as July 6, 2007.
A. RECITALS
1. Executive has the professional and personal skills to serve Inspire as its President and Chief Executive Officer, and can be instrumental in helping it to achieve its objectives to the mutual benefit of Inspire and Executive;
2. The parties wish to establish an employment relationship, to protect Inspire’s business and other interests, to protect the relevant interests of Inspire, to provide protections to Executive in the event Executive’s employment is terminated without cause, and to provide the essential terms of Executive’s employment.
B. AGREEMENT
In consideration of the foregoing premises, the mutual covenants and obligations of this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Employment. Subject to all of the terms and conditions of this Agreement, Inspire agrees to employ Executive, and Executive agrees to accept employment with Inspire. It is understood that Executive will be subject to the policies and terms (as they may be amended from time to time by Inspire) as adopted by Inspire’s Board of Directors (the “Board”), Inspire’s employee handbook and other policies in effect for salaried employees of Inspire, except as otherwise specifically provided in this Agreement.
2. Duties. The services of Executive shall be exclusive to Inspire, except as otherwise agreed to in writing by Inspire. Executive shall initially function in the capacity of President and Chief Executive Officer, shall exert Executive’s energy and full working time to the prosecution of Executive’s duties, and shall promptly and faithfully perform all these duties which pertain to that employment. Executive shall (a) assume primary responsibility for the general active management of the Inspire; (b) shall, in the absence of the Chairman of the Board, preside at all meeting of the shareholders and the Board; (c) shall see that all orders and resolutions of the Board are carried into effect; (d) may maintain records of and certify proceedings of the Board and shareholders; and (e) shall perform such other duties as may from time to time be prescribed by the Board. Executive will perform Executive’s obligations in a competent and professional manner, consistent with the expectations of Inspire’s Board. Executive may serve on outside boards of directors or committees of public or private organizations if the outside activities are first disclosed to and approved in writing by Inspire’s Board. That approval will not be granted if the outside activities are deemed by the Board to
materially conflict in any way with the provisions of this Agreement, to materially impair Executive’s ability to perform Executive’s duties under this Agreement, or to otherwise materially conflict in any way with business interests of Inspire. Notwithstanding the foregoing, Executive shall be entitled to serve on boards or committees of religious, educational, or charitable non-profit organizations without disclosing such activities to the Board or obtaining its consent.
3. Term of Employment. This Agreement is not intended to establish any minimum or maximum period for Executive’s continuing employment. Executive and Inspire have an “at-will” employment relationship, which means that either party has the right to terminate the employment relationship at any time and for any reason, with or without cause. The reason for and timing of the termination, as set forth in Paragraph 5, will determine the amount of post-termination payments and benefits, as set forth in Paragraph 6.
4. Compensation, Reimbursement and Benefits. As compensation for all of Executive’s services under this Agreement, Company agrees to provide Executive the following compensation, reimbursements and benefits:
a. Base Salary. Company will pay Executive a semi-monthly base salary (the “Base Salary”), payable in accordance with Inspire’s standard payroll practices. The initial annualized Base Salary shall be in the gross amount of Two Hundred Thousand Dollars ($200,000.00). The Base Salary shall be subject to annual performance review and possible increases by Inspire’s Board.
b. Performance Review. Not later than twelve (12) months after Executive commences employment with Inspire, the Board shall conduct a review of Executive’s performance to consider any changes in the scope or description of job responsibilities. Thereafter, the Board shall conduct annual performance reviews with Executive (not later than the anniversary of the initial performance review) and shall evaluate job responsibilities and any adjustments to base salary.
c. Incentive Awards. As additional compensation, Executive will be eligible to receive discretionary annual bonuses and/or long term incentive compensation (“Incentive Awards”) pursuant to the terms and conditions of Inspire’s annual bonus plan and/or Inspire’s long term incentive plan (jointly, “Incentive Plans”) which may be adopted by Inspire’s Board from time to time. With reference to the Incentive Plans, the parties understand as follows:
(1) Executive’s eligibility to receive bonuses or other incentive awards pursuant to any Plans will be determined by the Board, in its sole discretion. Notwithstanding the foregoing, it is the intention of Inspire that Executive’s bonus compensation target shall be twenty-five percent (25%) of Executive’s initial base compensation, provided that Executive and Inspire have achieved certain performance goals and objectives, examples of which are attached hereto as Exhibit A and Exhibit B.
