Document:

exv10w12

 

Exhibit 10.12

Exhibit A-1 to NSO Agreement with Kevin K. Sidow

PROMISSORY NOTE

			
	 	 	 
	Loan Amount: $827,475.00
	 	Alameda, California
	Interest Rate: 3.76%
	 	Date: March 22, 2005

     FOR VALUE RECEIVED, the undersigned, Kevin K. Sidow (“Borrower”) hereby promises to pay to the
order of St. Francis Medical Technologies, Inc., a Delaware corporation (“Lender”), at 960 Atlantic
Avenue, Alameda, California or such other place as Lender may designate by written notice to
Borrower, in lawful money of the United States of America, the principal sum of Eight Hundred
Twenty-Seven Thousand Four Hundred Seventy-Five and no/cents DOLLARS ($827,475.00), with interest,
to be paid as set forth below.

     1. Payments. The entire principal balance of this Promissory Note (this “Note”),
together with all accrued and unpaid interest thereon, shall be due and payable on the fourth
anniversary date of the date set forth above (the “Maturity Date”), provided, however, that if such
day is not a Business Day (as defined below) then on the next succeeding Business Day. Interest on
the outstanding principal balance hereunder shall accrue at the rate of Three and Seventy-six
one-hundredths percent (3.76%) per annum, calculated on the basis of a three hundred and sixty day
year. Interest shall accrue on this Note and be payable by Borrower on the Maturity Date.

     2. Purpose of Note. Borrower acknowledges that the purpose of the loan evidenced by
this Note is to provide financing for Borrower’s purchase of Common Stock of the Lender pursuant to
the terms of the Nonstatutory Stock Option Agreement with a Date of Grant of June 1, 2004 and the
Notice of Exercise and Common Stock Purchase Agreement dated as of March 22, 2005 (the “Stock
Agreements”).

     3. Prepayment. Borrower may prepay all or any portion of this Note at any time
without penalty, fee or acceleration prior to the Maturity Date of this Note.

     4. Security. Payment of this Note is secured by a certain Pledge and Security
Agreement (the “Security Agreement”) of even date herewith from Borrower, as Pledgor, to Lender,
as Pledgee, whereby Borrower has pledged certain shares of capital stock as security for Borrower’s
obligations under this Note, as more particularly described in the Security Agreement.

     5. Acceleration of Due Date. The entire unpaid principal balance of this Note,
together with all accrued and unpaid interest thereon, shall, at the election of Lender, become
immediately due and payable upon the
occurrence of any of the following, irrespective of the payment schedule set forth in
Paragraph 1 of this Note:

     (a)   Any failure on the part of Borrower to make any payment under this Note when the same is
due;

1

 

     (b)   Any failure on the part of Borrower to perform or observe any of his obligations under the
Security Agreement or any other security instrument which secures this Note, as and when
performance is due;

     (c)   On such date as Borrower’s employment relationship with Lender is terminated, or deemed
terminated pursuant to the terms of the Stock Agreements, for any reason;

     (d)   If at any time Borrower shall admit in writing his inability to pay his debts as they
become due, or shall make any assignment for the benefit of any creditors, or shall file a petition
seeking any reorganization, arrangement, composition, readjustment or similar release under any
present or future statute, law or regulation, or on the filing or commencement of any petition,
action, case or proceeding, voluntary or involuntary, under any state or federal law regarding
bankruptcy or insolvency;

     (e)   If at any time, Borrower shall, or take an action to, sell, assign, transfer, encumber or
otherwise dispose of any of the shares of capital stock, which Borrower has pledged pursuant to the
Security Agreement, or any interest therein, without the prior written consent of Lender; or 

     (f)   Immediately prior to and conditioned upon the effectiveness of Lender’s initial
registration statement filed under the Securities Act of 1933, as amended, covering Lender’s
securities.

     6.
Offset to Compensation. To the fullest extent permitted by law, upon any
termination of Borrower’s employment with Lender, Borrower hereby authorizes and directs Lender to
offset any unpaid principal balance due under this Note against any amounts owed by Lender to
Borrower, including, but not limited to, any wages, salary, bonuses, accrued vacation or sick pay,
and any other employment or consulting compensation or stock repurchase payments. Lender shall
promptly notify Borrower in writing of any such offset, including an itemization of the amounts
offset and the balance, if any, due and payable pursuant to this Note. Borrower agrees to execute
any necessary consents to such offset.

