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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this
fourth day of May 1996, by and between Masimo Corporation, a California
corporation ("Company"), and Xxx X. Xxxxx ("Executive").
RECITALS
A. Executive is a founder of the Company and has been its Chairman and
Chief Executive Officer ("CEO") since its inception. The Board of Directors of
the Company (the "Board") recognizes that the Executive's contributions as
Chairman and CEO have been instrumental to the success of the Company. Executive
and Company entered into an employment contract dated January 17, 1995. The
Board and Executive desire to amend and restate such prior agreement pursuant to
the terms hereof to assure the Company of the Executive's continued employment
in an executive capacity and to compensate him therefor.
B. Company considers the establishment and maintenance of a sound
management to be essential to protecting and enhancing the best interests of the
Company and its shareholders.
C. Company's Board of Directors has determined that appropriate steps
should be taken to retain Executive and to reinforce and encourage his continued
attention and dedication to his assigned duties.
D. The Company desires to retain the services of the Executive, and the
Executive desires to be employed by the Company pursuant to the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual promises and
the mutual covenants and agreements hereinafter set forth, the Company and the
Executive hereby agree as follows:
1. EMPLOYMENT. During the Employment Period (as hereinafter defined),
Company hereby agrees to continue to employ Executive and Executive hereby
agrees to continue to serve the Company, on the terms and conditions contained
in this Agreement.
2. POSITION AND DUTIES. Executive shall serve the Company as its Chairman
of the Board and Chief Executive Officer and shall report to the Board of
Directors. Executive shall be assigned the responsibilities of such office as
they may be modified from time to time by the Board of Directors of the Company
provided that such duties are consistent with Executive's present duties and
with Executive's position. Executive hereby accepts such employment and agrees
to devote substantially all of his full business and professional time and
energy to the business and affairs of the Company.
3. EMPLOYMENT PERIOD. The "Employment Period" shall commence on the date
hereof, and shall end on the later of (i) the third (3rd) anniversary date of
this Agreement or (ii) three years following the date on which notice of
non-renewal of this Agreement is given to the other by either the Executive or
the Company. This Agreement shall be renewed automatically on a daily basis so
that the outstanding term is always three (3) years following any effective
notice of nonrenewal or of termination given by this Company or the Executive.
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4. PLACE OF PERFORMANCE. In connection with his employment by the
Company, the Executive shall be based at the Company's office or facility
where, on the date hereof, the Executive is regularly rendering services on
behalf of the Company and shall not be required to be absent therefrom on
travel status or otherwise more than a reasonable number of days in any
calendar year. For purposes of the preceding sentence, the parties hereto agree
that a "reasonable number of days" shall mean such number of days which is not
in excess of one hundred twenty-five percent (125%) of the number of days on
which the Executive was on travel status or otherwise required by the Company
to be absent from this principal place of performance during the calendar year
immediately prior to the year of computation.
5. COMPENSATION.
5.1 BASE SALARY. In consideration for services performed pursuant to
this Agreement, Company will pay or cause to be paid to the Executive, and
Executive will be entitled to receive and hereby agrees to accept, an initial
annual base salary of One Hundred Seventy-Five Thousand Dollars ($175,000)
("Base Salary"), subject to increases in the discretion of the Board or its
annual review Compensation Committee, payable in accordance with the Company's
normal payroll payment policy.
5.2 BONUS. Executive shall be eligible to participate in any bonus
plan now or hereafter established and implemented by the Board (or designated
Committee) for the payment of bonuses to Executive or to management personnel.
The Company hereby agrees that as soon as reasonably practicable it shall
establish a senior management bonus plan for officers, including the Executive,
that provides for cash bonuses to participants based on the Company's attaining
certain financial goals and upon each participant's performance, in each case to
be established by the Board (or designated committee). In addition, Executive
may be entitled to receive such additional bonus amounts as the Board (or such
Committee as may be designated by the Board) shall determine in its discretion.
In determining such additional amounts, if any, the Board (or Committee) shall
consider among other things Executive's contribution to the accomplishment of
the Company's long-range business goals, the success of various corporate
strategies in which Executive participated, and Executive's unique services in
connection with the maintenance or increase in shareholder values in the
Company.
