EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of the 23rd day of
August, 1996, by and among ADVANCED MEDICAL, INC. ("AM"), IMED CORPORATION
("IMED"), a majority-owned subsidiary of AM, AM and IMED each being a
corporation organized under the laws of the State of Delaware and having an
office and place of business at 0000 Xxxxxxxxxxxx Xxxxxx, Xxx Xxxxx Xxxxxxxxxx
00000, and Xxxxxx X. Xxxx, ("Executive"), residing at 00000 Xxxxxxx Xxxxxx,
Xxxxx, Xxxxxxxxxx 00000.
B A C K G R O U N D
The Executive, AM and IMED are parties to an employment agreement
dated August 31, 1993, as amended from time to time (the "Existing Agreement").
IMED proposes to engage in a business combination (the "Business Combination")
as a result of which IVAC Holdings, Inc. ("Holdings"), the parent of IVAC
Medical Systems, Inc., a Delaware corporation ("Operating Co."), will be merged
with IMED Merger Sub, Inc., a wholly-owned subsidiary of IMED. Immediately
thereafter, Operating Co. will be merged with and into Holdings and IMED will be
merged with and into Holdings (the "Subsequent Combination"). IMED and AM
desire to employ the Executive as of the effective date of the Business
Combination ("Effective Date") in the capacity of the Executive Vice President,
Chief Financial Officer, Secretary and Treasurer of each of AM and IMED, and the
Executive desires to be so employed, all upon and subject to the terms and
conditions set forth in this Agreement. Following the Subsequent Combination
any reference to IMED in this Agreement shall be deemed to be a reference to
Holdings.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the parties agree as follows:
1. EMPLOYMENT. Each of IMED and AM hereby employs the Executive pursuant
to the terms and conditions of this Agreement, effective as of the Effective
Date, unless on or prior to such date the Executive dies, becomes unable to
perform his duties hereunder, voluntarily terminates his existing employment
with AM or IMED, or is discharged for "Cause" (as contemplated and defined in
AM's Third Amended and Restated 1988 Stock Option Plan) in which event this
Agreement shall be deemed to be terminated, fully released and of no force or
effect (a "Termination"). The Executive hereby
accepts such employment by IMED and AM, as the case may be, upon such terms and
conditions.
2. RESPONSIBILITIES AND DUTIES. During the Term of Employment (as
hereinafter defined), the Executive shall be employed as the Executive Vice
President, Chief Financial Officer, Secretary and Treasurer of each of AM and
IMED. In that capacity, for each of such companies, the Executive shall have
the responsibilities and duties customarily ascribed to a person holding the
offices referred to above in companies similarly situated, as well as: (i) with
respect to IMED, such other duties and responsibilities consistent with such
offices as the executive holding the title of Chief Executive Officer of IMED
(the "IMED CEO") or, if there is no one serving in the capacity of IMED CEO,
that the Board of Directors of IMED (the "IMED Board"), shall from time to time,
reasonably determine; and (ii) with respect to AM, such other duties and
responsibilities consistent with such offices as the executive holding the title
of Chief Executive Officer of AM (the "AM CEO") or, if there is no one serving
in the capacity of AM CEO, that the Board of Directors of AM (the "AM Board"),
shall from time to time, reasonably determine. It is agreed and understood
between the parties that the Executive shall devote a substantial portion of his
working time to the performance of his responsibilities and duties to IMED
hereunder, but shall also devote that portion of his working time as is
reasonably necessary to the performance of his responsibilities and duties to AM
hereunder. During the Term of Employment, the Executive shall devote his full
working time to the performance of his responsibilities and duties hereunder and
shall comply with the policies of IMED and AM with respect to conflict of
interest and business ethics from time to time in effect.
During the Term of Employment, the Executive shall not, without the
prior written consent of both AM and IMED, render services, whether or not
compensated, to any other person or entity as an employee, independent
contractor of otherwise, PROVIDED, HOWEVER, that nothing contained herein shall
restrict the Executive: (i) from rendering services to charitable organizations,
industry organizations, trade organizations and civic organizations; (ii) in
each case, with the prior written approval of both AM and IMED, which approval
will not be unreasonably withheld, from serving as a director of any one or more
other corporations; or (iii) from managing his personal investments, in each of
the above cases in such manner as shall not interfere with the performance by
the Executive of his duties and responsibilities hereunder.
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The Executive shall report directly to the CEO of the pertinent
company, if there is no other person serving in the capacity of CEO, to the
pertinent Board of Directors. The Executive's principal duties shall be
rendered at the principal office of IMED and AM in San Diego, California.
