EXHIBIT 10.4
AGREEMENT TO PROVIDE RETIREE MEDICAL BENEFITS
AND STOCK OPTION BENEFITS
THIS AGREEMENT, made as of January 3, 2002, by and between Tekelec, a
California corporation ("Company"), and its successors and assigns and Xxxxxxx X
Xxxxxxxx;
WHEREAS, the Company has established a plan that provides group health
coverage (the "Tekelec Health Plan") to employees of the Company;
WHEREAS, Xx. Xxxxxxxx is the Chief Executive Officer and President of the
Company ("CEO");
WHEREAS, Xx. Xxxxxxxx is a participant in the Tekelec Health Plan;
WHEREAS, the Company intends to provide medical, dental, and vision
benefits to Xx. Xxxxxxxx and his family in accordance with the terms of this
Agreement after he is no longer employed by the Company and to continue such
coverage for Xx. Xxxxxxxx' life;
WHEREAS, the Company may grant Xx. Xxxxxxxx additional stock options from
time to time after the date of this Agreement; and
WHEREAS, the Company wants to ensure that all future stock option
agreements granting Xx. Xxxxxxxx stock options will provide that such options
will, upon a Qualifying Retirement (as defined herein), immediately vest and be
exercisable for the full term of the option.
NOW, THEREFORE, in consideration of these premises and the mutual promises
and agreements set forth in this Agreement, the parties agree as follows:
ARTICLE I. HEALTH BENEFITS.
A. Eligibility. Xx. Xxxxxxxx, his lawful spouse at the time of Xx. Xxxxxxxx'
termination of employment with the Company ("Xx. Xxxxxxxx' Spouse") and his
dependants, if any, eligible for coverage and benefits under the Tekelec Health
Plan at that time of Xx. Xxxxxxxx' termination of employment with the Company
(the "Dependents") (collectively "Xx. Xxxxxxxx' Family") will receive medical,
dental and vision benefits under Article I of this Agreement (the "Health
Benefits") upon Xx. Xxxxxxxx' termination of employment with the Company for any
reason, so long as Xx. Xxxxxxxx' termination of employment with the Company
occurs after February 16, 2003. If such termination of employment occurs on or
before February 16, 2003, Xx. Xxxxxxxx, Xx. Xxxxxxxx' Spouse and his Dependents
will receive no benefits under Article I of this Agreement.
EXHIBIT 10.4
1. Duration of Xx. Xxxxxxxx' Coverage. Health Benefits for Xx. Xxxxxxxx
shall continue until Xx. Xxxxxxxx' death.
2. Duration of Xx. Xxxxxxxx' Spouse's Coverage. Health Benefits for Xx.
Xxxxxxxx' Spouse shall continue until the earliest of (a) the death of Xx.
Xxxxxxxx, (b) the legal separation or divorce of Xx. Xxxxxxxx and Xx.
Xxxxxxxx' Spouse, or (c) the death of Xx. Xxxxxxxx' Spouse.
3. Duration of Xx. Xxxxxxxx' Dependents' Coverage. Health Benefits for the
Dependents will continue until the earlier of: (a) such Dependent no
longer meets the eligibility requirements under the Tekelec Health Plan as
those eligibility requirements are in effect from time to time following
Xx. Xxxxxxxx' qualifying termination of employment from the Company, or
(b) the death of Xx. Xxxxxxxx.
B. Health Benefits. For purposes of this Agreement, the Company will provide, as
the Health Benefits provided under Article I.A. of this Agreement, the medical,
dental, and vision benefits and coverage provided under the Tekelec Health Plan
to the CEO of the Company. If the Company stops providing such benefits to its
employees, the Company is required to obtain and provide an arrangement that
will provide similar Health Benefits, and in no circumstances less Health
Benefits, to Xx. Xxxxxxxx' Family as those that were provided immediately before
the Company stopped providing such benefits to its employees.
The Company will purchase benefits provided under this Article through a health
coverage provider, as long as the Company determines (1) the cost of such
coverage is reasonable to fulfill the requirements under this Agreement and (2)
the coverage provided complies with the requirements of this Agreement. If the
Company does not provide coverage through a health coverage provider, the
Company will self-insure such coverage.
C. Funding. Xx. Xxxxxxxx will contribute to the cost of Health Benefits under
this Article at the same rate and on the same terms and conditions as the CEO
and other senior executives of the Company contribute for similar health
coverage under the Tekelec Health Plan. The Company shall contribute any
additional amounts, as necessary, to cover the cost of the Health Benefits
provided under this Agreement.