(2) The Incentive Plans shall be as complete and accurate as Inspire can reasonably make them. However, they are not necessarily all-inclusive because
circumstances which Inspire has not anticipated may arise. Inspire may interpret or vary from the Incentive Plans if, in its opinion, the circumstances warrant it.
(3) Inspire reserves the right to make any changes at any time to the Incentive Plans by adding to, deleting from or otherwise amending any portion of them, with or without notice to Executive, provided, however, that if Executive has been awarded non-cash compensation pursuant to such plans, then Executive shall receive notice of any changes to the plan as may be required by applicable law, and provided, further, that any such changes are applicable to participants in the Incentive Plans generally and not specific to Executive.
(4) Any questions regarding the computation of Incentive Awards under the Incentive Plans will be conclusively determined by Inspire’s Board, pursuant to the terms and conditions of the Incentive Plans.
d. Discretionary Bonus. Executive may be awarded an annual discretionary bonus (the “Bonus”). The amount of the Bonus and the timing of payment of such Bonus will be determined in the sole discretion of the Board.
e. Stock Options and Grants. The Board will periodically review Executive’s equity position and in its sole discretion issue stock options to Executive in accordance with the company stock option program which will be adopted by the Board.
f. Expenses. Inspire will reimburse Executive for any and all ordinary, necessary and reasonable business expenses that Executive incurs in connection with the performance of Executive’s duties under this Agreement, including entertainment, telephone, travel and miscellaneous expenses. Executive must obtain proper approval for such expenses pursuant to Company’s policies and procedures and Executive must provide Company with documentation for such expenses in a form sufficient to sustain Inspire’s deduction for such expenses under the Internal Revenue Code.
g. Time Off. Executive will be entitled to time off with or without pay in accordance with Inspire’s policies in effect at any particular time; provided, however, that Executive shall, in any event, be entitled to fifteen (15) days of Paid Time Off (“PTO”) during each full year of employment. Executive may carry at any point in time a maximum of twice the annual PTO. Once the maximum number of days has been achieved, no additional PTO will be accrued. The above PTO is not included as part of Inspire’s holiday schedule for which Executive will receive compensation for days identified by Inspire as a holiday.
h. Health, Disability and Life Insurance, and Other Executive Benefit Plans. Inspire will provide Executive with the same health, disability, and life insurance coverage provided generally to other full-time salaried employees of Inspire, and with other employee benefit plans which are presently existing or which may be established in the future by Inspire for its full-time salaried employees, subject to the terms and conditions of the applicable benefit plans.
i. Indemnification. Inspire will defend, indemnify and hold Executive harmless from costs, expenses, damages and other liability incurred by Executive as a result of performing services to Inspire, subject to the limitations and other terms and conditions of applicable Delaware statutes and Inspire’s Articles of Incorporation or By Laws.
j. Changes in Benefit Plans. It is understood that no references in this Agreement to particular employee benefit plans established or maintained by Inspire are intended to change the terms and conditions of these plans or to preclude Inspire from amending or terminating any such benefit plans.
k. Withholding; Taxes. Inspire may withhold from any compensation, reimbursements and benefits payable to Executive all federal, state, city and other taxes as shall be required pursuant to any law or governmental regulation or ruling, as well as other standard withholdings and deductions. Executive recognizes that all of the payments and some of the benefits which Executive receives under this Agreement will constitute compensation, and will be fully taxable to Executive. Executive agrees to properly report such payments and benefits on Executive’s applicable income tax returns and to pay all appropriate taxes.
5. Termination. Executive’s employment may be terminated at any time as follows:
a. Death. Executive’s employment shall automatically terminate upon Executive’s death.
b. Disability. Either party may terminate Executive’s employment at any time, upon written notice to the other party if Executive sustains a disability which precludes Executive from performing the essential functions of Executive’s job, with or without reasonable accommodations, as defined by applicable state and federal disability laws. Executive shall presumed to have such a disability for purpose of this Agreement if Executive qualifies, because of illness or incapacity, to begin receiving disability income insurance payments under any long term disability income insurance policy that Inspire maintains for the benefit of Executive. If Executive does not qualify for such payments, Executive shall nevertheless be presumed to have such a disability if Executive is substantially incapable of performing the essential functions of Executive’s job for a period of more than twenty six (26) consecutive weeks, with or without a reasonable accommodation.
