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Exhibit 10.24
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (this "Amendment") is made
and entered into as of October 2, 1995 (the "Effective Time") by and between
Xxxxx Medical Corporation (Delaware), a Delaware corporation (the "Company")
and Xxxxxx X. Xxxxxx ("Employee") and amends that certain Employment Agreement
between the parties dated May 1, 1995 (the "Employment Agreement").
RECITAL
WHEREAS, employee and the Company are parties to the Employment Agreement
which provides that Employee shall not compete with the Company for up to
eighteen (18) months following Employee's termination from the Company; and
WHEREAS, the Company desires to amend the Employment Agreement(s) to: (i)
include a revised three (3) year Covenant Not to Compete that is not invalid
under Section 16600 of the California Business and Professional Code; (ii)
provide for the imposition of other restrictions described below; and (iii) in
consideration of the foregoing, increase the compensation available to Employee
under the Employment Agreement; and
WHEREAS, concurrent with the execution of this Amendment the Company is
entering into an Agreement and Plan of Merger with Xxxxx/Healthdyne Acquisition
Company, Inc. and Healthdyne, Inc. (the "Merger Agreement") which triggers the
change in control provisions in the Employment Agreement (hereinafter referred
to as the "Merger"); and
WHEREAS, the parties intend for this Amendment to become effective
immediately prior to Effective Time of the Merger (as that term is defined in
the Merger Agreement).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereto hereby agree to amend the
Employment Agreement as follows:
1. The paragraph under Section 5.4 "Severance Compensation in the Event of
a Termination Upon a Change In Control" shall be deleted in its entirety and
replaced with the following:
In the event of a Termination upon a Change In Control, the Company shall
pay Employee in cash an amount equal to three (3) times the Employee's
average annual compensation from the Company (as reported on Form W-2
pursuant to applicable provisions of the Internal Revenue Code of 1986,
as amended (the "Code")) for the five (5) years ending prior to the date
of termination. Such payment shall be made in equal
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increments over a three (3) year period. Employee shall also be entitled
to accelerated vesting of any awards granted to Employee under Xxxxx'
Incentive Stock Option Plan with no acceleration, however, of Employee's
obligation to exercise such awards. Employee, shall be entitled, at no
cost to Employee, to participate in the full Employee program of any
outplacement firm, acceptable to both Employee and Xxxxx, until
Employee's reemployment by another employer. In addition to the cost of
such outplacement program, to the extent that any part of such cost
constitutes income to Employee for state or federal income tax purposes,
Xxxxx shall "gross-up" such amount to compensate Employee for all taxes
he may be required to pay. Employee shall continue to accrue retirement
benefits and shall continue to enjoy any benefits under any plans of
Xxxxx in which Employee is a participant to the full extent of Employee's
rights under such plans, including any perquisite provided under this
Agreement for a three (3) year period from the effective date of such
termination; provided, however, that the benefits under any such plans of
Xxxxx (other than Xxxxx' Incentive Stock Option Plan) in which Employee
is a participant, including any such perquisite, shall cease upon
Employee's re-employment by another employer.
2. The paragraph under Section 5.5 Severance Compensation in the Event of
A Failure to Renew This Agreement shall be deleted in its entirety and replaced
with the following language:
In the event Xxxxx fails or otherwise refuses for any reason to renew
this Agreement beyond the Basic term and any extension thereof (except
pursuant to Section 3.1 hereof) the Company shall pay Employee in cash an
amount equal to three (3) times the Employee's average annual
compensation from the Company (as reported on Form W-2 pursuant to
applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code")) for the five (5) years ending prior to the date of
termination. Such payment shall be made in equal increments over a three
(3) year period. Such payment shall be make in equal increments over a
three (3) year period. Employee shall also be entitled to accelerated
vesting of any awards granted to Employee under Xxxxx' Incentive Stock
Option Plan with no acceleration, however, of Employee's obligation to
exercise any such awards. Employee shall be entitled, at no cost to
Employee, to participate in the full Employee program of any outplacement
firm, acceptable to both Employee and Xxxxx, until Employee's
reemployment by another employer. In addition to the cost of such
outplacement program, to the extent that any part of such cost
constitutes income to Employee for state or federal income tax purposes,
Xxxxx shall "gross-up" such amount to compensate Employee for all taxes
she may be required to pay. Employee shall continue to accrue retirement
benefits and shall continue to enjoy any benefits under any plans of
Xxxxx in which Employee is a participant to the full extent of Employee's
rights under such plans, including any perquisites provided under this
Agreement, for a three (3) year period from the effective date of such
termination; provided, however, that the benefits under any such plans of
Xxxxx (other than Xxxxx' Incentive Stock Option Plan) in which Employee
is a participant, including any such perquisites, shall cease upon
Employee's reemployment by another employer.
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3. The entire Section 8 "Protection of Company Assets and Dispute
Resolution" of the Agreement shall be deleted and replaced with the following
(except that the entire Subsection 8.2 "Arbitration" shall be moved in to the
"Miscellaneous" Section and renumbered as Subsection 11.12, and Subsection 8.4
"Confidential Information and Trade Secrets" shall survive in the new Section
8, renumbered as Subsection 8.7):
8. Protective Covenants
8.1 Definitions
This Subsection Subsections 8.1 through 8.6 of this Section 8.
sets forth the definition of certain capitalized terms used in
Subsections 8.1 through 8.6 of this Section 8.