     7. Collection Costs Borne by Borrower. Borrower agrees to pay all costs and
expenses, including without limitation reasonable attorneys’ fees, incurred by Lender in any action
brought to enforce the terms of this Note and/or to collect this Note, and any appeal thereof.

     8. Miscellaneous.

     (a)   No delay or omission on the part of Lender in exercising any right under this Note or
under the Security Agreement or any other security agreement given to secure this Note shall
operate as a waiver of such right or of any other right under this Note.

     (b)   In the event of default, under this Note, Borrower shall have fifteen (15) days from the
date of notice of default and demand for payment in which to cure such default. Such notice may be
by written notice mailed to Borrower at the last address given to Lender by Borrower and shall be
deemed received three (3) days after being mailed by certified, first-class mail, return receipt
requested or the next day mailed by overnight delivery.

 

 

     (c)   Borrower hereby waives presentment for payment, demand, notice of demand and of dishonor
and non-payment of this Note, notice of intention to accelerate the maturity of this Note, protest
and notice of protest, diligence in collecting, and the bringing of suit against any other party.
The pleading of any statute of limitations as a defense to any demand against the Borrower, any
endorsers, guarantors and sureties of this Note is expressly waived by each and all of such parties
to the extent permitted by law. Time is of the essence under this Note. Any payment hereunder
shall first be applied to any collection costs, then against accrued and unpaid interest hereunder
and then against the outstanding principal balance of this Note.

     9.
Late Charge. If payment of principal or interest under this Note shall not be
made within ten (10) days after the date due, Borrower agrees to pay, in addition to the unpaid
principal or interest, a sum equal to three percent (3%) of the unpaid principal or interest, which
sum Borrower agrees represents a fair and reasonable estimate, considering all of the circumstances
existing on the date of this Note, of the costs and expenses incident to handling and collecting
such delinquent payment that will be sustained by Lender due to the failure of Borrower to make
timely payment. The parties further agree that proof of actual damages would be costly and
impracticable. Such charge shall be paid without prejudice to the right of Lender to collect any
other amounts provided to be paid or to declare a default under this Note or under the Security
Agreement referred to in this Note or from exercising any of the other rights and remedies of
Lender.

     10. Governing Law. The Note shall be governed by the laws of the State of
California, without regard to its choice of laws principles, and shall be construed in accordance
therewith.

     11. Definitions.

     (a) Business Day. As used in this Note the term “Business Day” shall mean any day
other than a Saturday, Sunday or a legal holiday observed by employees of the State of California.

     12. Successors. This Note shall be binding upon Borrower and the personal
representatives, heirs, successors and assigns of Borrower.

[SPACE INTENTIONALLY LEFT BLANK]

 

 

     13. Severability. If any part of this Note is determined to be illegal or
unenforceable, all other parts shall remain in full force and effect.

	 	 	 	 	 
	 

	 	/s/ Kevin K. Sidow 
	 	 
	 

	 	 

Kevin K. Sidow
	 	 
	 

	 	Borrower	 	 

     I, Nancy Sidow, the spouse of Borrower, do hereby consent to the
borrowing by Borrower of the loan evidenced by this Note on the terms and conditions set forth
herein, and to the pledge evidenced by the Security Agreement referred to in Paragraph 4 of this
Note, and any extensions, modifications or amendments thereto, as security for the obligations of
Borrower under this Note.

	 	 	 	 	 
	 

	 	/s/ Nancy Sidowexv10w13

 

Exhibit 10.13

U S V P

US VENTURE PARTNERS

Philip M. Young

General Partner

May 12,
2004                    

Mr. Kevin K. Sidow 

10831 Shiregreen Lane 

Fort Wayne, IN 46814

Dear Kevin:

     
It gives me great pleasure to offer you the position of
President and Chief Executive Officer of St. Francis
Medical Technologies (“St. Francis” or “the
Company”). The Board of Directors intends to elect you to
the Board promptly following your acceptance of this offer. We
are strongly convinced that you will add substantially to the
team and provide the Company with exactly the type of leadership
that the Company needs at this time. We also believe
St. Francis represents an extraordinary opportunity for you
as well.