c. With Cause. Inspire may terminate Executive’s employment at any time, with “Cause”, upon written notice to Executive. “Cause” shall be defined as:
(1) Executive’s material breach of any of Executive’s obligations under this Agreement, or Executive’s repeated failure or refusal to perform or observe Executive’s duties, responsibilities and obligations as an Executive of Inspire, for reasons other than disability, if such breach, failure or refusal continues or it or another breach, failure or refusal is repeated following written notice thereof to the Executive;
(2) Any material dishonesty or other breach of the duty of loyalty of Executive affecting Inspire or any customer, vendor or employee of Inspire;
(3) Use of alcohol or other drugs in a manner which materially affects the performance of Executive’s duties, responsibilities and obligations as an employee of Inspire, if such use continues or is repeated following written notice thereof to the Executive;
(4) Conviction of, or a plea of guilty or nolo contendre to, a charge of commission of a felony or of any crime involving misrepresentation, moral turpitude or fraud;
(5) Commission by Executive of any other willful or intentional act which materially injures the reputation, business or business relationships of Inspire if such act occurs or continues following written notice to the Executive of the same or of a prior willful or intentional act injuring the repetition, business or business relationships of Inspire; or
(6) The existence of any court order or settlement agreement prohibiting Executive’s continued employment with Inspire.
A matter of the type described in this paragraph (c) shall be “material” if such matter, alone or together with other such matters is material.
d. Without Cause. Inspire may terminate Executive’s employment at any time, without Cause, upon one (1) month written notice to Executive. Inspire may, in its sole discretion, opt not to have Executive provide active employment services during some or all of the notice period, and place Executive on a paid leave of absence for some or all of the notice period.
e. Resignation. Executive may, upon one (1) month written notice to Inspire, terminate Executive’s employment at any time for no reason or may, at any time, terminate his employment for Good Reason (as defined below). Upon receiving such notice, Inspire may, in its sole discretion, opt not to have Executive provide active employment services during some or all of the notice period, and place Executive on a paid leave of absence for some or all of the notice period. If Inspire exercises this option, it shall not convert the resignation to a termination by Inspire. For purposes of this paragraph, “Good Reason” shall mean:
i) A material reduction, without Executive’s consent, in Executive’s duties or responsibilities, (provided no such reduction shall be deemed to have occurred solely by reason of the Company’s having hired a new Chief Executive or President as long as Executive continues to have responsibilities that are consistent with executive status and further provided that no such reduction shall be deemed to have occurred solely due to the change in the Company’s status from that of an independent company to that of a subsidiary or division of a buyer of the Company following a “Change of Control”, as defined in Subparagraph 6.d.);
ii) A material reduction, without Executive’s consent, of Executive’s base salary, unless such reduction is part of an overall reduction in salary for executive employees and Executive’s reduction is proportionate to the overall reduction in salary;
iii) The Company’s moving Executive’s place of employment, without Executive’s consent, more than 50 miles from the place of Executive’s employment prior to such move, although business travel shall not be deemed to be a move of Executive’s place of employment; or
iv) The Company’s material breach of this Agreement; provided Executive has provided the Company detailed written notice of such alleged breach and the Company has not, within thirty (30) days of receipt of such notice, cured such alleged breach.
6. Payments and Benefits Upon Termination. Upon the termination of Executive’s employment, Executive shall only be entitled to the following payments and benefits:
a. Disability; Death. If Executive’s employment is terminated due to the disability or death of Executive, regardless of the date of termination, Executive or Executive’s estate or heirs, as appropriate, shall be paid (i) Executive’s Base Salary, prorated through the date of termination; (ii) any cash bonus either accrued or previously awarded but not yet paid to Executive at the time of his death or disability; (iii) any benefits payable under any disability or life insurance policy maintained by Inspire for the benefit of Executive at the time of the termination of employment, subject to the terms and conditions of such policies; (iv) Executive’s accrued but unpaid PTO, prorated through the date of termination; (v) any unpaid expense reimbursement; and (vi) Executive’s or Executive’s estate or heirs, as appropriate, other accrued and vested benefits, if any, under any of Inspire’s Incentive Plans or any of Inspire’s other employee benefit plans (e.g., 401(k) plan), subject to the terms and conditions of those plans.