8.1.1 "Competing Business" shall mean a business (other than
the Company) that, directly or through a controlled subsidiary or
through an affiliate, (a) develops, markets and/or sells products
for uterine contraction monitoring in the home or products that
would be used in lieu of or in competition with uterine contraction
monitoring products ("Competing Products"), and/or (b) provides
obstetrical home care services, including, without limitation,
programs for monitoring patients who are at risk of preterm
delivery, programs for managing patients suffering from obstetrical
hypertension or diabetes, infusion therapy services involving drugs
to control preterm labor, nursing services and maternity management
services for both low and high risk pregnancies ("Competing
Services"). Notwithstanding the foregoing, no business shall be
deemed a "Competing Business" unless, within at least one of the
business's three most recently concluded fiscal years, that
business, or a division of that business, derived more than twenty
(20%) percent of its gross revenues or more than $2,000,000 in
gross revenues from the development, marketing or sale of Competing
Products and/or the provision of Competing Services.
8.1.2 "Competitive Position" shall mean: (a) the Employee's
direct or indirect equity ownership (excluding ownership of less
than one (1%) percent of the outstanding common stock of any
publicly held corporation) or control of any portion of any
Competing Business; or (b) any employment, consulting, partnership,
advisory, directorship, agency, promotional or independent
contractor arrangement between the Employee and any Competing
Business where the Employee performs services for the Competing
Business substantially similar to those the Employee performed for
the Company; provided, however that Employee shall not be deemed to
have a Competitive Position solely because of Employee's services
for a Competing Business that are not directly related to
the sale of Competing Products or the provision of Competing
Services, unless more than thirty-five percent (35%) of the gross
revenues of the Competing Business are derived from the sale of
Competing Products and/or the provision of Competing Services.
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8.1.3 "Covenant Payments" shall mean the payments and benefits
under this Agreement that are made or provided to the Employee
under Section 4 of this Agreement in exchange for the Employee's
agreeing to the covenants in Subsections 8.2 through 8.7
(collectively, the "Protective Covenants"). The parties hereby
stipulate that the value of the Covenant Payment is One Million One
Hundred Ninety-Eight Thousand Six Hundred Fifty-Nine Dollars
($1,198,659.00).
8.1.4 "Covenant Period" shall mean the period of time from the
date of this Amendment to the date that is three (3) years after
the effective date of any termination in the case of a Termination
upon a Change in Control, a Termination Upon a Failure to Renew or
a Termination for Cause, and the date that is one (1) year after
any termination in the case of a Termination Other Than For Cause.
8.1.5 "Customers" shall mean actual customers, clients,
referral sources or managed care organizations or actively sought
prospective customers, clients, referral sources or managed care
organizations of the Company (a) during the two (2) years prior to
the effective date of the termination, and (b) during the Covenant
Period.
8.1.6 "Restricted Territory" shall mean a one hundred-fifty
(150) mile radius of the currently existing Company locations.
8.2 Limitation on Competition. Ancillary to and as a
condition precedent to the Merger, in connection with which the
Employee will receive, both directly and indirectly, significant
benefits and value, and in consideration of the Covenant Payments
payable by the Company to the Employee under this Agreement, the
Employee agrees that during the Covenant Period, the Employee will
not, without the prior written consent of the Company, anywhere
within the Restricted Territory, either directly or indirectly,
alone or in conjunction with any other party, accept, enter into or
take any action in conjunction with or in furtherance of a
Competitive Position (other than action to reject an unsolicited
offer of a Competitive Position).
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8.3 Limitation on Soliciting Customers. Ancillary to and as a
condition precedent to the Merger, in connection with which the
Employee will receive, both directly and indirectly, significant
benefits and value, and in consideration of the Covenant Payments
payable by the Company to the Employee under this Agreement, the
Employee agrees that during the Covenant Period, the Employee will
not, without the prior written consent of the Company, alone or in
conjunction with any other party, solicit, divert or appropriate or
attempt to solicit, divert or appropriate on behalf of a Competing
Business with which Employee has a Competitive Position any
Customer located in the Restricted Territory (or any other Customer
with which the Employee had any direct contact on behalf of the
Company) for the purpose of providing the Customer or having the
Customer provided with a Competing Product or Competing Service.
8.4 Limitation on Soliciting Personnel or Other Parties.
Ancillary to and as a condition precedent to the merger, in
connection with which the Employee will receive, both directly and
indirectly, significant benefits and value, and in consideration of
the Covenant Payments payable to the Company to the Employee under
this Agreement, the Employee hereby agrees that he will not,
without the prior written consent of the Company, alone or in
conjunction with any other party, solicit or attempt to solicit any
employee, consultant, contractor, independent broker or other
personnel of the Company to terminate, alter or lessen that party's
affiliation with the Company or to violate the terms of any
agreement or understanding between such employee, consultant,
contractor or other person and the Company.
8.5 Acknowledgment. The parties acknowledge and agree that
the covenants of the Employee in Subsection 8.2 through 8.7 are
and shall be treated, under law, as "ancillary to the sale of the
Company's business." The parties acknowledge and agree that the
protective Covenants are reasonable as to time, scope and territory
given the Company's need to protect its trade secrets and
confidential business information and given the substantial
payments and benefits to which the Employee is entitled in
connection with the Merger and otherwise pursuant to this
Agreement.
8.6 Remedies. The parties acknowledge that any breach or
threatened breach of a Protective Covenant by the Employee is
reasonably likely to result in irreparable injury to the Company,
and therefore, in addition to all remedies provided at law or in
equity, the Employee agrees that the Company shall be entitled to a
temporary restraining order and a permanent injunction to prevent a
breach or contemplated breach of the Protective Covenant. If the
Company seeks an injunction, the Employee waives any requirement
that the Company post a bond or any other security.
4. This Amendment shall become null and void if the Effective Date, as
defined in the Merger Agreement, does not occur in accordance with the terms
set forth in the Merger Agreement.
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5. All other terms and conditions of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
it to be effective as of the day and year first written above.
COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
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Name:
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Title:
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Signature: /s/ Xxxxxx X. Xxxxxx
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Employee
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