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EXHIBIT 2
NON-COMPETITION AGREEMENT
This Non-competition Agreement ("Agreement") dated as of
___________________ between Healthdyne Technologies, Inc., a Georgia corporation
(the "Company"), and _______________________________ (the "Executive").
WHEREAS, the Company's Board of Directors has determined that it is
appropriate to provide security to the Company by preventing competition from
members of the Company's executive management, including the Executive, in the
event of their termination of employment with the Company following a Change in
Control, as defined herein; and
WHEREAS, the Board of Directors has further determined that it is
appropriate to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in potentially disturbing circumstances arising from
the possibility of a Change in Control; and
WHEREAS, the benefits payable by the Company to the Executive as
provided herein are intended to ensure that the Executive receives reasonable
compensation in return for the Executive's agreement not to compete with the
Company in the event of the Executive's termination of employment with the
Company following a Change in Control;
NOW, THEREFORE, this Agreement sets forth the compensation which the
Company agrees it will pay to the Executive and the terms by which the Executive
agrees not to compete with the Company if the Executive's employment with the
Company terminates under one of the circumstances described herein following a
Change in Control.
1. Term. This Agreement shall terminate upon the earliest of (i) three
years from the date hereof if a Change in Control has not occurred within such
three-year period; (ii) the Date of Termination of the Executive based on death,
Disability (as defined in Section 3(b)), Retirement (as defined in Section 3(c))
or Cause (as defined in Section 3(d)) or by the Executive other than for Good
Reason (as defined in Section 3(e)); (iii) three years from the date of a Change
in Control (as defined in Section 2) if the Executive's employment with the
Company has not terminated as of such time; and (iv) the date the Company
satisfies its obligation, if any, to make payments and provide benefits to the
Executive pursuant to Section 4.
2. Change in Control. For purposes of this Agreement, a Change in
Control shall be deemed to have occurred if (a) there shall be consummated (i)
any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or
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pursuant to which shares of the Company's common stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of the Company's common stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (b) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company, or (c) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall
become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 30% of the Company's outstanding Common Stock, or (d) during any period
of two consecutive years, individuals who at the beginning of such period
constitute the entire Board of Directors of the Company shall cease for any
reason to constitute a majority thereof unless the election, or the nomination
for election by the Company's stockholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; provided, however, that, in the
absence of a majority vote of the directors specified in subsection (d) of this
Section 2 to the contrary, the sale, lease, exchange or other disposition (in
one transaction or a series of related transactions) of less than 70% of the
total fair market value of all of the assets of the Company immediately prior to
such transaction or transactions shall not be deemed to be a Change in Control
and provided further that the transaction or transactions which involve the
sale, lease, exchange or other disposition of 70% or more of the total fair
market value of all of the assets of the Company immediately prior to such
transaction or transactions shall be deemed to be a Change in Control even if
approved by the Board of Directors of the Company.
3. Termination Following Change in Control.
(a) If a Change in Control shall have occurred while the Executive is
still an employee of the Company, the Executive shall be entitled to the
compensation and benefits provided in Section 4 upon the subsequent termination
of the Executive's employment with the Company by the Executive or by the
Company during the term of this Agreement, unless such termination is as a
result of (i) the Executive's death; (ii) the Executive's Disability; (iii) the
Executive's Retirement; (iv) the Executive's termination by the Company for
Cause; or (v) the Executive's decision to terminate employment other than for
Good Reason.
(b) Disability. The term "Disability" as used in this Agreement shall
mean termination of the Executive's employment by the Company as a result of the
Executive's incapacity due to physical or mental illness, provided that the
Executive shall have been absent from his duties with the Company on a full-time
basis for six consecutive months and such absence shall have continued unabated
for 30 days after Notice of Termination as described in Section 3(f) is
thereafter given to the Executive by the Company.
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(c) Retirement. The term "Retirement" as used in this Agreement shall
mean termination of the Executive's employment by the Company based on the
Executive's having attained age 65 or such other retirement age as shall have
been established pursuant to a written agreement between the Company and the
Executive.
(d) Cause. The term "Cause" for purposes of this Agreement shall mean
the Company's termination of the Executive's employment on the basis of criminal
or civil fraud on the part of the Executive involving a material amount of funds
of the 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
Company's Board of Directors at a meeting of the Board called and held for such
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's 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 in the first sentence of this Section 3(d) and specifying the
particulars thereof in detail. For purposes of this Agreement only, the
preparation and filing of fictitious, false or misleading documents in
connection with any federal, state or other healthcare program, or any other
violation of any rule or regulation in respect of any federal, state or other
regulatory program by the Company or any subsidiary of the Company shall not be
deemed to constitute "criminal fraud" or "civil fraud".