b. Termination by Inspire For Cause; Resignation. If Inspire terminates Executive’s employment for Cause, or if Executive resigns without Good Reason, regardless of the date of termination, Executive shall be paid (i) Executive’s Base Salary, prorated through the date of termination; (ii) Executive’s accrued but unpaid PTO, prorated through the date of termination; (iii) any unpaid expense reimbursement; and (iv) Executive’s other accrued and vested benefits, if any, under any of Inspire’s Incentive Plans or any of Inspire’s other employee benefit plans (e.g., 401(k) plan), subject to the terms and conditions of those plans.
c. Termination by Inspire Without Cause; Resignation for Good Reason. If Company terminates Executive’s employment without Cause, or if Executive resigns for Good Reason, regardless of the date of termination, Executive shall be paid the same payments and benefits as set forth in Subparagraph 6a. above. In addition, if Executive signs (and does not rescind, as allowed by law) a release of claims, to the full extent permitted by law, in a form reasonably satisfactory to Inspire which assures, among other things, that Executive will not commence any type of litigation or assert other claims as a result of the termination (except to enforce his rights under this Agreement), Inspire shall pay Executive a post-termination payment, as set forth below:
(1) If the effective date of termination of employment is during the first or second full year of Executive’s employment, an amount equal to six (6) months of Executive’s Base Salary as of the date of termination, and Inspire shall be responsible for the
payment of premiums for any COBRA benefits which Executive elects to receive during such six (6) month period.
(2) If the effective date of termination of employment occurs after the second full year of Executive’s employment, an amount equal to one (1) year of Executive’s Base Salary as of the date of termination, plus one (1) month of Executive’s Base Salary as of the date of termination for each year in excess of two (2) years that Executive has been employed by Inspire, and Inspire shall be responsible for the payment of premiums for any COBRA benefits which Executive elects to receive, for twelve (12) months of eligible COBRA coverage, as provided by law.
The applicable post-termination payments shall be made in a lump sum within two (2) weeks after Executive signs (and does not rescind, as allowed by law) the above referenced release of claims, subject to appropriate withholding and deductions. No incentive awards, retirement savings contributions, or 401(k) contributions will be paid to Executive by Inspire based on the amount of the post-termination payment.
d. At Any Time as a Result of a Change of Control. If Inspire terminates Executive’s at-will employment without Cause at any time, as a result of a Change of Control, and if Executive does not receive an offer of employment with the new controlling entity under an agreement providing the same base pay and comparable incentives, benefits and terms (giving credit to Executive’s prior employment with the Company), Executive shall be paid the same payments and benefits as set forth in Subparagraph 6.c. above, subject to the same conditions set forth in Subparagraph 6.c. above. It is understood that the payment under this change of control provision will be paid in lieu of, and not in addition to, the post-termination payment referenced in Subparagraph 6.c. Further, it is understood that no incentive Awards, retirement savings contributions, or 401(k) contributions will be paid to Executive by Inspire based on the amount of the post-termination payment. It is understood that if Executive does receive an offer of employment with at least the same base pay and comparable incentives, benefits and terms (giving credit to Executive’s prior employment with the Company) with the new controlling entity, and chooses not to accept that employment, the Executive’s termination of employment shall be considered a resignation without Good Reason, and treated as set forth in Subparagraph 6.b. above. For purposes of this Agreement, “Change of Control” means the occurrence of any of the following:
(1) a sale by shareholders of the Company of a substantial portion of their stock in the Company, or a merger, reorganization or consolidation, whereby the Company’s equity holders existing immediately prior to such sale, merger, reorganization or consolidation do not, immediately after consummation of such sale, reorganization, merger or consolidation, own more than fifty percent (50%) of the combined voting power of the surviving entity’s then outstanding voting securities entitled to vote generally in the election of directors but only if such event results in a change in Board composition such that the directors immediately preceding such events do not comprise a majority of the Board following such event; or
(2) the sale or other disposition of all or substantially all of the Company’s assets to an entity in which the Company, any subsidiary of the Company, or the Company’s equity holders existing immediately prior to such sale beneficially own less than fifty percent (50%) of the combined voting power of such acquiring entity’s then outstanding voting securities entitled to vote generally in the election of directors but only if such event results in a change in Board composition such that the directors immediately preceding such events do not comprise a majority of the Board following such event.
7. Business Protections. Inspire has many confidential and proprietary business interests and other information relating to its products, services and customers, which it needs to adequately protect. For this reason, its willingness to enter into this Agreement is contingent upon Executive’s acceptance of the covenants set forth in paragraph 8 below. Executive understands that the business protections in paragraph 8 will apply throughout Executive’s employment, and will continue to apply thereafter even if Executive’s employment is terminated under Paragraph 5 of this Agreement, regardless of the reason for or timing of the termination.