     
The terms of our offer to you are as follows:

	 	 	 
	
	
	
	

	
    
    Title:

    	 	
    President and Chief Executive Officer

    and Member of the Board of Directors
    
	 
	
	
	
	

	
    
    Reporting to:

    	 	
    Board of Directors
    
	 
	
	
	
	

	
    
    Base Salary:

    	 	
    Your base salary shall be $22,916.67 per month (a
    $275,000 annualized rate), payable in accordance with customary
    Company payroll procedures then in effect for others employed by
    the Company, subject to review on an annual basis.
    
	 
	
	
	
	

	
    
    Annual Bonus:

    	 	
    Up to $75,000 per calendar year based on
    achievement of objectives mutually-agreed upon by you and the
    Board (pro rated for a partial year in 2004), payable in the
    first quarter of the following year and conditioned upon your
    employment as of year end.
    
	 
	
	
	
	

	
    
    Relocation:

    	 	
    The Company will pay you a relocation allowance
    of $120,000, which amount shall be intended to reimburse you for
    the costs of your relocation to the San Francisco Bay Area. You
    are under no obligation to provide the Company with evidence of
    your actual relocation costs nor to reimburse the Company if
    your actual relocation costs are less; however, the Company
    shall also have no obligation or liability to you, however, if
    your actual relocation costs exceed the amount of this
    relocation allowance. This relocation allowance shall be made in
    the form of a 5.0% interest rate, two-year term loan from the
    Company to you, with all interest and principal due and payable
    on the earlier of (i) June 30, 2006, or
    (ii) 30 days following any voluntary termination of
    employment by you. Fifty percent (50%) of the principal and
    interest due on this note shall be forgiven on satisfactory
    completion of the first 12 months of your employment with
    the Company, and the balance of which shall be forgiven upon
    satisfactory completion of 24 months of employment. You
    recognize that some or all of this amount may be taxable upon
    forgiveness of the
    

 

	 	 	 
	 	 	
    principal and interest of this note and that you
    will be responsible for any income taxes payable.
    
	 
	
	
	
	

	
    
    Equity:

    	 	
    Options issued under the Company’s Employee
    Stock Option Plan to acquire 1,275,000 shares of the
    Company’s Common Stock (representing 5.5% of the fully
    diluted share base of the Company, including in that share base
    all shares currently outstanding and all stock options currently
    outstanding, including the shares covered by this option on a
    pro forma basis) at a price equal to fair market value, as
    determined by the Board, on the date of grant (presently
    $0.65 per share). Twenty-five percent (25%) of these shares, or
    318,750 of these shares, will vest at the end of your 1st year
    of employment and the remaining 75% will vest monthly
    (26,562.5 shares per month) over the following three years.
    You will be given the opportunity (but will not be obligated) to
    purchase the shares with a full-recourse promissory note secured
    by the purchased shares. If you choose to exercise this option,
    and leave before the vesting period is complete, the unvested
    equity is subject to buy-back at the original purchase price.
    The Company agrees to work with you in good faith to creatively
    explore purchase alternatives to achieve the most optimal
    combination of tax and accounting treatment benefits for you and
    the Company.
    
	 
	
	
	
	

	
    
    Change in Control:

    	 	
    In the event of a “Change in Control”
    (as defined in the St. Francis Medical Technology, Inc.
    Stock Incentive Plan, a copy of which has been provided to you),
    (a) the vesting of an additional 33% of the then-unvested
    shares subject to the foregoing option will be accelerated and
    the balance will continue to vest at the same monthly rate as
    they would have vested if no such acceleration had occurred for
    the first 12 months of your employment following such
    Change in Control, and (b) 100% of the shares subject to
    the foregoing option shall become vested after 12 months of
    employment following such Change in Control. In addition, in the
    event that you are terminated without “Cause” or
    terminate your own employment for “Good Reason” (as
    defined below) within one year after a “Change in
    Control,” 100% of the shares which are not vested at the
    time of your termination will accelerate and become vested. In
    this context, “Cause” shall mean (i) gross
    negligence, willful misconduct, or repeated, willful and
    flagrant insubordination in the performance of your duties to
    the Company; (ii) repeated unexplained or unjustified
    absence from the Company; (iii) a material and willful
    violation of any federal or state law; (iv) commission of
    any act of fraud with respect to the Company; or
    (v) conviction of a felony or a crime involving moral
    turpitude causing material harm to the standing and reputation
    of the Company. For purposes of this letter agreement,
    “Good Reason” shall mean your termination of your
    employment following a Change of Control by reason of the
    material diminution of your duties and responsibilities, the
    reduction of your overall compensation other than as a part
    of a general reduction for all executive officers, or the transfer of your
    principal place of business for the Company outside the greater
    Bay Area. Receipt of the benefits provided to you under this
    paragraph will be conditioned on you executing a standard form
    of release of the Company and associated persons from any claims
    against the Company.
    
