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Exhibit 14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of December 3, 2000, is by and between
Philips Electronics North America Corporation, and any direct or indirect
subsidiary or division of Philips Electronics North America Corporation that
executes this Agreement ("Philips") on the one hand, and Ian Farmer
("Executive") on the other hand.
WHEREAS, the Executive's current employer, ADAC Laboratories, Inc. (the
"Company"), has entered into an Agreement and Plan of Merger, dated November
12, 2000 ("the Merger Agreement") with Philips whereby Philips will acquire the
Company.
WHEREAS, Philips desires to continue to employ the Executive with the Company
commencing upon the Closing (as defined in the Merger Agreement), and the
parties desire to enter into an employment agreement describing the terms and
conditions of Executive's employment.
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the Executive and
Philips agree as follows:
1. Position. On the Closing, Philips agrees to have the Company continue the
employment of the Executive, and the Executive agrees to serve as an
employee of the Company on the terms and conditions in this Agreement. This
Agreement will not become effective unless and until the transaction
contemplated by the Merger Agreement is consummated. The "Retention Period"
shall commence on the Closing and end on the second anniversary of the
Closing. During the Retention Period, the Executive shall serve as the
Chief Executive Officer, ADAC Laboratories, Inc. Executive's principal
place of employment shall be in Milpitas, CA.
2. Salary. During the Retention Period, the Company shall pay the Executive a
base salary equivalent to that paid to the Executive by the Company at the
Closing. This amount will be subject to an annual merit review in
accordance with Philips' merit review program.
3. Annual Bonus. In accordance with Philips' prevailing bonus policies
applicable to similarly situated employees of Philips, the Executive shall
be eligible to participate in an annual cash bonus plan with a target
amount equal to one-hundred (100) percent of the Executive's base salary,
subject to the terms of such bonus plan. Payments under such annual bonus
plan shall be made quarterly in a manner consistent with that in effect
immediately prior to the Closing. The Executive may earn more (up to 150
percent) or less (including a $0 bonus) than the target amount based on
objectives which will include both business results and the Executive's
individual performance.
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4. Welcome to Philips Stock Options. As soon as practicable following the
Closing, the Executive shall receive a special one-time grant of options
to acquire thirty thousand (30,000) shares of common stock of Royal
Philips Electronics. These options will vest ratably in two equal
installments, subject to continued employment. The first 50 percent shall
vest upon the date that is eighteen months following the date of the
grant. The remainder will vest upon the date that is thirty-six months
following the date of the grant.
5. Regular Philips Stock Options. Beginning in 2002, the Executive shall be
eligible to participate in the Philips Electronics Global Stock Option
Plan in a manner consistent with similarly situated employees of Philips,
subject to the terms of the plan as may be modified from time to time.
6. Retention Bonus. The Company shall provide the Executive with a cash
retention bonus equal to three hundred and fifty thousand dollars
($350,000.00). Twenty five percent of the bonus will be paid to the
Executive within 60 days of the first anniversary of the Closing, provided
the Executive is an employee of Philips or the Company on that date. The
remainder of the bonus will be paid to the Executive two years following
the Closing if the Executive is an employee of Philips or the Company on
that date.
7. Employee Benefits. Executive shall be eligible to participate in such
employee benefit plans and insurance programs offered by Philips to its
similarly situated employees in accordance with the eligibility
requirements for participation in those programs.
8. Termination. This Agreement shall be terminated (a) upon the expiration of
the Retention Period, (b) upon the death of the Executive, (c) if the
Executive shall have been substantially unable to perform his or her
duties for 180 days in any 365 consecutive day period ("Disability"), (d)
by the Company or Philips for Cause and upon written notice, (e) by the
Company or Philips without Cause and upon written notice, or (f) by the
Executive for any reason.
9. Amounts Due Upon Termination
(a) In the event the Executive's employment is terminated by the
Company or Philips during the Retention Period other than for
Cause (as defined below), the Executive shall be paid a cash lump
sum within 60 days of termination equal to (a) the base salary for
the remaining portion of the Retention Period, but not less than
twelve months of Executive's base salary in effect on the date of
the Executive's termination (b) the Retention Bonus, to the extent
not theretofore paid. In addition, for the year in which such
termination occurs, Executive shall be paid a pro rata portion of
the Executive's annual bonus. The Executive shall not be entitled
to receive severance pursuant to any other severance plan
maintained by the Company or Philips if the Executive receives the
payments above.
(b) In the event of the Executive's death or disability (as defined
in Section 8(c) above), the Executive shall be paid in a cash lump
sum within 60 days the Retention Bonus, to the extent not
theretofore paid.
(c) in the event of a termination by the Executive other than for
Relocation, or in the event of any termination of employment
following the Retention Period, no payment
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shall be made to the Executive of any amount due after the date of
such termination.
10. "Cause" means as any of the following (i) gross and willful refusal, which
continues after thirty (30) days' written warning, to discharge the normal
and material employment duties required of the Executive, (ii) theft or
other misappropriation of Philips or Company property, trade secrets or
other intellectual property rights and use thereof to the detriment of
Philips, the Company or any successor of either, or (iii) commission of a
crime such that Philips' or the Company's reputation with its customers is
materially damaged and cannot be repaired. A Disability shall not be deemed
(Cause) herein.
11. Confidential Information. The Executive shall hold in confidence all secret
or confidential information relating to the Company or Philips
("Confidential Information") which shall have been obtained by the Executive
during his employment with the Company or Philips. The Executive shall not
disclose the Confidential Information to third parties without the written
consent of the Company or Philips. All Confidential Information shall be
returned to the Company or Philips after the termination of the Executive's
employment. The Executive shall sign the Philips standard agreement relating
to employee ethics and intellectual property assignment.
12. Nonsolicitation. Should the Executive's employment terminate during the
Retention Period, for the period remaining in such Retention Period
Executive shall not employ or seek to employ any person employed by Philips'
medical systems business, or otherwise encourage, or entice such person to
leave such employment. During the same period, Executive shall not (a)
solicit any customer or prospective customer of Philips' medical systems
business to transact any business whose product or activities directly
compete with the products or activities of Philips' medical systems business
anywhere where Philips conducts its medical systems businesses or to reduce,
or refrain from doing any business with Philips' medical systems business or
(b) interfere with or damage (or attempt to interfere with or damage) any
relationship between Philips' medical systems business and any such customer
or prospective customer.
13. Withholding. All applicable taxes shall be withheld on all payments made to
the Executive under this Agreement.
14. Similar Terms or Substantially Equivalent Position. Executive covenants and
agrees that the terms and conditions contained in this Agreement constitute
"similar terms" for purposes of the Executive Severance Agreement, when
compared to the terms and conditions provided to Executive by the Company
immediately prior to the Closing.
15. Miscellaneous. This Agreement shall be binding upon and shall inure to the
benefit of the parties, their successors, and assigns. Philips agrees to
cause the Company to fulfill the obligations under this Agreement, and if
the Company does not fulfill such obligations, then Philips shall fulfill
such obligations. This Agreement is governed by the laws of the State of
California. This Agreement may not be amended, modified, or waived unless in
writing signed by the parties. This Agreement sets forth the entire
agreement of the parties with respect to the subject
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matter, and supersedes all prior agreements, whether oral or written, except the
Executive Severance Agreement.
PHILIPS EXECUTIVE
By: /s/ Tim Mickelson By: /s/ Ian Farmer
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Title: President and CEO
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