8. Post-Employment Restrictions.
a. Restrictions on Competition. Executive agrees that while employed by Inspire, and for twelve (12) months after the last day Executive is employed by Inspire, Executive will not be employed by or otherwise perform services for an organization which is engaged in the research and development, marketing, or distribution of a product or treatment which is the same as or which competes with any product or treatment offered or being developed by Inspire during, or as of the date of termination of, Executive’s employment with Inspire.
b. Prohibition on Solicitation of Inspire Employees. Executive agrees that at all times while employed by Inspire, and for twelve (12) months thereafter, Executive will not solicit, cause to be solicited, or participate in or promote the solicitation of any person to terminate that person’s employment with Inspire or to breach that person’s employment agreement with Inspire.
c. Post-Employment Disclosure. In the event Executive’s employment with Inspire terminates, Executive agrees that during the term of the restrictions described in Paragraph 8.a. above, Executive will promptly inform Inspire of the identity of any new employer, the job title of Executive’s new position, and a description of any services to be rendered to that employer. In addition, Executive agrees to respond within ten (10) days to any written request from Inspire for further information concerning Executive’s work activities sufficient to provide Inspire with assurances that Executive is not violating any of the obligations Executive has undertaken in this Agreement.
d. Prohibition on Disclosure of Confidential Information. Executive shall hold the “Confidential Information”, as defined in Subparagraph 8.e., including trade secrets and/or data, in the strictest confidence and will never, without prior written consent of the Company, (directly or indirectly) disclose, assign, transfer, convey, communicate to or use for his own or another’s benefit or (directly or indirectly) disclose, assign, transfer, convey,
communicate to or use by him, a competitor of the Company or any other person or entity, including, but not limited to, the press, other professionals, corporations, partnerships or the public, at any time during his employment with the Company or at any time after his termination of employment with the Company, regardless of the reason for the Executive’s termination, whether voluntary or involuntary. Executive further promises and agrees that he will faithfully abide by any rules, policies, practices or procedures existing or which may be established by the Company for insuring the confidentiality of the Confidential Information, including, but not limited to, rules, policies, practices or procedures:
i) Limiting access to authorized personnel;
ii) Limiting copying of any writing, data or recording;
iii) Requiring storage of property, documents or data in secure facilities provided by the Company and limiting safe or vault lock combinations or keys to authorized personnel; and/or
iv) Checkout and return or other procedures promulgated by the Company from time to time.
e. Definition of Confidential Information. For the purposes of this Agreement, “Confidential Information” means any information not generally known to the public and proprietary to the Company and includes, without limitation, trade secrets, inventions, and information pertaining to research, development, purchasing, marketing, selling, accounting, licensing, business systems, business techniques, customer lists, prospective customer lists, price lists, business strategies and plans, pending patentable materials and/or designs, design documentation, documentation of meetings, tests and/or test standards, or manuals whether in document, electronic, computer or other form. For example, Confidential Information may be contained in the Company’s customer lists, prospective customer lists, the particular needs and requirements of customers, the particular needs and requirements of prospective customers, and the identity of customers or prospective customers. Information shall be treated as Confidential Information irrespective of its source and any information which is labeled or marked as being “confidential” or “trade secret” shall be presumed to be Confidential Information. The definition of “Confidential Information” as set forth in this paragraph is not intended to be complete. From time to time during the term of his employment, Executive may gain access to other information not generally known to the public and proprietary to the Company concerning the Company’s businesses that is of commercial value to the Company, which information shall be included in the definition in this paragraph, even though not specifically listed above. The definition of Confidential Information applies to any form in which the subject information, trade secrets, or data may appear, whether written, oral, or any other form of recording or storage.
f. Restrictions. The restrictions herein provided shall not apply with respect to “Confidential Information”, “Offering Materials”, “Evaluation Materials”, “Informational Materials”, “Project Materials”, “Property Information”, “Project Information”, or the like which: (A) is or becomes a part of the public domain without breach of this Agreement by the Executive; or (C) is disclosed pursuant to judicial action or government regulations, provided the
receiving party notifies the disclosing party prior to such disclosure and cooperates with the disclosing party in the event the disclosing party elects to legally contest and avoid such disclosure.