	 
	
	
	
	

	
    
    Termination Without Cause:

    	 	
    In the event of termination without Cause
    (whether before or after a Change of Control) during your first
    two years of employment with the Company, (a) your Base
    Salary and benefits will continue for the greater of
    (i) twelve months minus one-half the number of whole months
    you have been employed, or (ii) six months from the date of
    termination, with payments to be made during the continuation
    

 

 

	 	 	 
	 	 	period according th the Company’s normal
payroll policy, and (b) any outstanding principal and interest on
the relocation allowance note shall be forgiven. In addition, if you
are terminated without Cause before a Change in Control during the
first twelve (12) months of your employment, a total of
250,000 shares subject to your stock option will vest,
notwithstanding that no shares would otherwise be vested. Receipt of
the salary and benefits provided to you under this paragraph will be
conditioned on you executing a standard form of release of the
Company and associated persons from any claims against the Company,
and subject to mitigation obligations and offset by you in the event
you obtain other employment during the severance period.

	 
	Cost-of-housing
Allowance:	 	The Company will pay you the following
additional amounts as an allowance for the cost-of-housing
differential between your current location and the San Francisco Bay
Area: a monthly amount equal to one twelfth
(1/12th)
of the product of (a) the actual simple annual interest rate
payable on the home mortgage loan that you obtain for the purchase of
your home in the San Francisco Bay Area, and
(b) $1.0 million dollars; however, that this
cost-of-housing differential shall terminate on the earlier of
(a) the third anniversary of your employment, or (b) six
months following any IPO of the Company.

	 
	Vacation:	 	In accordance with Company policy

	 
	Benefit Plan:	 	You shall be entitled to the Company’s
basic employment benefits available to all Company employees, as the
same currently exists or may exist in the future. You acknowledge
that participation in Company benefit programs may require payroll
deductions and/or direct contributions by you.

	 
	At Will:	 	The Company’s employees serve on an at will
basis. Your employment is voluntary and for no set period. If you
accept employment with the Company, you will be free to resign at any
time. Likewise, the Company will be free to terminate your employment
at any time, with or without good cause or for any or no cause.

	 
	Employment Terms:	 	This offer of employment is contingent upon your
signing and returning to the Company on or before your employment
start date, the Company’s standard form of “Confidential
Information and Invention Assignment Agreement.” That
agreement provides, among other things that you will not solicit
employees of the Company for a period of one year following
termination of your employment by the Company for any reason. In
addition, you will not accept any additional outside business
responsibilities (such as serving on the Board of Directors of other
companies) without the prior approval of the Board of Directors of
St. Francis.

	 
	Expenses:	 	The Company will reimburse reasonable
business-related expenses incurred by you in accordance with
applicable Company policies.

	 
	Start Date:	 	As soon as practicable, at your election, no
later than June 21, 2004

     Please
note that this offer letter sets forth the entire agreement and
understanding between you and the Company regarding your employment
relationship and supersedes any other written or oral representation,
promise or discussion.

 

 

     
To indicate your acceptance of this offer, please sign and
return one copy of this letter in the enclosed Federal Express
return-addressed envelop. Kevin, we are very much looking
forward to having you as President and Chief Executive Officer
of the Company.

		
	 	
    Yours very truly,
	 
	 	
    /s/ Phillip M. Young
	 	
    Phillip M. Young
	 	
    Director
	 	
    St. Francis Medical Technologies, Inc.
	 	
    For the Board of Directors of the Company

     
By accepting this offer you agree this is a full time position
and you will make every effort necessary to perform adequately
the duties that are assigned to you.

	 	 	 	 
	
	
	
	

	 	
    
    Agreed to and accepted:
    

    	 	 
	 	 
	 	 
	 	
    /s/ Kevin Sidow

    
Kevin Sidow
    	 	
    5/13/04

    
Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00110-of-00352.parquet"}]]