(e) Good Reason. For purposes of this Agreement, "Good Reason" shall
mean any of the following actions taken by the Company without the Executive's
express written consent:
(i) The assignment to the Executive by the Company of duties
inconsistent with, or the reduction of the powers and functions associated with,
the Executive's position, duties, responsibilities and status with the Company
immediately prior to a Change in Control, or an adverse change in the
Executive's titles or offices as in effect immediately prior to a Change in
Control, or any removal of the Executive from or any failure to re-elect the
Executive to any of such positions, except in connection with the termination of
his employment for Disability, Retirement or Cause or as a result of the
Executive's death or by the Executive other than for Good Reason;
(ii) A reduction by the Company in the Executive's
base salary as in effect on the date hereof or as the same may be increased from
time to time during the term of this Agreement or the Company's failure to
increase (within 12 months of the Executive's last increase in base salary) the
Executive's base salary after a Change in Control in an amount
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which at least equals, on a percentage basis, the average annual percentage
increase in base salary for all officers of the Company effected in the
preceding 36 months;
(iii) Any failure by the Company to continue in effect any
benefit plan, program or arrangement (including, without limitation, any profit
sharing plan, group annuity contract, group life insurance supplement, or
medical, dental, accident and disability plans) in which the Executive is
participating at the time of a Change in Control (or any other plans providing
the Executive with substantially similar benefits) (hereinafter referred to as
"Benefit Plans"), or the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Benefit Plan or deprive the Executive of any
fringe benefit enjoyed by the Executive at the time of a Change in Control;
(iv) Any failure by the Company to continue in effect any
incentive plan or arrangement (including, without limitations, any bonus or
contingent bonus arrangements and credits and the right to receive performance
awards and similar incentive compensation benefits) in which the Executive is
participating at the time of a Change in Control (or any other plans or
arrangements providing him with substantially similar benefits) (hereinafter
referred to as "Incentive Plans") or the taking of any action by the Company
which would adversely affect the Executive's participation in any such Incentive
Plan or reduce the Executive's benefits under any such Incentive Plan, expressed
as a percentage of his base salary, by more than five percentage points in any
fiscal year as compared to the immediately preceding fiscal year, or any action
to reduce Executive's bonuses under any Incentive Plan by more than 20% the
average annual bonus previously paid to Executive over the preceding three
fiscal years;
(v) Any failure by the Company to continue in effect any plan
or arrangement to receive securities of the Company (including, without
limitation, the Company's Stock Option Plan, Stock Option Plan II and any other
plan or arrangement to receive and exercise stock options, stock appreciation
rights, restricted stock or grants thereof) in which the Executive is
participating or has the right to participate in at the time of a Change in
Control (or plans or arrangements providing him with substantially similar
benefits) (hereinafter referred to as "Securities Plans") or the taking of any
action by the Company which would adversely affect the Executive's participation
in or materially reduce the Executive's benefits under any such Securities Plan;
(vi) A relocation of the Company's principal executive offices
to a location outside of Marietta, Georgia, or the Executive's relocation to any
place other than the location at which the Executive performed the Executive's
duties prior to a Change in Control, except for required travel by the Executive
on the Company's business to an extent
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substantially consistent with the Executive's business travel obligations at the
time of a Change in Control;
(vii) Any failure by the Company to provide the Executive with
the number of paid vacation days (or compensation therefor at termination of
employment) accrued to the Executive through the date of a Change in Control,
together with any earned but unused vacation days for the vacation year in
question;
(viii) Any material breach by the Company of any provision of
this Agreement;
(ix) Any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company effected in accordance
with the provisions of Section 6(a) hereof;
(x) Any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(f), and for purposes of this Agreement, no such
purported termination shall be effective; or
(xi) Any attempt by the Company to require that the Executive
enter into a non-competition agreement with the Company where the terms of such
agreement as to its scope or duration are greater than the terms set forth in
Section 5 hereof.
(f) Notice of Termination. Any termination of the Executive's
employment by the Company for a reason specified in Section 3(b), 3(c) or 3(d)
shall be communicated to the Executive by a Notice of Termination prior to the
effective date of the termination. For purposes of this Agreement, a "Notice of
Termination" shall mean a written notice which shall indicate whether such
termination is for the reason set forth in Section 3(b), 3(c) or 3(d) and which
sets 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. For purposes of this Agreement, no termination of the Executive's
employment by the Company shall constitute a termination for Disability,
Retirement or Cause unless such termination is preceded by a Notice of
Termination.