g. Certain Company Remedies. The Executive acknowledges that the Company will suffer irreparable harm if the Executive breaches Subparagraphs 8.a., 8.b. and/or 8.d. of this Agreement. Accordingly, the Company shall be entitled to seek any right or remedy they may have, under this Agreement or otherwise, at law or equity, including but not limited to, an injunction, enjoining or restraining Executive from any violation of Subparagraphs 8.a., 8.b. and/or 8.d. of this Agreement. In the event the Company pursues any remedies pursuant to this Subparagraph 8.f. and prevails in such a proceeding, the Executive shall pay the Company’s attorneys’ fees in connection with such proceeding. Should the Company not prevail in such a proceeding, the Company shall pay the Executive’s attorneys’ fees in connection with such proceeding. Furthermore, should a court of competent jurisdiction determine that the Executive has breached Subparagraphs 8.a., 8.b., and/or 8.d., the restrictions in such Subparagraphs will be extended by the period during which the Executive was in breach.
9. Inventions. Inventions mean any and all inventions, discoveries, ideas, processes, writings, works of authorship, designs, developments and improvements, whether or not protectable under the applicable patent, trademark or copyright statutes, generated, conceived or reduced to practice by the Executive, alone or in conjunction with others, while employed by Inspire.
a. Disclosure. Executive agrees to promptly disclose to Inspire in writing all
Inventions.
b. Ownership, Assignment and Recordkeeping. All Inventions shall be the exclusive property of Inspire. Executive hereby assigns all Inventions to Inspire. Executive agrees to keep accurate, complete and timely records of Executive’s Inventions, which records shall be the property of Inspire and shall be retained on Inspire’s premises.
c. Cooperation. During and after the termination of Executive’s employment, Executive agrees to give Inspire all cooperation and assistance necessary to perfect, protect, and use its rights to Inventions. Without limiting the generality of the foregoing, Executive agrees to sign all documents, do all things, and supply all information that Inspire may deem necessary to (i) transfer or record the transfer of Executive’s entire right, title and interest in Inventions, and (ii) enable Inspire to obtain patent, copyright or trademark protection for Inventions anywhere in the world.
d. Attorney-in-Fact. Executive irrevocably designates and appoints Inspire and its duly authorized officers and agents as attorney-in-fact to act for and in Executive’s behalf and stead to execute and file any lawful and necessary documents, and to do all other lawfully permitted acts, required for the assignment of, application for, or prosecution of any United States or foreign application for letters patent, copyright or trademark with the same legal force and effect as if executed by Executive.
e. Waiver. Executive hereby waives and quitclaims to Inspire any and all claims, or any nature whatsoever, which Executive may now have or may hereafter have for infringement of any patent, copyright, or trademark resulting from any Inventions.
f. Future Patents. Any Invention relating to the business of Inspire with respect to which Executive files a patent application within one (1) year following termination of Executive’s employment shall be presumed to cover Inventions conceived by Executive during the term of Executive’s employment, subject to proof to the contrary by Executive by good faith, contemporaneous, written and duly corroborated records establishing that such Invention was conceived and made following termination of employment and without using Confidential Information.
g. Release or License. If an Invention does not relate to the existing or reasonable foreseeable business interests of Inspire, Inspire may, in its sole and unreviewable discretion, release or license the Invention to the Executive upon written request by the Executive. No release or license shall be valid unless in writing signed by Inspire’s general counsel.
h. Notice. Executive is hereby notified that this Agreement and this Paragraph 9 does not apply to any Invention for which no equipment, supplies, facility or trade secret information of Inspire was used and which was developed entirely on the Executive’s own time, and (1) which does not relate (i) directly to the business of Inspire or (ii) to Inspire’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the Executive for Inspire.
10. Company’s Repurchase Option of Founder’s Stock. Executive is the founder of Inspire and holder of one million nine hundred twenty six thousand (1,926,000) shares of common stock in Inspire (the “Founder’s Stock”). The Company has the option to repurchase a portion of the Founder’s Stock at $.01 per share, on the terms and conditions set forth in this Paragraph 10 (the “Repurchase Option”) if Executive ceases to be employed by the Company for any reason, or no reason, including without limitation Purchaser’s death, disability, voluntary resignation or termination by the Company with or without cause. The Company shall have 30 days following the date of termination with which to provide written notice to Executive of the Company’s intention to repurchase such shares.