5.3 STOCK OPTIONS AND RELATED INCENTIVE PLANS. Executive shall be
eligible to participate in the Company's existing incentive programs and any
additional or successor incentive plan or plans. Any option grants made to
Executive pursuant to such plans shall provide for an expiration date
consistent with the provisions of such plans, without regard to termination of
employment; provided, however, in no event shall any option remain exercisable
beyond its stated expiration date.
5.4 EXPENSES. Company shall reimburse Executive for all reasonable
expenses incurred and paid by Executive in the course of the performance of his
duties pursuant to this Agreement; provided that the Executive shall properly
account for such expenses in accordance with Company policy.
5.5 FRINGE BENEFITS. The Executive shall be entitled to continue to
participate in or receive benefits under all of the Company's employee benefits
plans and arrangements in effect on the date hereof or plans or arrangements
providing the Executive with at least equivalent benefits
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thereunder. The Company agrees that, without the Executive's consent, it will
not make any changes in such plans or arrangements which would adversely affect
the Executive's rights or benefits thereunder. The Executive shall be entitled
to participate in or receive benefits under any pension plan, profit-sharing
plan, savings plan, stock option plan, life insurance, health-and-accident plan
or arrangement made available by the Company in the future to its executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Nothing paid to the Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed to be in lieu of compensation
to the Executive hereunder.
5.6 VACATIONS. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company's Board from time
to time for its senior executive officers (prorated in any calendar year during
which the Executive is employed by the Company for less than the entire such
year in accordance with the number of days in such calendar year during which
he is so employed). The Executive shall also be entitled to all paid holidays
given by the Company to its senior executive officers.
5.7 PERQUISITES. The Executive shall be entitled to continue to
receive the fringe benefits appertaining to the office of Chairman and CEO of
the Company in accordance with present practice.
6. CONFIDENTIAL INFORMATION. Executive has entered into and agrees to be
bound by the terms and conditions of the Company's Employee Confidentiality
Agreement (the "Confidentiality Agreement"). Executive agrees to execute such
other documents (including, but not limited to, new versions of the
Confidentiality Agreement) as may be necessary in order to protect the Company's
confidential information.
7. TERMINATION.
7.1 DEATH. The Executive's employment hereunder shall terminate upon
his death.
7.2 DISABILITY. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full time basis for one hundred twenty (120) consecutive
business days, and within thirty (30) days after written notice of termination
is given shall not have returned to the performance of his duties hereunder on
a full time basis, the Company may terminate the Executive's employment
hereunder.
7.3 CAUSE. The Company may terminate the Executive's employment
hereunder for Cause. For the purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment hereunder upon (i) the willful
and continued failure by the Executive to substantially perform his duties
hereunder, other than any such failure resulting from the Executive's capacity
due to physical or mental illness, or (ii) the willful engaging by the
Executive in gross misconduct materially injurious to the Company, or (iii) the
willful violation by the Executive of the provisions of Confidentiality
Agreement hereof provided that such violation results in demonstrably material
injury to the Company. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful" unless done, or
omitted to be done, by him not in good faith and without reasonably belief that
his action or mission was in the best interests of the
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Company. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution, duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for the purpose (after reasonable notice to the
Executive and an opportunity for him, together with his counsel, to be heard
before the Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in clause (i), (ii), or (iii),
and specifying the particulars thereof in detail.
7.4 TERMINATION BY THE EXECUTIVE. The Executive may terminate his
employment hereunder (i) for Good Reason, (ii) if his health should become
impaired to an extent that makes the continued performance of his duties
hereunder hazardous to his physical or mental health or his life, or (iii) at
any time by giving six months' written notice to the Company of his intention to
terminate. For purposes of this Agreement, "Good Reason" shall mean (A) any
assignment to the Executive of any duties other than those contemplated by, or
any limitation of the powers of the Executive in any respect not contemplated by
Section 2 hereof, except in connection with termination of the Executive's
employment for Cause, (B) a reduction in the Executive's rate of compensation,
or a reduction in the Executive's fringe benefits or any other failure by the
Company to comply with Section 5 hereof, (C) failure by the Company to comply
with Section 4 hereof or (D) a "Change in Control of the Company" as that term
is defined in Section 9 below.