(g) Date of Termination. "Date of Termination" shall mean (a) if the
Executive's employment is terminated by the Company for Disability, 30 days
after a Notice of Termination is given to the Executive (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time basis during such 30-day period) or (b) if the Executive's
employment is terminated by the Company or the Executive for any other reason,
the date on which the Executive's termination is effective; provided that, if
within 30 days after any Notice of Termination is given to the Executive by the
Company the
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Executive notifies the Company that a dispute exists concerning the termination,
the Date of Termination shall be the date the dispute is finally determined
whether by mutual agreement by the parties or upon final judgment, order or
decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
4. Compensation and Benefits upon Termination of Employment.
(a) If the Company shall terminate the Executive's employment after a
Change in Control other than pursuant to Section 3(b), 3(c) or 3(d) and Section
3(f), or if the Executive shall terminate his employment for Good Reason, then
the Company shall pay to the Executive, in consideration of the Executive's
adherence to the terms of Section 5 hereof, the following:
(1) On the fifth day following the Date of Termination, the
Company shall pay the Executive in cash an amount three times the Executive's
average annual compensation from the Company and Healthdyne, Inc. (as reported
on Form W-2 pursuant to applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code")) for the five years ending prior to the Date of
Termination, less $1.00.
(2) For a period of three years following the Date of
Termination, the Executive and anyone entitled to claim under or through the
Executive shall be entitled to all benefits under the group hospitalization
plan, health care plan, dental care plan, life or other insurance or death
benefit plan, or other present or future similar group employee benefit plan or
program of the Company for which key executives are eligible at the date of a
Change in Control, to the same extent as if the Executive had continued to be an
employee of the Company during such period and such benefits shall, to the
extent not fully paid under any such plan or program, be paid by the Company.
(3) For a period of three years after the Date of Termination,
the Company shall allow the Executive to utilize for his business and personal
use any company-leased automobile previously furnished to him or an equivalent
type and style of automobile and shall reimburse the Executive for the
maintenance and repair costs of such automobile and extend full insurance
coverage relating to such automobile in favor of the Executive, as additional
named insured, during such three year period. In addition, the Executive shall
be entitled, at the Executive's sole discretion, to exercise any option to
acquire such automobile pursuant to the terms which may be provided in the lease
agreement for the automobile in question.
(b) The parties hereto agree that the payments provided in Section 4(a)
hereof are reasonable compensation in consideration of the Executive's adherence
to the terms of Section 5 hereof. Neither party shall contest the payment of
such benefits as constituting
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an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code. In the event that the Executive becomes entitled to the compensation and
benefits described in Section 4(a) hereof (the "Compensation Payments") and the
Executive becomes subject to the tax imposed by Section 4999 of the Code (the
"Excise Tax") as a result of such Compensation Payments and any other benefits
or payments required to be taken into account under Code Section 280G(b)(2)
("Parachute Payments"), the Company shall pay to the Executive at the time
specified in Section 4(a) above an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Parachute Payments and any Federal, state and local income tax
and Excise Tax upon the payment provided for by this paragraph, shall be equal
to the Parachute Payments determined prior to the application of this paragraph.
For purposes of determining the amount of the Parachute Payments, no payments or
benefits shall be included if, in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to the Executive, such payments or
benefits (in whole or in part) do not constitute Parachute Payments, or such
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code. The
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal
income taxes at the highest marginal rate of Federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rates of taxation in the state and locality
of the Executive's residence on the Date of Termination, net of the maximum
reduction in Federal income taxes which could be obtained from deduction of such
state and local taxes. In the event that the Excise Tax payable by the Executive
is subsequently determined to be less than the amount taken into account
hereunder at the time of termination of the Executive's employment, the
Executive shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction plus interest on the amount of such
repayment at the rate provided for in Section 1274(b)(2)(B) of the Code
("Repayment Amount"). In the event that the Excise Tax payable by the Executive
is determined to exceed the amount taken into account hereunder at the time of
the termination of the Executive's employment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest payable with respect to such excess)
at the time that the amount of such excess is finally determined ("Additional
Gross-up"). The obligation to pay any Repayment Amount or Additional Gross-up
shall remain in effect under this Agreement for the entire period during which
the Executive remains liable for the Excise Tax, including the period during
which any applicable statute of limitation remains open.
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5. Agreement Not to Compete.
(a) In return for the Compensation Payments provided under Section 4(a)
hereof, the Executive agrees that, for a period of twelve (12) months following
the Executive's Termination Date that gives rise to such Compensation Payments,
he or she, as the case may be, will not, directly or indirectly, alone or in
conjunction with any one or more parties, within a fifty (50) mile radius of the
intersection of Georgia State Road 400 and Interstate 285 in Atlanta
(i) manufacture and distribute any one or more of the
following medical devices for use in the home:
diagnostic and therapeutic devices for the evaluation
and treatment of sleep disorders, oxygen
concentrators and medical nebulizers for the
treatment of respiratory disorders, monitors for
infants at risk for sudden infant death syndrome and
uterine contraction monitoring devices for pregnant
women at risk for preterm labor (collectively, the
"Competing Products"), or
(ii) affiliate with or have any interest in (as a
shareholder, owner (excluding ownership of less than
two percent of the stock of a corporation, the shares
of which are publicly traded), employee, officer,
director, independent contractor, agent or
consultant) any business, firm, person, partnership,
corporation or other entity that, during its then
most recently concluded fiscal year, derived more
than 30% of its gross revenues from the manufacture
and distribution of any one or more of the Competing
Products for use in the home (a "Competing Company");
provided that the applicability restriction in this
subsection (ii) shall not apply if the Executive does
not provide services directly or indirectly to the
Competing Company relating to the Competing Products.