3. COMPENSATION. For all services to be performed by the Executive
under this Agreement, IMED shall pay to the Executive during the Term of
Employment a base salary ("Base Salary") at the rate of $250,000 per annum. All
Base Salary payable to the Executive pursuant to this Section 3 shall be payable
in accordance with the normal payroll practices of IMED for executive personnel
from time to time in effect. IMED shall review the amount of Base Salary at
least annually as of the payroll payment date nearest each anniversary of the
Effective Date and may (but shall have no obligation to) increase the
Executive's Base Salary, pay management bonuses (other than the Company Bonus
and the Additional Bonus) to the Executive or do both.
4. EXPENSES AND ADDITIONAL BENEFITS.
a. BENEFIT PLANS. The Executive will be eligible to participate in
any "stay-put" or "retention" bonus plans of AM or IMED or both AM and IMED. In
addition, the Executive will be eligible to participate in the employee benefit
plans, medical insurance plans, disability income plans, retirement plans and
other health and welfare plans of IMED as generally made available to all
executive officers of IMED, as they may exist from time to time, except: (i) for
any severance and other termination benefits; and (ii) to the extent such plans
are duplicative of, or in conflict with, benefits otherwise provided to the
Executive under this Agreement and subject to the applicable terms and
conditions of such plans as they may exist from time-to-time, including, without
limitation, those relating to eligibility and employee contribution.
b. OTHER BENEFITS. During the Term of Employment, IMED shall
provide the Executive with a mobile phone, fax and computer and pay all
reasonable costs associated therewith and shall pay the initiation fee and
annual dues of a country club chosen by the Executive such as the Fairbanks
Ranch Country Club or another country club located in San Diego, California.
c. AUTOMOBILE. During the Term of Employment, AM shall pay all
lease payments under a lease for an automobile in the class of a BMW 740iL,
together with all insurance and
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maintenance costs on such vehicle, consistent with past practice.
d. VACATION. During the Term of Employment, the Executive will be
entitled to four (4) weeks paid vacation and holidays in accordance with IMED's
policies available to executives.
e. DOCUMENTED EXPENSES. IMED shall reimburse the Executive for all
reasonable, documented travel, entertainment and other out-of-pocket expenses
incurred by the Executive on behalf of the IMED in the course of his employment
hereunder in accordance with IMED's normal policies and provisions regarding
such reimbursement. AM shall reimburse the Executive for all reasonable,
documented travel, entertainment and other out-of-pocket expenses incurred by
the Executive on behalf of the AM in the course of his employment hereunder in
accordance with AM's normal policies and provisions regarding such
reimbursement.
f. TAXES. The Executive understands and acknowledges that he may
incur personal income tax (whether federal, state, local or otherwise) liability
relating to some or all of the benefits described in this Agreement and agrees
that he shall be solely responsible for the maintenance of any records relating
thereto and he shall be solely responsible for the payment thereof. All Base
Salary or other compensation or benefits, in cash or in kind, paid to the
Executive hereunder shall be subject to normal withholding and deductions
imposed by any one or more of local, state, federal and foreign governments.
g. INCENTIVE COMPENSATION. Beginning with IMED's 1997 fiscal year
and for each fiscal year thereafter during the Term of Employment, the Executive
shall be eligible to receive an annual bonus (the "Company Bonus") of 50% of the
Executive's Base Salary for such fiscal year (the "Target Amount") based upon
IMED achieving certain operational and financial criteria, including revenue and
profitability targets and other organizational milestones (such criteria being
hereinafter collectively referred to as the "Targets"). As long as the Xxxxxx
Agreement (as hereinafter defined) is in effect, the Targets for each fiscal
year during the Term of Employment shall be the same as those targets set by the
IMED Board for Xxxxxxx Xxxxxx, the IMED CEO as of the Effective Date, pursuant
to the employment agreement of Xx. Xxxxxx (the "Xxxxxx Agreement") or, such
other targets as Xx. Xxxxxx and the Executive may agree upon not less than 45
days prior to
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the beginning of such fiscal year; PROVIDED, HOWEVER, that if the Targets for
the fiscal year 1997 are to be Targets agreed upon by Xx. Xxxxxx and the
Executive, such Targets will be agreed upon within 90 days following the
Effective Date. If the Xxxxxx Agreement is no longer in effect, the Targets for
each fiscal year shall be those Targets agreed upon, not less than 45 days prior
to the beginning of such fiscal year, by the Executive and by a director serving
on the IMED Board and designated by the IMED Board for such purpose; PROVIDED,
HOWEVER, that the Targets for fiscal year 1997 will be agreed upon within 90
days following the Effective Date. If IMED does not achieve the Targets in any
fiscal year during the Employment Term, the Board of Directors may, in its sole
and absolute discretion, award the Executive a bonus with respect to such fiscal
year in such amount as it, in its sole and absolute discretion, shall determine.