7.5 NOTICE OF TERMINATION. Any termination by the Company pursuant to
subsection 7.3 or by the Executive pursuant to subsection 7.4 above shall be
communicated by written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
7.6 DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated pursuant to subsection 7.2 above,
thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), (iii) if the Executive's
employment is terminated pursuant to subsection 7.3 or clause (iii) of
subsection 7.4 above, the date specified in the Notice of Termination, or (iv)
if the Executive's employment is terminated for any other reason, the date on
which a Notice of Termination is given; provided that if within sixty (60) days
after a Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding and final arbitration award or by a final judgment, order or decree of a
court of competent jurisdiction (the time for appeal therefrom having expired
and no appeal having been perfected).
8. COMPENSATION UPON TERMINATION, DEATH OR DURING DISABILITY.
8.1 DEATH. If the Executive's employment shall be terminated by
reason of his death, the Company shall pay to such person as he shall designate
in a notice filed with the Company, or, if no such person shall be designated,
to his estate as a death benefit, an amount equal to one-half (1/2) of the
Executive's Base Salary at the rate in effect on the date of the Executive's
death. Such amount shall be paid for the duration of this Agreement, or three
(3) years, whichever
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is longer, in substantially equal monthly installments at the same time as Base
Salary is paid hereunder. This amount shall be exclusive of and in addition to
any payments the Executive's surviving spouse, beneficiaries or estate may be
entitled to receive pursuant to any pension or employee benefit plan or life
insurance policy presently maintained by the Company.
8.2 DISABILITY. During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his full Base Salary and incentive
compensation until the Executive's employment is terminated pursuant to
subsection 7.2 hereof, or until the Executive terminates his employment pursuant
to clause (ii) of subsection 7.4 hereof, whichever first occurs. After
termination, the Executive shall be paid one-half (1/2) of his Base Salary at
the rate then in effect for three (3) years. Such disability benefits shall be
reduced by any disability payment otherwise payable by or pursuant to plans
provided by the Company and actually paid to the Executive and shall be paid in
substantially equal monthly installments at the same times as Base Salary is
paid hereunder.
8.3 CAUSE. If the Executive's employment shall be terminated for Cause,
the Company shall pay the Executive his full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
the Company shall have no further obligations to the Executive under this
Agreement.
8.4 OTHER. If the Company shall terminate the Executive's employment other
than pursuant to subsections 7.1, 7.2 or 7.3 hereof or if the Executive shall
terminate his employment pursuant to clause (i) of subsection 7.4 hereof, then
the Company shall pay to the Executive a cash severance benefit equal to
Executive's Base Salary at the rate then in effect for a period of two (2)
years. Such severance pay shall be payable to Executive in accordance with the
Company's normal payroll payment policy. If such termination occurs on or after
June 30, 1998, Company shall vest all of Executive's stock options and issue the
stock therefor as additional compensation. Company shall also pay the
withholding tax due on the issuance of such stock at the "Bonus Rate" to the
federal and state taxing authorities.
8.5 EMPLOYEE BENEFIT PLANS. Unless the Executive's employment is
terminated pursuant to subsection 7.3 hereof, the Company shall maintain in full
force and effect, for the continued benefit of the Executive for the full term
of this Agreement all employee benefit plans and programs in which the Executive
was entitled to participate immediately prior to the Date of Termination
provided that the Executive's continued participation is possible under the
general terms and provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is barred, the Executive
shall be entitled to receive an amount equal to the annual contributions,
payments, credits or allocations made by the Company to him, to his account or
on his behalf under such plans and programs from which his continued
participation is barred.
8.6 PARTICIPATION IN FUTURE FINANCINGS. If Executive's employment is
terminated other than pursuant to subsections 7.1, 7.2 or 7.3 hereof or if
Executive shall terminate his employment pursuant to clause (i) of subsection
7.4 hereof, then until the Company has completed an initial public offering, the
Executive shall have a preemptive right to purchase or subscribe for (i) any
shares of Common Stock, (ii) any other equity security of the Company,
including, without limitation, shares of Preferred Stock, (iii) any option,
other than options granted pursuant to an employee stock option plan, warrant or
other right to subscribe for, purchase or otherwise acquire any equity security
of the Company, or (iv) any debt Securities (the "Offered Securities").