a. Repurchase Schedule. Founder’s Stock subject to repurchase by the Company shall be deemed “Repurchaseable Shares” and Founder’s Stock not subject to repurchase by the Company shall be deemed “Non-Repurchaseable Shares”. On the date of this Agreement (the “Commencement Date”), twenty five percent (25%) of the Founder’s Stock (equal to 481,500 shares) shall be Non-Repurchaseable Shares. Thereafter, an additional 1/48th of the remaining Founder’s Stock (1/48th of 1,444,500 which equal 30,094 shares) will become Non-Repurchaseable Shares on each full month following the Commencement Date, so that all of the Founder’s Stock will have become Non-Repurchaseable Shares forty-eight (48) months after the Commencement Date (assuming that termination of Executive’s employment does not occur within such forty-eight-month period). The number of Founder’s Stock that are Repurchaseable Shares or Non-Repurchaseable Shares will be proportionally adjusted to reflect
any stock dividend, stock split, reverse stock split or recapitalization of the Common Stock of the Company occurring after the Commencement Date.
b. Acceleration of Repurchase Schedule. In the event Company terminates Executive’s employment without Cause, or if Executive resigns for Good Reason, or if Executive’s employment terminates for any reason subsequent to a Change of Control, and if Executive signs (and does not rescind, as allowed by law) a Release of Claims, to the full extent permitted by law, in a form reasonably satisfactory to Inspire which assures, among other things, that Executive will not commence any type of litigation or assert other claims as a result of the termination (except to enforce his rights under this Agreement), Inspire shall accelerate repurchase schedule of Executive’s shares, as set forth below:
i. Termination without Cause; Resignation with Good Reason: In the event that Executive is terminated without Cause, or Executive resigns with Good Reason, then on such date an additional fifty percent (50%) of the remaining Repurchaseable Shares shall become Non-Repurchaseable Shares.
ii. Change of Control: In the event that Executive’s employment terminates for any reason subsequent to a Change of Control, then on such date, one hundred percent (100%) of the remaining Repurchaseable Shares shall become Non- Repurchaseable Shares.
11. “Market Stand-Off” Agreement. Executive agrees in connection with any registration of the Company’s securities that, upon the request of the Company or the underwriters managing any public offering of the Company’s securities, Executive will not sell or otherwise dispose of any Shares without the prior written consent of the Company or such underwriters, as the case may be, for a period of time not to exceed 180 days (which period may be extended upon the request of the managing underwriter for an additional period of up to 15 days if the Company issues or proposes to issue an earnings or other public release within 15 days of the expiration of the 180-day lockup period) from the effective date of such registration as the Company or the underwriters may specify; provided that all officers and directors of the Company and all holders of at least 1% of the Company’s equity securities purchased from the Company (other than securities purchased from the Company in a registered public offering) are bound by and have entered into a similar agreement and the restriction on transfer has not been waived in whole or in part with respect to any such officers, directors or holders.
12. Tax Elections. Executive understands that Executive (and not the Company) shall be responsible for the Executive’s own tax liability that may arise as a result of the holding of the Founder’s shares.
13. Miscellaneous.
a. Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof and, except as otherwise stated, supersedes any and all oral or written prior agreements and understandings with respect to such subject matter; the
parties have made no agreements, representations, or warranties relating to the subject matter of this Agreement which are not set forth herein.
b. Construction. Each provision of this Agreement shall be interpreted so that it is valid and enforceable under applicable law. If any provision of this Agreement is to any extent invalid or unenforceable under applicable law, that provision will still be effective to the extent it remains valid and enforceable. The remainder of this Agreement also will continue to be valid and enforceable, and the entire Agreement will continue to be valid and enforceable in other jurisdictions.
c. Waivers. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against who enforcement of the waiver or estoppel is sought. A waiver shall operate only as to the specific term or condition waived. No waiver shall constitute a continuing waiver or a waiver of such term or condition for the future unless specifically stated. No single or partial exercise of any right or remedy under this Agreement shall preclude any party from otherwise or further exercising such rights or remedies, or any other rights or remedies granted by law or any other document.
d. Captions. The headings in this Agreement are for convenience of reference only and do not affect the interpretation of this Agreement.
e. Modifications. This Agreement may not be altered, modified or amended except by an instrument in writing signed by each of the parties hereto.
f. Governing Law. The laws of the State of Delaware shall govern the validity, construction and performance of this Agreement, to the extent not pre-empted by federal law. Any legal proceeding related to this Agreement shall be brought in an appropriate Minnesota court, and each of the parties hereto hereby consents to the exclusive jurisdiction of the courts of the State of Minnesota for this purpose.