D. Election for Health Benefits. Xx. Xxxxxxxx will have the opportunity to make
elections for Health Benefits for Xx. Xxxxxxxx' Family in the same manner and
frequency as the CEO and other senior executives of the Company may under the
Tekelec Health Plan. In the event the Company stops providing medical, dental
and vision benefits for its employees, Xx. Xxxxxxxx shall be able to change
elections for the Health Benefits no less frequently than annually.
EXHIBIT 10.4
E. Coordination of Benefits. For purposes of Article I.F., the following
definitions shall be used.
1. "Group Plan" means any group or group-type arrangement of coverage,
including benefits associated with this Article I, whether insured or
uninsured, which provides health benefits or services to a member of Xx.
Xxxxxxxx' Family, either by indemnity or prepaid services, by means of (i)
group or blanket insurance, (ii) franchise insurance that terminates upon
cessation of employment, (iii) group hospital or medical service plans and
other group prepayment coverage, or (iv) any coverage under
labor-management trusteed arrangements, union medical arrangements,
employer organization arrangements, government benefit arrangements or
government programs (excluding Medicare).
2. "Allowable Expenses" means any necessary, reasonable, and customary
item of expense for health care when the item of expense is covered at
least in part by one or more Group Plans covering a member of Xx.
Xxxxxxxx' Family for whom claim is made. An Allowable Expense does not
include (i) differences between the cost of an average semiprivate
hospital room and a private hospital room unless the private hospital room
is medically necessary (as defined in the insurance policy), or (ii) the
amount of any reduction in benefits because a member of Xx. Xxxxxxxx'
Family does not comply with the Group Plan provisions.
3. "Primary Plan" means the Group Plan whose medical, dental and vision
benefits for a member of Xx. Xxxxxxxx' Family must be determined without
consideration of the existence of any other plan.
4. "Secondary Plan" means a Group Plan which is not a Primary Plan. If a
member of Xx. Xxxxxxxx' Family is covered by more than one Secondary Plan,
the order of benefit determination rules decide the order in which their
benefits are determined in relation to each other.
F. Coordination with Other Group Plans. If Xx. Xxxxxxxx or Xx. Xxxxxxxx' Family
are eligible for benefits under this Article and under one or more Group Plans,
the benefits of this Agreement shall be coordinated and determined by the
provisions of this Section. This Section is intended to prevent the payment of
benefits that exceed Allowable Expenses. Coordination of benefits under this
Agreement will normally be controlled by the insurance policy providing such
coverage, but notwithstanding any other provisions of the Agreement or any
associated insurance policy, Article I.F.1. and 2. shall control determinations
of coordination of benefits to the extent applicable.
1. If Xx. Xxxxxxxx is covered under a Group Plan as an employee, benefits
under the Group Plan shall be treated as the Primary Plan, and benefits
provided under this Article shall be treated as the Secondary Plan.
EXHIBIT 10.4
2. If Xx. Xxxxxxxx is (i) covered by a Group Plan, other than as a result
of this Agreement, as a retiree (the "Retiree Group Plan") and (ii)
coverage under the Retiree Group Plan provides equivalent or greater
benefits than benefits under this Article, the Retiree Group Plan shall be
treated as the Primary Plan, and benefits provided under this Article
shall be treated as the Secondary Plan. If the Retiree Group Plan does not
provide equivalent or greater benefits than the benefits provided under
this Article, the benefits under this Article shall be treated as the
Primary Plan, and the Retiree Group Plan shall be treated as the Secondary
Plan.
ARTICLE II. STOCK OPTIONS
A. Accelerated Vesting. Any stock option agreement between the Company and Xx.
Xxxxxxxx executed after the effective date of this Agreement shall provide to
the effect that:
Upon Xx. Xxxxxxxx' "Qualifying Retirement" (as such term is defined
below) for any reason other than a termination by the Company for
"Cause" (as such term is defined in Section 2(d)(ii) through (xi) of
the Company's Officer Severance Plan, as amended), the options, to
the extent unvested as of the effective date of Xx. Xxxxxxxx'
Qualifying Retirement, shall immediately vest and become exercisable
in full. For purposes hereof, the term "Qualifying Retirement" shall
mean the termination of the Xx. Xxxxxxxx' employment with the
Company at or after age 55 with not less than five years of
continuous employment as an employee of the Company.
B. Extension of Exercise Period. Any stock option agreement between the Company
and Xx. Xxxxxxxx executed after the effective date of this Agreement shall
provide to the effect that:
Upon Xx. Xxxxxxxx' Qualifying Retirement for any reason other than a
termination by the Company for "Cause" (as such term is defined in
Section 2(d)(ii) through (xi) of the Company's Officer Severance
Plan, as amended), an option, exercisable on such Qualifying
Retirement date or as a result of his Qualifying Retirement, that
would otherwise subsequently cease to be exercisable pursuant to the
terms of the stock option agreement before the expiration of the
option's full term, shall continue to be exercisable until the
expiration of the option's full term.