Executive
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shall have a preemptive right to purchase or subscribe for that portion of the
offered Securities as the aggregate number of shares of Common Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares) then held by or issuable to Executive bears to the total number of
outstanding shares of Common Stock (as adjusted for any stock dividends,
combinations or splits with respect to such shares) of the Company then held by
or issuable to any person as a result of any convertible security, warrant or
option, other than options granted pursuant to an employee stock option plan.
9. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement
"Change in Control" shall be deemed to have occurred at such time as:
(1) any person (including any syndicate or group within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or any successor provision to either of the
foregoing) is or becomes the beneficial owner, directly or indirectly, of
shares of capital stock of the Company entitling such person to exercise
more than 35% of the total voting power of all voting shares of the
Company; or
(2) there shall occur any consolidation of the Company with, or
merger of the Company into, any other person, any merger of another person
into the Company, or any sale or transfer of all or substantially all of
the assets of the Company to another person (other than (a) a merger which
is effected solely to change the jurisdiction of incorporation of the
Company or (b) any consolidation with or merger of the Company into a
wholly owned subsidiary or of a wholly owned subsidiary into the Company,
or any sale or transfer by the Company of all or substantially all of its
assets to one or more of its wholly owned subsidiaries in any one
transaction or a series of transactions; provided, in each case that the
resulting corporation (if not the Company) or each such subsidiary assumes
or guarantees the obligations of the Company hereunder; or
(3) there shall occur a change in the Board of Directors of the
Company in which the individuals who constituted the Board of Directors of
the Company at the beginning of the two-year period immediately preceding
such change (together with any other director whose election by the Board
of Directors of the Company or whose nomination for election by the
stockholders of the Company was approved by a vote of at least a majority
of the directors then in office either who were directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the directors
then in office.
10. BINDING AGREEMENTS. This Agreement and all rights of the Executive
hereunder shall inure of the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successor, heirs,
distributees, devisees and legatees.
11. NON-WAIVER OF RIGHTS. The failure to enforce, at any time, any of the
provisions of this Agreement or to require, at any time, performance by the
other party of any of the provisions hereof shall in no way be construed to be
a waiver of such provision or to affect either the validity of this Agreement,
or any part hereof, or the right of either party thereafter to enforce each and
every provision in accordance with the terms of this Agreement.
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12. INVALIDITY OF PROVISIONS. The invalidity or nonenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provisions were omitted.
13. ASSIGNMENTS. This Agreement is binding upon the parties hereto and
their respective successors, assigns, heirs and personal representatives. Except
as otherwise provided herein, neither of the parties hereto may make any
assignment of this Agreement, or any interest herein, without the prior written
consent of the other party, except that, without such consent, this Agreement
shall be assigned to any corporation or entity which shall succeed to the
business presently being operated by Company, by operation of law or otherwise,
including by dissolution, merger, consolidation, transfer of assets, or
otherwise.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
15. AMENDMENTS. No modification, amendment or waiver of any of the
provisions of this Agreement shall be effective unless in writing specifically
referring hereto, and signed by the parties hereto.
16. NOTICES. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Xxx X. Xxxxx
00 Xxxxxxxx
Xxxxxx Xxxxxx, XX 00000
If to the Company: Masimo Corporation
00000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
17. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the making, performance or interpretation thereof shall be
settled by arbitration in Orange County, California, in accordance with the
Rules of the American Arbitration Association then existing, and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy. Arbitrators shall be persons experienced in
negotiating, making and consummating employment matters. Notwithstanding the
pendency of any such dispute or controversy, the Company should continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, base salary and any bonus
due) and continue Executive as a participant in all compensation, benefit and
insurance plans in which Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved. Amounts
paid under this section are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts due under
this
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Agreement. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that Executive shall be entitled to seek
specific performance of his right to be paid during the pendency of any dispute
or controversy arising under or in connection with this Agreement.
18. ENTIRE AGREEMENT. This Agreement supersedes all prior employment
agreements (if any), both written and oral, between Company and Executive.
19. INTERPRETATION. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the laws of the State of
California.
IN WITNESS WHEREOF, the Company at the direction of the Board has caused
this Agreement to be executed as of the day and year first above written.
"Company"
MASIMO CORPORATION
By: /s/ XXXX XXXXXXXX
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Its: VP and CFO
"Executive"
/s/ XXX X. XXXXX
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Xxx X. Xxxxx
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