Exhibit 10.44
CONFIDENTIAL
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This Amendment to Employment Agreement (the "Amendment") is made and
entered into as of the 16th day of August, 2000 between Craig B. Reynolds, an
individual residing at 1046 Middlebrook Way, Kennesaw, Georgia 30152 (the
"Executive"), and Respironics, Inc., a Delaware corporation with its principal
place of business at 1501 Ardmore Boulevard, Pittsburgh, Pennsylvania 15221
(the "Company").
RECITALS
--------
A. The Company and Executive are parties to that certain Employment
Agreement made as of November 11, 1997 (as amended by that certain Amendment No.
1 to the Employment Agreements between Respironics, Inc. and Craig B. Reynolds
dated as of February 11, 1998 and that certain Amendment to Employment Agreement
dated as of June 29, 2000 and that certain Amendment to Employment Agreement
dated August 8, 2000, the "Employment Agreement").
B. The Company and Executive desire to further amend the Employment
Agreement, as set forth herein.
C. As part of the amendments to be made to the Employment Agreement
pursuant to this Amendment, Executive has agreed to forego the exercise of
certain rights set forth in Section 2.04(b) of the Employment Agreement and
remain in the employ of the Company in accordance with the terms and conditions
of the Employment Agreement (as amended hereby).
D. As partial consideration for Executive's agreement to forego the
exercise of certain rights set forth in Section 2.04(b) of the Employment
Agreement and remain in the employ of the Company in accordance with the terms
and conditions of the Employment Agreement (as amended hereby), the Company has
agreed (i) to pay to Executive certain additional amounts upon termination or
expiration of the Employment Agreement (as amended hereby), (ii) to provide for
the continued employment of Executive by the Company for a period following
termination or expiration of Executive's employment under the Employment
Agreement (as amended hereby) and (iii) to guaranty a $300,000 loan obtained by
Executive, to reimburse Executive for interest payable on such loan and to
gross-up one time Executive's income to account for any additional federal and
state income tax payable by Executive as a result of the Company's reimbursement
of Executive for interest payable on such loan.
NOW THEREFORE, intending to be legally bound, the Company and
Executive agree as follows:
1. Section 1.01. The parties hereby acknowledge and agree that,
------------
notwithstanding the first sentence of Section 1.01 or the first sentence of
Section 4.05 of the Employment Agreement, Executive's current title and position
is Executive Vice President and Chief Operating Officer of the Company. The
parties agree that this change in title and position were agreed upon and that
it did not and does not trigger any termination or other compensation
provision in the Employment Agreement, including without limitation any right
for Executive to terminate the Employment Agreement pursuant to Section 2.04(a)
thereof and receive the payments contemplated thereby.
2. Clause (b) of Section 2.03(a). Clause (b) of Section 2.03(a) of
-----------------------------
the Employment Agreement is hereby amended to read in its entirety as follows:
"(b) been convicted of a crime involving moral turpitude which
affects Executive's ability to perform his duties under this Agreement
or which materially adversely affects the Company".
3. Section 2.04(b). Section 2.04(b) of the Employment Agreement is
---------------
hereby deleted in its entirety, it being the intention of the parties that
Executive shall have foregone the right to terminate the Employment Agreement
between the 18th month and the 31st month and 5th day after the Closing Date and
receive the benefits under Section 2.04(b).
4. New Section 2.08. A new Section 2.08 is hereby added to the
----------------
Employment Agreement, such Section 2.08 to read in its entirety as follows:
"2.08. Extended Employment Period and Additional Payments Upon
-------------------------------------------------------
Termination or Expiration of Agreement. (a) Commencing
--------------------------------------
simultaneously upon expiration of this Agreement or upon termination
of this Agreement by the Company or Executive for any reason (other
than termination due to the death of Executive in accordance with
Section 2.02 hereof), Executive shall remain in the employ of the
Company for the Extended Employment Period (as defined below) in
accordance with the terms of this Section 2.08.
(b) As used herein, the "Extended Employment Period" shall mean
(x) if this Agreement expires or if Executive terminates this
Agreement for reasons other than pursuant to Section 2.04(a)(i) -
(viii) or 2.06 or if the Company terminates this Agreement for cause
pursuant to Section 2.03(a), two (2) years from the date of
termination or expiration; or (y) if Executive terminates this
Agreement pursuant to Section 2.04(a)(i) - (viii) or 2.06 or the
Company terminates this Agreement for any reason other than for cause
pursuant to Section 2.03(a) or due to the death of Executive in
accordance with Section 2.02 hereof, the later of (A) two (2) years
from the date of termination or (B) November 30, 2005.
