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EXHIBIT 10.7
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 Xxxxxxx Xxxx ("Executive").
RECITALS
A. Executive is a key employee of the Company and has been its Chief
Technical Officer since October of 1989. The Board of Directors of the Company
(the "Board") recognizes that the Executive's contributions as the Chief
Technical Officer 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 Chief
Technical Officer and shall report to the Chief Executive Officer. Executive
shall be such duties as 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.
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 Twenty Thousand dollars ($120,000) ("Base
Salary"), subject to increases in the discretion of the Board or its
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 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
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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 his executive position 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 Employees 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
incapacity 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 reasonable belief that
his action or mission was in the best interests of the Company.
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
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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, (D) a "Change in Control" as that term
is defined in Section 9 below or (E) Xxx X. Xxxxx shall no longer be the
Company's Chief Executive Officer.
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) days 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 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.
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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 of if the Executive
shall terminate his employment pursuant to clause (i) of subsection 7.4 hereof,
then the Company shall pay to Executive in cash a 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 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 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.
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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
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 to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
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.
12. INVALIDITY OF PROVISIONS. The invalidity or unenforceability 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
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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: Xxxxxxx Xxxx
00000 Xxxxxxx
Xxxxxxx Xxxxx, 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 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.
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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/ XXX XXXXX
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Its: President and CEO
"Executive"
/s/ XXXXXXX XXXX
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Xxxxxxx Xxxx
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