In addition, beginning with IMED's 1997 fiscal year and for each
fiscal year thereafter during the Term of Employment, the Executive shall be
eligible to receive an additional annual bonus (the "Additional Bonus") of 25%
of the Executive's Base Salary for each fiscal year during the Term of
Employment (the "Individual Target Amount") based upon certain operational,
financial and personal goals and certain organizational milestones (the
achievement of which is in the control of and intended to be primarily the
result of the Executive's efforts) (such criteria being hereinafter collectively
referred to as the "Individual Targets"). The Individual Targets for each
fiscal year during the Term of Employment will be agreed upon, not less than 45
days prior to the beginning of such fiscal year, by the Executive and the IMED
CEO or, if there is no other person serving in the capacity of IMED CEO, by the
Executive and by a director serving on the IMED Board and designated by the IMED
Board for such purpose; PROVIDED, HOWEVER, that the Individual Targets for
fiscal year 1997 will be agreed upon within 90 days following the Effective
Date.
The Company Bonus and the Additional Bonus, if any, payable hereunder
for any fiscal year shall be paid by IMED in a single installment within 30 days
following the date (the "Delivery Date") of delivery to the Board of Directors
of IMED's audited financial statements for the fiscal year to which such bonus
relates or as otherwise agreed to by the Executive and either the IMED Board or
the IMED CEO.
h. OPTIONS. All of the stock options previously granted by AM to
the Executive through the date hereof under
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the AM 1988 Amended and Restated Stock Option Plan (the "Plan") shall continue
in effect in accordance with the terms of the grant of each such option and the
option agreement evidencing such grant, and, except as contemplated in Section
6(c) below, shall continue to vest at the rate of 20% per year from the date of
grant.
Effective as of the Effective Date, AM shall grant the Executive
options (the "Options") under the Plan to purchase an aggregate of 75,000 shares
of AM's common stock at a per share exercise price equal to the average closing
price of AM's common stock for the five business days next following the signing
of this Agreement (inclusive) and vesting ratably on each one year anniversary
of the date of grant in equal amounts over three years.
Anything herein to the contrary notwithstanding, all Options not then
vested shall immediately vest and become exercisable at the effective time of a
Change of Control, as such term is defined in the Plan.
5. TERM OF EMPLOYMENT.
The Executive's term of employment hereunder ("Term of Employment")
shall commence on the Effective Date and shall continue until the "Agreement
Termination Date", which shall mean the earliest to occur of:
a. the death of the Executive;
b. the total or partial disability of the Executive that renders him
unable to perform his obligations under this Agreement for either IMED
or AM for a period of not less than six (6) consecutive months;
c. the discharge of the Executive by the IMED Board or the AM Board
for "Cause" (as defined in AM's Amended and Restated 1988 Stock Option
Plan);
d. the discharge of the Executive by the IMED Board or the AM Board
without Cause and only by giving the Executive thirty (30) day advance
notice in writing of such termination (a "Separation") prior to the
Final Date;
e. the voluntary termination of the Term of Employment by the
Executive; PROVIDED, HOWEVER,
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that in the event of a material breach by IMED or AM of the terms of
this Agreement (a "Material Breach"), the Executive will provide IMED
or AM with notice thereof and if IMED or AM fails to cure the same
during the thirty (30) day period following receipt of such notice,
the Executive may terminate his employment with AM and IMED and such
shall be deemed to constitute a Separation; or
f. the Final Date;
If the Executive is terminated pursuant to Sections 5(b) or 5(c), the
Executive shall be given written notice of termination thirty (30) days in
advance of such termination. During the thirty (30) day period, the Executive
will be given the opportunity to present his position on the matter to the AM or
IMED CEO, or if there is no one serving in the capacity of AM CEO, the AM Board
of Directors, and if there is no one serving in the capacity of IMED CEO, the
IMED Board of Directors.
"Final Date" shall mean the third anniversary of the Effective Date,
provided that the Final Date shall automatically extend for additional one year
periods on the third anniversary date of the Effective Date and on each
subsequent anniversary date of the Effective Date unless any party has given
written notice of non-renewal to the other party at least 60 calendar days prior
to: (i) such third anniversary date; or (ii) any such other anniversary date.
If such notice of non-renewal is given by AM or IMED, and the Final Date occurs
as a result thereof (an "AM/IMED Notice Event"), then such termination of this
Agreement shall be deemed to constitute a Separation.