(c) During the Extended Employment Period, the Company shall pay
to Executive an aggregate amount equal to one hundred and fifty
percent (150%) of his Base Salary in effect immediately prior to
termination or expiration of this Agreement and commencement of the
Extended Employment Period, payable in equal bi-weekly installments
during the Extended Employment Period (the "Additional Employment
Payments"). In addition, during the Extended Employment Period,
Executive will be entitled to full benefits (e.g., health, dental,
car, disability, life and other benefit plans and programs) as were in
effect with respect to Executive immediately prior to termination or
expiration of this
-2-
Agreement and commencement of the Extended Employment Period, subject
to changes made by the Company in such benefits from time to time
during the Extended Employment Period for all employees similarly
situated to Executive immediately prior to termination or expiration
of this Agreement and commencement of the Extended Employment Period.
The Company shall withhold all amounts required with respect to the
Additional Employment Payments.
(d) During the Extended Employment Period, Executive shall
perform general advisory duties for the Company for a minimum of one
(1) eight (8) hour day per calendar month or as mutually agreed upon
by Executive and the Company. It is acknowledged and agreed that
Executive shall not be an executive officer of the Company during the
Extended Employment Period, and shall not be subject to the Company's
policy restricting the sale of securities by the Company's officers
and employees; provided, however, that Executive shall comply with all
trading restrictions as may be applicable under federal and state
securities laws. During the Extended Employment Period, Executive
will not be required to travel from his place of employment in
Marietta, Georgia (or such other location as Executive may designate
in writing from time to time) on Company business without Executive's
consent. Executive shall receive the Additional Employment Payments
and the benefits provided for in this Section 2.08 during the Extended
Employment Period regardless of whether the Company requests Executive
to perform advisory services. Executive shall voluntarily resign from
the Board of Directors of the Company effective as of the commencement
of the Extended Employment Period.
(e) It is the intention of the parties that Executive shall
remain an employee of the Company during the Extended Employment
Period and that, accordingly, the Company represents and warrants that
any and all stock options or awards granted to Executive
(collectively, "Options") under any stock option plan, stock incentive
plan or similar plan or program maintained by the Company or any of
its predecessors (collectively, "Option Plans") which were outstanding
immediately prior to termination or expiration of this Agreement and
commencement of the Extended Employment Period shall remain in full
force and effect during the Extended Employment Period and shall
continue to vest and become exercisable during the Extended Employment
Period, and that the Options shall be exercisable after the expiration
of the Extended Employment Period in accordance with the terms of the
respective Option Plans. The Company further represents and warrants
that the number of shares of Common Stock covered by the Options and
the exercise price thereof shall not be affected by any change in tax
treatment of such Options and that such Options shall remain in full
force and effect notwithstanding any change in tax treatment of such
Options. The Company makes no representation and warranty with
respect to the tax treatment of the Options upon the exercise of such
Options by Executive; however, the Company agrees that it will at all
times recognize and treat Executive as an employee during the term of
the Extended Employment Period. The Company agrees that it will take
any and all actions necessary to insure that
-3-
the Option Plans are consistent with the Company's obligations under
this Section 2.08, and the Company agrees that no provision of the
Option Plans will preclude the Company from meeting its obligations
hereunder.
(f) If this Agreement is terminated pursuant to Section 2.02 as
a result of the death of Executive, or if Executive dies during the
Extended Employment Period, then the Company shall pay or continue to
pay the Additional Employment Payments to Executive's estate in equal
bi-weekly installments for the remainder of the Extended Employment
Period. In addition, all Options outstanding on the date of
Executive's death shall immediately vest and shall be exercisable by
his estate for a period of one (1) year from the date of his death.
(g) The parties agree and acknowledge that a breach by the
Company of its obligations under this Section 2.08 will result in
significant damages to Executive that will be difficult to quantify.
