Exhibit 11.1
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement")is entered into as of May 23,
2002, by and between HUDSON RESPIRATORY CARE INC., a California corporation
("Company"), and Charles A. French ("Employee") (with Company and Employee
sometimes being referred to herein individually as a "party" and collectively as
the "parties").
RECITALS:
WHEREAS, Employee currently is an employee of Company; and
WHEREAS, the parties desire to provide for Company's continued
employment of Employee pursuant to the terms and provisions of this Agreement
commencing as of May 23, 2002 (the "Effective Date").
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals, the
mutual covenants and conditions contained herein, and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
ARTICLE 1. SERVICES AND COWENSATION.
I.1. Employment of Employee. The parties hereby acknowledge that
prior to the Effective Date Employee has been employed by Company. Commencing as
of the Effective Date, Company agrees to employ Employee and Employee agrees to
be employed by Company pursuant and subject to the terms and provisions of this
Agreement. Employee agrees to serve Company faithfully and to the best of his
ability in such capacity or capacities and with such duties and responsibilities
as may be determined by Company from time to time. Employee shall devote such
his full time and attention to the business of Company during the term of this
Agreement. Employee shall not, while employed by Company, directly or indirectly
render any services of a business, commercial or professional nature to any
other person or organization, whether for compensation or otherwise.
I.2. Position held by Employee. As of the Effective Date, the
Employee is serving as the President and Chief Executive Officer of the Company.
I.3. Compensation.
(a) As compensation for Employee's performance of his services
under this Agreement, Company shall pay Employee a base salary of four hundred
thousand dollars per year. Company will also guarantee to pay an annual bonus of
one hundred thousand dollars. Such compensation shall be prorated for a partial
year based on the number of days worked for Company during such year, and shall
be payable in accordance with Company's customary employee payroll practices,
including but not limited to all customary withholding practices.
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(b) As additional compensation for Employee's performance of his
services under this Agreement, Company agrees to pay a realization bonus upon
the sale of Company, which shall be equal to the difference between 1% of the
total consideration paid for the Company and the profit realized on stock
options granted to Employee (the "Realization Bonus"). This Realization Bonus
shall be paid on the closing date of the sale of the Company.
(c) By agreeing to pay Employee an annual salary Company is not
agreeing to employ Employee for any specified term or to pay Employee, upon the
termination of his employment, any amounts other than those set forth in this
section and Section 1.5 hereof. Company may in its sole discretion adjust
Employee's compensation as it deems appropriate from time to time, provided,
however, that any such adjustment shall apply prospectively only to periods
following notification to Employee of such adjustment. Without limitation upon
the discretion of Company, such compensation adjustments may be made to reflect
(i) any changes in Employee's employment position or responsibilities, (ii)
Company's evaluation of Employee's job performance, and/or (iii) the nature
and/or profitability of Company's business activities. Nothing contained herein
shall be deemed contrary to Employee's right to effect a Qualifying Resignation
under circumstances to which the provisions of Section 1.5(c)(iii) hereof apply.
I.4 Fringe Benefits.
(a) Employee shall be entitled to participate in all health,
welfare, insurance, pension and other similar employee benefit plans and
programs of Company which are open to participation by employees holding
employment positions comparable to Employee's position; provided, however, that
such participation by Employee shall in all cases be subject to the terms and
provisions of each such employee plan or program and also to applicable federal,
state or other governmental laws and regulations. Employee shall have the right
following termination of his employment for any reason to stay enrolled in the
Company's medical and dental plans at a cost equal to that which would be
charged if he were still an employee until he is eligible for coverage under
Medicare.
(b) Employee's eligibility for the use of a Company automobile
or to payment of an automobile allowance from Company, and the terms of such
automobile use or allowance, shall be determined from time to time by Company in
its discretion in accordance with its periodic review of all elements of its
management compensation arrangements.
I.5 Termination of Employment; Severance Pay.
(a) The parties hereby expressly agree that Employee's
employment by Company may be terminated by either party at any time and for any
reason, whether with or without cause.