g. Notices. All notices and other communications required or permitted under this Agreement shall be in writing and provided to the other party either in person, by fax, or by certified mail. Notices to Inspire must be provided or sent to its Board; notices to Executive must be provided or sent to Executive in person or at Executive’s home.
h. Survival. Notwithstanding the termination of Executive’s employment and the termination of this Agreement, the terms of this Agreement which relate to periods, activities, obligations, rights or remedies of the parties upon or subsequent to such termination shall survive such termination and shall govern all rights, disputes, claims or causes of action arising out of or in any way related to this Agreement.
i. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of Inspire’s successors and assigns.
j. Reimbursement of Fees in Connection with this Agreement. The Company agrees to pay (or reimburse Executive for) the fees and expense of Executive’s counsel in connection with the negotiation and preparation of this Agreement up to a maximum of Two Thousand Five Hundred ($2,500.00) dollars.
[Remainder of Page Left Blank Intentionally]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
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Exhibit A
Team Performance Objectives FY 2007 Inspire Medical Systems
July 6, 2007 — December 31, 2007
The following objectives assume a Series A financing close by Nov 15, 2007
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Objective |
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Weight |
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80% |
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100% |
|
120% |
|
1. |
|
Cuff Electrode Lead Prototypes ready for first animal study by Dec 7, 2007 |
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20 |
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Dec 31, 2007 |
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Dec 7, 2007 |
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Nov 15, 2007 |
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2. |
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Initiate Intra-Oral Temporary Stimulation Research to Support Start of Pilot Clinical Trial by Dec 14, 2008. |
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20 |
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Dec 31, 2007 |
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Dec 14, 2007 |
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Nov 30, 2007 |
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3. |
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Implantable Pulse Generator ceramic substrate builds complete (engineering and clinical units) by November 30, 2007. |
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10 |
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Dec 31, 2007 |
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Nov 30, 2007 |
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Nov 15, 2007 |
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4. |
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Pressure Sensor activities to support January 2008 prototype build (all elements complete) by December 15, 2007. · Complete Finite Element Analysis including initial report. · Manufacturing process development, tooling design, and tooling built for solder and sputtering processes. · Sensor housing/membrane design and tooling complete, first parts received · Sensor FET (IC) design and layout complete, ready for fabrication |
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30 |
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Dec 31, 2007 |
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Dec 15, 2007 |
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Nov 30, 2007 |
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5. |
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Quality System Manual, Development Protocol, and Program Plan complete by December 1, 2007 (revisions 1.0) |
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10 |
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Dec 31, 2007 |
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Dec 1, 2007 |
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Nov 1, 2007 |
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6. |
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Next Generation Physician Programmer proof of concept feasibility by December 1, 2007. |
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10 |
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Dec 31, 2007 |
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Dec 1, 2007 |
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Nov 1, 2007 |
Exhibit B
Draft: Team Performance Objectives FY 2008
Inspire Medical Systems
January 1, 2008 — December 31, 2008
The following objectives assume a Series A financing close by Nov 15, 2007
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|
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Objective |
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Weight |
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80% |
|
100% |
|
120% |
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1. |
|
Expenses +/- 15% through December 31, 2008 |
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15 |
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115% |
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100% |
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85% |
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2. |
|
Intra-Oral Temporary Stimulation Protocol Developed and Piloted to Support Start of Pilot Clinical Trial by September 1, 2008. |
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15 |
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Oct 1, 2008 |
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Sept 1, 2008 |
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Aug 1, 2008 |
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3. |
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Animal studies complete by September 5, 2008. |
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20 |
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Oct 15, 2008 |
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Sept 5, 2008 |
|
Aug 5, 2008 |
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4. |
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Inspire II Implantable System Qualified for Clinical Implants by November 15, 2008 |
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20 |
|
Dec 31, 2008 |
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Nov 15, 2008 |
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Nov 1, 2008 |
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5. |
|
Inspire II 30-patient Pilot Clinical Trial IDE approved by December 11, 2008. |
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20 |
|
Dec 31, 2008 |
|
Dec 11, 2008 |
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Nov 1, 2008 |
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6. |
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Inspire Pilot Clinical first human implant by Dec 15, 2008. |
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10 |
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Dec 31, 2008 |
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Dec 15, 2008 |
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Dec 1, 2008 |