6. EFFECTS OF TERMINATION.
a. Upon termination of the Term of Employment pursuant to Sections
5(a), (b), (c), (e) except as a result of a termination pursuant to a Material
Breach or (f), the Executive shall be entitled to receive within thirty (30)
days after the date of termination any amounts due and unpaid to the Executive
from IMED as of the Agreement Termination Date.
b. Following the termination of the Term of Employment pursuant to
Section 5(d) or Section 5(e) as a result of a Material Breach, or in the event
of the occurrence of an AM/IMED Notice Event, the Executive shall be entitled to
receive: (i)a lump sum payment of an amount equal to one (1)
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year's Base Salary to be paid promptly following the date of termination; and
(ii) payment of such prorated portion of the Company Bonus and Additional Bonus
as IMED determines to be appropriate under the circumstances (IMED hereby
agreeing to be reasonable in that regard), to be paid promptly following the
determination thereof (the payments to be made pursuant to Section 6(b)(i) and
6(b)(ii) being referred to herein as the "Severance Payments"). During the one
year period following termination of the Term of Employment (but not for any
period after which the Executive has commenced full time employment with an
employer other than AM or IMED and has qualified for coverage under the benefit
plans of such employer), the Executive shall be entitled to receive (to the
extent consistent with past practice) the benefits referred to on Schedule 1
hereto to the extent he participated therein at the time of Separation.
Severance Payments made to the Executive hereunder are in lieu of, and
not in addition to, any unemployment compensation payments from any state or
local governmental agency or instrumentality or otherwise for the same
unemployment period. The Executive agrees he will not apply for unemployment
benefits.
c. In the event of the occurrence of a Separation, then all stock
options granted to the Executive pursuant to the Plan prior to the effective
date of such Separation shall immediately vest and become exercisable at any
time during the one year period following a Separation.
d. The rights and remedies provided to the Executive under this
Section 6 and any right to any stay-put or retention bonus as contemplated in
the first sentence of Section 4(a) hereof shall be the sole and exclusive rights
and remedies of the Executive in the event of either or both of the termination
of this Agreement and the Executive's employment hereunder.
7. NON-DISCLOSURE, NON COMPETITION
AND NON-SOLICITATION
a. NON-DISCLOSURE. The Executive agrees that all information
pertaining to the prior, current or contemplated business of IMED, AM and their
affiliates (excluding (i) publicly available information (in substantially the
form in which it is publicly available) unless such information is publicly
available by reason of unauthorized disclosure and (ii) information of a general
nature not pertaining
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exclusively to IMED or AM which is generally available) are valuable and
confidential assets of IMED and AM. Such information shall include, without
limitation, information relating to intellectual property, patents, trademarks,
trade secrets, supplier lists, customer lists, bidding procedures, financing
techniques and sources and such financial statements of IMED, AM and their
affiliates as are not available to the public. The Executive shall hold all
such information in trust and confidence for IMED and AM and shall not use or
disclose any such information for other than IMED's or AM's business and shall
be liable for damages incurred by IMED or AM as a result of disclosure of such
information by the Executive for any purpose other than IMED's or AM's business,
either during his employment or after the Agreement Termination Date.
b. NON-COMPETITION. Executive agrees that at any time during the
Term of Employment and for a period of twelve (12) months thereafter, whether or
not the Executive is discharged for Cause prior thereto, the Executive will not
accept any employment with, or render any services to, any person, firm or
corporation in which its primary business activity competes with any business
conducted by IMED, AM or their affiliates on the Agreement Termination Date.
c. NON-SOLICITATION. Executive agrees that he will not, during the
Term of Employment and for a period of twelve (12) months thereafter, directly
or indirectly, individually or on behalf of other persons, aid or endeavor to
solicit or induce (i) any employees of IMED, AM or their affiliates to leave
their employment with IMED, AM or their affiliates in order to accept employment
with another person or entity, or (ii) any customers of IMED, AM or their
affiliates to purchase products or services sold or provided by IMED, AM or
their affiliates from another person or entity.
d. NO ADEQUATE REMEDY AT LAW. The parties hereto acknowledge that
it is impossible to measure in money the damages which will accrue to IMED or AM
in the event the Executive breaches any of the covenants in paragraphs 7(a)
through (c) above and, if IMED or AM shall institute any action or proceeding to
enforce those covenants, the Executive hereby waives and agrees not to assert
the claim or defense that IMED or AM has an adequate remedy at law. The
foregoing shall not prejudice IMED or AM's right to require the Executive to
account for and pay over to IMED or AM the amount of any actual damages incurred
by IMED or AM as a result of any such breach, up to but not in excess of the
compensation
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and other benefits derived or received by the Executive as a result of any
transaction constituting a breach of the covenants set forth in paragraph 7(a),
(b) or (c) above.