(b) Except as provided in subsection (c) and subject to
Employee's execution of a Waiver and Release of all claims against Company and
its affiliates, if Employee's employment with Company is involuntarily
terminated by Company, or if Employee resigns pursuant to a Qualifying
Resignation (as defined below), then Company shall pay to Employee for a period
of twelve (12) months (the "Severance Period") a severance payment equal to the
base salary and guaranteed bonus discussed in Section 1.3 (the "Severance
Payment"). Employee's Severance Payment shall be paid on a monthly basis during
the Severance Period
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commencing on the last regular Company payroll date for the month in which
Employee's termination date falls. If Employee shall be reemployed within the
Severance Period, Employee's Severance Payment shall be reduced by the amount of
monthly base compensation which Employee shall earn pursuant to such other
employment during the Severance Period. Employee shall be obligated to provide
Company with adequate verification of the amount of compensation which Employee
will earn pursuant to such other employment.
(c) Notwithstanding the foregoing, Employee shall not be
entitled to any Severance Payment in the event of the termination of Employee's
employment with Company by reason of any one or more of the following: (i)
Cause; (ii) Employee's death or Permanent Disability; or (iii) Employee's
resignation, other than a Qualifying Resignation. As used in this Agreement, the
following terms shall have the meanings set forth below:
(i) "Cause" shall mean (i) Employee's conviction of,
or the entry of a pleading of guilty or nolo contendre by Employee to,
a felony or a crime involving moral turpitude, (ii) Employee's
material failure to perform his duties required under his employment
relationship, material failure to comply with the Company's, its
Parent's and/or any subsidiary's standard policies and procedures
generally applicable to employees, or failure to comply with any
provision of this employment agreement after having received written
notice from the Company, its Parent and/or a subsidiary identifying
such failure and after having received an opportunity of at least ten
(10) days in which to cure the failure so identified by the Company,
its Parent and/or a subsidiary if such failure is susceptible to cure,
(iii) a willful act by Employee as a result of which he receives an
improper personal benefit at the expense of the Company, its Parent
and/or a subsidiary, (iv) an act of fraud or dishonesty committed by
Employee against the Company, its Parent and/or a subsidiary, or (v)
any other misconduct by Employee that is materially injurious to the
business or reputation of the Company, its Parent and/or a subsidiary.
"Parent" means River Holding Corp.
(ii) "Permanent Disability" shall mean a disability
which qualifies Employee for disability payments under Company's
long-term disability plan.
(iii) "Qualifying Resignation" shall mean a resignation
by Employee within 60 days after any of the following: (a) a change of
Employee's duties and responsibilities which cause Employee's position
to be one of materially lesser responsibility and scope; or (b) a
reduction in Employee's base salary.
(d) If Employee's employment with the Company is terminated for
(i) Cause; (ii) Employee's death or Permanent Disability; or (iii) Employee's
resignation, other than a Qualifying Resignation, as described above in
subsection (c), Employee shall receive a lump sum payment equal to the full
amount of Employee's base salary and guaranteed bonus payable, but not yet paid,
though the date on which Employee is terminated plus any accrued vacation. Upon
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the date of Employee's termination, all benefits provided to the Employee by the
Company pursuant to employee benefit plans and programs shall cease in
accordance with the Company's regular policies and customary practices
applicable to such benefit plans, with the exception of the right to continue to
participate in the Company's medical and dental plans as discussed in
Section 1.4.
(e) The payment of any Severance Payment as provided under this
Section 1.5 shall be subject to Company's usual and customary employee payroll
practices and also subject to all applicable withholding requirements. Except
for such Severance Payment, Employee shall not be entitled to any further
compensation or other severance benefits by reason of a termination of his
employment with Company, with the exception of the right to continue to
participate in Company's medical and dental plan. Employee also agrees that this
Severance Payment is intended to compensate Employee for all claims, losses
and/or damages resulting from or arising out of his termination with Company.