ARTICLE III. MISCELLANEOUS
A. Information to be Furnished. Xx. Xxxxxxxx shall provide the Company with such
information and evidence as may reasonably be requested from time to time for
the purpose of complying with the Agreement.
EXHIBIT 10.4
B. Limitation of Rights. Neither the establishment of this Agreement, nor any
amendment of the Agreement, nor the payment of any benefits shall be construed
as giving to Xx. Xxxxxxxx or other person any legal or equitable right against
the Company or its respective officers and directors, as an employee or
otherwise, except as expressly provided in this Agreement, and in no event will
the terms of employment or service of Xx. Xxxxxxxx be modified or in any way
affected by this Agreement.
C. Benefits Not Solely from Policy. Except as required by law, applicable
regulation or elsewhere in this Agreement, the benefits provided under Article I
of this Agreement shall be paid first from an insurance policy (or an
arrangement having the effect of an insurance policy). If there is no such
policy or other arrangement, benefits payable under this Agreement shall be paid
from the general assets of the Company. Nothing in this Agreement shall be
construed to require (except as required by law and applicable regulation) the
Company to maintain any fund or segregate any amount for the benefit of Xx.
Xxxxxxxx or Xx. Xxxxxxxx' Family.
D. Nonassignability of Rights. The right of a member of Xx. Xxxxxxxx' Family to
receive any reimbursement under the Agreement shall not be alienable by such
member by assignment or any other method and shall not be subject to being taken
by the member's creditors by any process whatsoever, and any attempt to cause
such right to be so subjected will not be recognized, except to such extent as
may be required by law.
E. Severability. If any provision of this Agreement is held invalid,
unenforceable or inconsistent with any law, regulation or requirement, its
invalidity, unenforceability or inconsistency shall not affect any other
provision of the Agreement, and the Agreement shall be construed and enforced as
if such provision were not a part of the Agreement.
F. Construction of Terms. Words of gender shall include persons and entities of
any gender, the plural shall include the singular and the singular shall include
the plural. Section headings exist for reference purposes only and shall not be
construed as part of the Agreement.
G. Choice of Law/Jurisdiction and Venue. THIS AGREEMENT SHALL BE CONSTRUED,
ADMINISTERED, AND GOVERNED IN ALL RESPECTS (i) UNDER APPLICABLE FEDERAL LAW,
INCLUDING, WITHOUT LIMITATION, THE PROVISIONS OF ERISA AND THE INTERNAL REVENUE
CODE OF 1986 (AS AMENDED) AND RELEVANT INTERPRETATIONS OF BOTH, AND (ii) TO THE
EXTENT NOT PREEMPTED BY FEDERAL LAW, UNDER THE LAWS OF THE STATE OF CALIFORNIA.
EXCLUSIVE JURISDICTION AND VENUE OF ALL DISPUTES ARISING OUT OF OR RELATING TO
THIS PLAN SHALL BE IN ANY COURT OF APPROPRIATE JURISDICTION IN LOS ANGELES
COUNTY, CALIFORNIA. THE PROVISIONS OF THIS SECTION SHALL SURVIVE AND REMAIN IN
EFFECT UNTIL ALL OBLIGATIONS ARE SATISFIED, NOTWITHSTANDING ANY TERMINATION OF
THE PLAN.
EXHIBIT 10.4
H. No Vested Interest. Except for the right to receive any benefit payable under
this Agreement in regard to a previously incurred claim, no person shall have
any right, title, or interest in or to the assets of the Company because of this
Agreement.
I. No Guarantee of Employment. Nothing in this Plan shall be construed as a (i)
contract of employment between the Company and Xx. Xxxxxxxx, (ii) guarantee that
Xx. Xxxxxxxx will be continued in the employment or service of the Company, or
(iii) limitation on the right of the Company to discharge any of its employees
with or without cause.
All employment with the Company is "at-will," which means that Xx. Xxxxxxxx may
resign at any time with or without notice and that the Company reserves the
right to terminate Xx. Xxxxxxxx' employment or alter his position, duties, or
title, with or without notice, for any or no particular reason or cause. While
the terms of Xx. Xxxxxxxx' employment and compensation may be subject to review
and will change from time to time, the at-will nature of his employment with the
Company is not changed by this Agreement and may only be changed by a resolution
duly approved by the Company's Board of Directors.