8. REPRESENTATIONS AND WARRANTIES.
a. The Executive represents and warrants to and agrees with IMED and
AM that the execution and delivery of this Agreement by the Executive and the
performance by the Executive of his duties hereunder shall not result in any
breach of, or constitute a default under, any agreement to which he is a party
or by which he may be bound.
b. IMED and AM each represent and warrant to and agrees with the
Executive that the execution and delivery of this Agreement by IMED and AM and
the performance by IMED and AM of its obligations hereunder shall not result in
any breach of, or constitute a default under, any agreement to which it is a
party or by which it may be bound.
9. NOTICE. Any notice to be given hereunder by a party shall be
deemed given, if in writing and delivered personally or sent by registered or
certified mail, to their respective addresses hereinabove provided, and shall be
effective upon receipt. Any party may change its or his address by written
notice to all other parties given in the manner specified above.
10. ASSIGNMENT. This Agreement and all rights under this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective personal or legal representatives,
executors, administrators, heirs, distributees, deviates, legatees, successors
and assigns. This Agreement is personal in nature, and none of the parties to
this Agreement shall, without the written consent of the others, assign or
transfer this Agreement or any one or more of its rights or obligations under
this Agreement to any other person or entity, except that: (i) the foregoing
shall not restrict the Business Combination or the Subsequent Combination as
contemplated herein; and (ii) either or both of IMED or AM may assign this
Agreement to any of its affiliates; PROVIDED, that such assignment shall not
relieve the assigning party of its obligations hereunder. If the Executive
should die while any amounts are still payable, or any benefits are still
required to be provided, to the Executive hereunder, all such amounts or
benefits, unless otherwise provided herein, shall be paid or provided in
accordance with the terms of this Agreement to
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the Executive's devisee, legatee, or other designee or, if there be no such
designee, to the Executive's estate.
11. GOVERNING LAW. This Agreement shall be construed and governed in
all respects by the law applicable to contracts made and to be performed in
State of California.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding among IMED, AM and the Executive relating to the subject
matter hereof, and neither this Agreement nor any provisions hereof can be
modified, changed, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination is
sought.
13. SEVERABILITY. The invalidity of any term or terms of this
Agreement shall not invalidate or otherwise affect any other term of this
Agreement, which shall remain in full force and effect. The parties agree that
in the event a court of competent jurisdiction determines that any terms of
Section 6 hereof are invalid or otherwise unenforceable, it is their intention
that such court shall substitute terms therefor which such court determines are
enforceable, so as to result in the enforcement of such Section to the maximum
extent permitted by law.
14. OBLIGATION SEVERAL. The obligation of IMED and AM hereunder are
several and not joint. IMED shall only be obligated for the express obligations
of IMED hereunder and AM shall only be obligated for the express obligations of
AM hereunder.
15. EFFECT. From and after the Effective Date, this agreement shall
supersede, and replace all other agreements (written or oral), understandings,
letters and discussions concerning Executive's employment with IMED, AM or any
of its affiliates including, without limitation, the Existing Agreement
(collectively, the "Prior Agreements"). On the Effective Date all of the Prior
Agreements shall, by virtue of this Agreement, be and be deemed to be
terminated, fully released and of no force or effect. Until the Effective Date,
if any, the terms of the Prior Agreements shall continue in effect in accordance
with the terms thereof.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, more of which need contain the signature of more than one party
hereto, each of which shall
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be deemed to be an original, and all of which together shall constitute a single
agreement.
IN WITNESS WHEREOF, the parties hereto executed or caused this
Agreement to be executed as of the day and year first above written.
IMED CORPORATION.
By: /s/ Xxxxxx X. Picower
Name: Xxxxxx X. Picower
Title: Chairman of the
Board of Directors
ADVANCED MEDICAL, INC.
By: /s/ Xxxxxx X. Picower
Name: Xxxxxx X. Picower
Title: CEO
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
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Schedule 1
Life Insurance Benefits - Basic,
Supplemental, Family Protection
Comprehensive Medical/Dental Plan
Retirement Plan*
Savings and Stock Plan
------------------------
*/Pursuant to the terms of the Retirement Plan, from and after the date
employment is terminated, the Executive will continue to be covered by the
Retirement Plan and will be entitled to those benefits which have vested in the
plan, but will not be entitled to receive any additional benefits under that
plan after the date of such termination, whether or not the Executive is
receiving Severance Payments.
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