ARTICLE II. PROHIBITED ACTIVITIES; CONFIDENTIAL INFORMATION;
NONDISCLOSURE; NONINTERFERENCE AND NONSOLICITATION COVENANTS.
II.1. Prohibited Activity. As used herein the term "Prohibited
Activity" means (a) the direct or indirect diversion of business to, or
solicitation of business for or on behalf of, any person, firm, corporation or
other entity which is a competitor of Company, and (b) solicitation, or
inducement of any employee of Company to terminate his relationship with Company
for the purpose of becoming employed by or associated with a competitor of
Company. Employee hereby agrees that during the ten-n of his employment with
Company he will not engage in any Prohibited Activity.
II.2. Confidential Information; Nondisclosure Covenant.
(a) As used herein the term "Confidential Information" shall
mean all customer and contract lists, records, financial data, trade secrets,
business and marketing plans and studies, manuals for employee and personnel
policies, manufacturing and/or production manuals, computer programs and
software, strategic plans, formulas, manufacturing and production processes and
techniques (including without limitation types of machinery and equipment used
together with improvements and modifications thereon), tools, applications for
patents, designs, models, patterns, drawings, tracings, sketches, blueprints,
and all other similar information developed and/or used by Company in the course
of its business and which is not known by or readily available to the general
public.
(b) Employee acknowledges that, in the course of performing
services for and on behalf of Company, Employee has had and will continue to
have access to Confidential Information. Employee hereby covenants and agrees to
maintain in strictest confidence all Confidential Information in trust for
Company, its successors and assigns. During the period of Employee's employment
with Company and at any and all times following Employee's termination of
employment for any reason, including without limitation Employee's voluntary
resignation or involuntary termination with or without cause, Employee agrees to
not
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misappropriate, or disclose or make available to anyone outside Company's
organization, any Confidential Information or anything relating thereto without
the prior written consent of Company, which consent may be withheld by Company
for any reason or no reason at all.
(c) Upon Employee's termination of his employment with Company
for any reason, including without limitation Employee's voluntary resignation or
involuntary termination with or without cause, Employee hereby agrees to
promptly return to Company's possession all copies of any writings, drawings or
other information relating to Confidential Information which are in Employee's
possession or control. Employee further agrees that, upon the request of Company
at any time during Employee's period of employment with Company, Employee shall
promptly return to Company all such copies of writings, drawings or other
information relating to Confidential Information which are in Employee's
possession or control.
(d) Employee hereby assigns to Company all right, title and
interest in and to any ideas, inventions, original works or authorship,
developments, improvements or trade secrets which Employee solely or jointly has
conceived or reduced to practice, or will conceive or reduce to practice, or
cause to be conceived or reduced to practice, during his employment with
Company. All original works of authorship which are made by Employee (solely or
jointly with others) within the scope of Employee's services hereunder and which
are protectable by copyright are "works made for hire," as that term is defined
in the United States Copyright Act.
11.3. Noninterference and Nonsolicitation Covenants. In further
reflection of Company's important interests in its proprietary information and
trade and employee relationships, Employee agrees that, during the Severance
Period following the termination of Employee's employment with Company for any
reason, including without limitation Employee's voluntary resignation or
involuntary termination with or without cause, Employee will not do any of the
following without the prior written consent of Company:
(a) directly or indirectly, for or on behalf of any person,
firm, corporation or other entity, interfere with any contractual or other
business relationship that Company has with any of its customers, clients,
service providers or materials suppliers as of the date of Employee's
termination of employment; or
(b) directly or indirectly solicit or induce any employee of
Company to terminate his employment relationship with Company.
II.4. Severance Payment Forfeiture for Breach. If Employee at any
time breaches his/her covenants or obligations under the foregoing provisions of
Sections 2.1, 2.2 and/or 2.3, Employee shall forfeit, and shall not be entitled
to receive, any remaining installments of the Severance Payment otherwise
payable to Employee under this Agreement.