J. Adoption by Successor Employer or Affiliates. In the event of the
reorganization, purchase, merger, dissolution, or reconstitution, whether direct
or indirect, of the Company, any successor entity shall be required to adopt and
continue this Agreement; in which event, the Agreement shall continue without
any gap or lapse in coverage or benefits. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle Xx. Xxxxxxxx, Xx. Xxxxxxxx'
Spouse and Dependents at that time to pursue all remedies that they may be
entitled to at law or in equity.
The Company shall pay to each member of Xx. Xxxxxxxx' Family all legal
fees and expenses incurred by that individual, if any, in successfully seeking
to obtain or enforce any right, coverage or benefit provided under this
Agreement.
K. Entire Agreement. This Agreement constitutes the entire agreement existing
between or among the parties respecting the subject matter addressed and
supercedes any and all prior agreements, arrangements and understandings
relating to the matters provided for herein, and no party shall be entitled to
benefits other than those specified in this Agreement. As between or among the
parties, no oral statements or prior written material not specifically
incorporated in this Agreement shall be of any force and effect. The parties
specifically acknowledge that in entering into and executing this Agreement, the
parties rely solely upon the representations and agreements contained in this
Agreement and no others. All prior representations or agreements, whether
written or verbal, not expressly incorporated in this Agreement are superseded,
and no changes in or additions to this Agreement shall be recognized unless and
until made in writing and signed by all parties to the Agreement.
EXHIBIT 10.4
L. Legal Advice. Both the Company and Xx. Xxxxxxxx have received (or have
voluntarily and knowingly elected not to receive) independent legal advice with
respect to the advisability of entering into this Agreement and with respect to
all matters covered by this Agreement, and neither has been entitled to rely
upon or has in fact relied upon the legal or other advice of the other party or
such other party's counsel (or employees) in entering into this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
TEKELEC
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------ -------------------------------
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxx
Vice President and General Counsel
EXHIBIT 10.4
AMENDMENT NO. 1 TO THE
AGREEMENT TO PROVIDE RETIREE MEDICAL BENEFITS
AND STOCK OPTION BENEFITS
This Amendment No. 1 to the Agreement to Provide Retiree Medical Benefits
and Stock Option Benefits is entered into effective as of February 1, 2002 (the
"Effective Date") by and between TEKELEC, a California corporation (the
"Company"), and Xxxxxxx X. Xxxxxxxx (Xx. Xxxxxxxx").
Recitals
A. The Company and Xx. Xxxxxxxx have entered into that certain Agreement to
Provide Retiree Medical Benefits and Stock Option Benefits (the
"Agreement") in January 2002, to provide, among other things, certain
stock option benefits to Xx. Xxxxxxxx upon a Qualifying Retirement (as
such term is defined in the Agreement) by Xx. Xxxxxxxx.
B. The Company and Xx. Xxxxxxxx wish to amend Article II.A. of the Agreement
to modify the Company's obligations to accelerate the vesting of certain
of Xx. Xxxxxxxx' stock options upon his Qualifying Retirement.
Amendment
NOW, THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Effective the Effective Date, Article II.A. of the Agreement shall be
amended to read in its entirety as follows:
"A. Accelerated Vesting. Any stock option agreement between the Company
and Xx. Xxxxxxxx evidencing a stock option granted by the Company to Xx.
Xxxxxxxx on or after February 1, 2002, shall provide to the effect that:
Upon Xx. Xxxxxxxx' "Qualifying Retirement" (as such term is defined
below) for any reason other than a termination by the Company for
"Cause" (as such term is defined in Section 2(d)(ii) through (xi) of
the Company's Officer Severance Plan, as amended), the first four
vesting installments of the options (or such other number of vesting
installments as is expressly set forth in a resolution duly adopted
by the Board of Directors or the Compensation Committee of such
Board) covering at least 25% of the shares subject to such options,
to the extent unvested as of the effective date of Xx. Xxxxxxxx'
Qualifying Retirement, shall immediately vest and become exercisable
in full.
EXHIBIT 10.4
For purposes hereof, the term "Qualifying Retirement" shall mean the
termination of the Xx. Xxxxxxxx' employment with the Company at or
after age 55 with not less than five years of continuous employment
as an employee of the Company."
2. Both the Company and Xx. Xxxxxxxx have received (or have voluntarily and
knowingly elected not to receive) independent legal advice with respect to
the advisability of entering into this Agreement and with respect to all
matters covered by this Agreement, and neither has been entitled to rely
upon or has in fact relied upon the legal or other advice of the other
party or such other party's counsel (or employees) in entering into this
Agreement.
3. Except as otherwise expressly amended herein, all other terms and
provisions of the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment is executed effective as of the
Effective Date.
TEKELEC
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------- --------------------------
Xxxxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxx
Vice President and General Counsel