(b) The Executive and the Company acknowledge and agree that the
covenants of the Executive in subsection (a) above (the "Protective Covenants")
are reasonable as to time, scope and territory given (i) that the Executive has
worked for the Company throughout and even beyond the territory covered by the
covenant, (ii) that the Company needs to protect the Company's substantial
investment in its client relationships, particularly given the complexity and
competitive nature of the business in which the Company is engaged, and (iii)
that the Executive has sufficient skills to find alternative, commensurate
employment or consulting work in the Executive's field of expertise that would
not entail a violation of the covenants.
(c) In the event of a breach by the Executive of a Protective Covenant,
the Company shall have the right to set-off against any sums the Company owes
the Executive
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the amount of any damages incurred or suffered by the Company as a result of the
breach. Any such set-off of any such sums against the damages incurred by the
Company as a result of any such breach by the Executive shall not be presumed to
be in full satisfaction of or as liquidated damages for or as a release of any
claim for damages against the Executive that may accrue to the Company as a
result of the breach. The parties further agree that any breach or threatened
breach of a Protective Covenant by the Executive would result in irreparable
injury to the Company, and therefore, in addition to all of the remedies
provided at law or in equity, the Executive agrees and consents that the Company
shall be entitled to seek a temporary restraining order and a permanent
injunction to prevent a breach or contemplated breach of the Protective
Covenant.
6. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) All compensation and benefits provided to the Executive under this
Agreement are in consideration of the Executive's adhering to the terms set
forth in Section 5(a) hereof and the Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of employment by another employer after the Date of
Termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue solely as
a result of the passage of time, under any Benefit Plan, Incentive Plan or
Securities Plan, employment agreement or other contract, plan or arrangement.
7. Successor to the Company.
(a) The Company will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment shall be a material breach of this Agreement and shall entitle the
Executive to terminate the Executive's employment for Good Reason. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor or assign to its business and/or assets as aforesaid. If at any time
during the term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by
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the Company, "Company" as used in Sections 3, 4, 12 and 13 hereof shall in
addition include such employer. In such event, the Company agrees that it shall
pay or shall cause such employer to pay any amounts owed to the Executive
pursuant to Section 4 hereof.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amounts are still payable to him or her hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or the designee or,
if there be no such designee, to the Executive's estate.
8. Notice. For 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
registered mail, return receipt required, postage prepaid, as follows:
If to Company:
Healthdyne Technologies, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
If to Executive:
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or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia.
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10. Validity. The invalidity or unenforceability of any provisions of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11. 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 shall constitute one and the same instrument.
12. Legal Fees and Expenses. The Company shall pay all legal fees,
expenses and damages which the Executive may incur as a result of the
Executive's instituting legal action to enforce his rights hereunder, or in the
event the Company contests the validity, enforceability or the Executive's
interpretation of, or determinations under, this Agreement. If the Executive is
the prevailing party or recovers any damages in such legal action, the Executive
shall be entitled to receive in addition thereto pre-judgment and post-judgment
interest on the amount of such damages.
13. Severability, Modification. All provisions of this Agreement are
severable from one another, and the unenforceability or invalidity of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, but such remaining provisions shall
be interpreted and construed in such a manner as to carry out fully the
intention of the parties. Should any judicial body interpreting this Agreement
deem any provision of this Agreement to be unreasonably broad in time,
territory, scope or otherwise, it is the intent and desire of the parties that
such judicial body, to the greatest extent possible, reduce the breadth of such
provision to the maximum legally allowable parameters rather than deeming such
provision totally unenforceable or invalid.
14. Confidentiality. The Executive acknowledges that he or she has
previously entered into, and continues to be bound by the terms of, a
Confidentiality Agreement with the Company.
15. Agreement Not an Employment Contract. This Agreement shall not be
deemed to constitute an employment contract between the Company and the
Executive, and nothing herein shall be deemed to give the Executive the right to
continue in the employ of the Company or to eliminate the right of the Company
to discharge the Executive at any time.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
HEALTHDYNE TECHNOLOGIES, INC.
By_________________________________
Xxxxx X. Xxxxxxxx, President
and Chief Executive Officer
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Executive
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