II.5. Injunctive Remedy. In the case of any breach or threatened
breach by Employee of any of his covenants or obligations under Sections 2.1,
2.2 and/or 2.3, the parties hereto agree that damages may not be an adequate
remedy for Company and that, in the event of any such breach or threatened
breach, the Company may, either with or without pursuing any
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potential damage remedies, immediately obtain and enforce an injunction
prohibiting Employee from committing or continuing to commit such breach or
threatened breach.
ARTICLE III. MISCELLANEOUS
III. 1.Notices. All notices, requests, or other communications
(collectively referred to as "Notices") required or permitted to be given
hereunder or which are given with respect to this Agreement shall be in writing
and may be personally delivered, or may be deposited in the United States mail,
postage prepaid and addressed as follows:
To Company at: Hudson Respiratory Care Inc.
27711 Diaz Road
Temecula, CA 92390
To Employee at: Employee's current residential mailing address
as reflected in Company's employee records
A Notice, which is delivered personally shall be deemed given as of the date of
personal delivery, and a Notice mailed as provided herein shall be deemed given
on the second business day following the date so mailed. Either party may change
its address for purposes of Notices pursuant to a Notice, given as provided in
this Agreement, advising the other party of such change.
III.2. Effective Date. Employee and Company understand and
acknowledge that, as of the date of execution of this Agreement, Employee is an
employee of Company. Employee and Company agree, however, that the employment
relationship between Employee and Company shall be governed in all respects by
the terms and provisions of this Agreement effective as of the date hereof.
III.3. Governing Law. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with the laws of the
State of California applicable to Agreements made and to be performed only
within the State of California.
III.4. Entire Agreement. The terms of this Agreement are intended
by the parties as a final expression of their agreement with respect to such
terms as are included in this Agreement and may not be contradicted by evidence
of any prior or contemporaneous agreement. The parties further intend that this
Agreement constitutes the complete and exclusive statement of its terms and that
no extrinsic evidence whatsoever may be introduced into any judicial proceeding,
if any, involving this Agreement, except for written modifications as provided
under Section 3.5 hereof. The parties agree that there are no collateral
agreements of any kind concerning Employee's employment with Company. The
parties further agree that any and all prior employment agreements and
agreements relating to the Company's former Equity Participation Plan by and
between the parties are hereby revoked and superseded in their entirety by the
provisions of this Agreement.
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III.5. Modifications and Amendments. This Agreement may not be
amended, modified changed or supplemented, nor may obligations hereunder be
waived, except by written instrument signed by both parties.
III.6. Successors and Assigns. This Agreement and the provisions
hereof shall be binding upon each of the parties, their successors, assigns
and/or heirs.
III.7. Assignment. Employee's rights, duties, and obligations under
this Agreement may not be assigned by Employee without the prior written consent
of Company. In. connection with any sale, transfer or other disposition of all
or any part of Company's business, Company may assign to the transferee
Company's rights, duties and obligations under this Agreement.
III.8. Third Party Rights. The parties do not intend to confer any
benefit hereunder on any person, firm or corporation other than the parties
hereto.
III.9. Non-Waiver of Rights. The failure or delay of either party
in the exercise of any right given to such party hereunder shall not constitute
a waiver of rights unless the time specified herein for exercise of such rights
has expired, nor shall any single or partial exercise of any right preclude the
other or further exercise thereof or of any other right.
III.10. Partial Invalidity. If any provision of this Agreement is
found to be invalid or otherwise unenforceable by any court or other tribunal of
competent jurisdiction, the invalidity or unenforceability of such provision
shall not affect the validity and enforceability of the remaining provisions
hereof.
III.11. Pronouns and Plurals. Wherever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
III.12. Counterparts. This Agreement may be executed in two
counterparts, each of which may be deemed an original, but both of which
together shall constitute one and the same agreement.
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IN WITNESS WHEREOFF, the parties hereto have executed this Agreement as of the
date first written above.
"COMPANY"
HUDSON RESPIRATORY CARE INC.,
a California corporation
By: /s/ Jon D. Ralph
-----------------------------
Jon D. Ralph
Director
"EMPLOYEE"
By: /s/ Charles A. French
-----------------------------
Charles A. French
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