Accordingly, in order to provide certainty with respect to Executive's
ability to receive the benefit of his bargain by entering into the
Amendment to this Agreement dated August 16, 2000, Executive, in the
event of a breach by the Company of its covenants, representations and
warranties in this Section 2.08, shall either, at Executive's sole
option, be entitled to (i) specific performance of the covenants,
representations and warranties of this Section 2.08, or (ii)
liquidated damages in the amount of One Million Seven Hundred Thousand
Dollars ($1,700,000) less (A) all Additional Employment Payments paid
----
by the Company and (B) the Value (as defined below) of those Options
which were granted to Executive on or after February 12, 1998 and
which were unvested as of August 16, 2000 (the "Applicable Options");
provided that for purposes clause (B) above, the Value of the
--------
Applicable Options shall not exceed One Million Two Hundred Thousand
Dollars ($1,200,000). As used herein, the "Value" of the Applicable
Options shall mean the difference (if positive) between (x) the fair
market value of the Company's Common Stock on the date of the breach
of this Section 2.08 by the Company giving rise to Executive's claim
for liquidated damages or the sale price of such Common Stock if sold
prior to such breach and (y) the exercise price of the Applicable
Options. The parties agree and acknowledge that the liquidated
damages set forth above are a good faith estimate of the damages that
Executive would incur and not a penalty.
(h) In the event that Executive is entitled to receive monetary
benefits upon termination of this Agreement in accordance with
Sections 2.01, 2.03(b), 2.04(a), 2.05, 2.06 and/or 2.07 hereof (if
applicable), such monetary benefits shall be paid in full as if
Executive's employment had not been continued for the Extended
Employment Period in accordance with this Section 2.08. If Executive
is entitled to continuation of health insurance and other benefits as
a result of the termination of this Agreement (e.g, benefits are
continued in accordance with Sections 2.04, 2.05 and/or 2.06 hereof),
such continuation shall commence at the end of the Extended Employment
Period, it being the intention of the parties that Executive shall
receive full COBRA benefits commencing upon the later of
-4-
termination of the benefits provided to Executive (i) under this
Agreement or (ii) the Extended Employment Period, as the case may be.
(i) This Section 2.08 shall survive termination or expiration of
this Agreement for any reason. Executive may terminate his employment
during the Extended Employment Period by giving the Company at least
ninety (90) days prior written notice of his intent to terminate the
Extended Employment Period; provided that if Executive terminates his
--------
employment during the Extended Employment Period, all obligations of
the Company under this Section 2.08 shall terminate effective as of
the date of termination. The Company may not terminate Executive
during the Extended Employment Period for any reason whatsoever other
than upon the death of Executive. In the event of any conflict
between the provisions of this Section 2.08 and the other provisions
of this Agreement, the provisions of Section 2.08 shall prevail."
5. Guaranty of PNC Loan and Related Provisions. (a) The parties
-------------------------------------------
hereby acknowledge and agree that, pursuant to that certain Guaranty Agreement
dated May 31, 2000 from the Company to PNC Bank, National Association (the
"Guaranty"), the Company has agreed to guaranty the $300,000 loan made by PNC
Bank, National Association to Executive (the "PNC Loan"). The Company will keep
the Guaranty in place until the earlier of (i) expiration of the Extended
Employment Period, (ii) termination of the Extended Employment Period by the
Executive or (iii) repayment of the PNC Loan. Executive shall notify the
Company promptly upon repayment of the PNC Loan.
(b) The Company shall reimburse Executive on a monthly basis for, or
advance to Executive, an amount equal to the interest payable by Executive on
the PNC Loan.
(c) For each calendar year during the Term of Employment Agreement
and the Extended Employment Period, the Company shall gross-up one time
Executive's income to account for any additional federal and state income tax
payable by Executive as a result of the Company's reimbursement of Executive for
interest payable on the PNC Loan. Such gross-up shall be paid at the maximum
applicable rate on an annual basis at such time as Executive has determined his
tax liability with respect to such interest reimbursement for the prior year.
(d) As security for the Guaranty, Executive shall execute and deliver
to the Company, simultaneously with the execution and delivery of this
Amendment, a Security Agreement pursuant to which Executive shall grant to the
Company a security interest in and pledge of 30,159 shares of the Company's
Common Stock, together with stock powers and certificates representing such
shares of the Company's Common Stock. The Company shall cooperate with
Executive to permit Executive to sell the shares of Common Stock and use the
proceeds thereof to repay the PNC Loan, including, but not limited to,
forwarding the pledged shares to the broker involved in the sale of the shares
of Common Stock within three (3) business days of notice of the sale of such
shares, provided Executive provides instructions and the broker agrees to
forward the proceeds of the transaction to PNC to repay the loan. In addition,
the Company will forward the pledged shares of Common Stock to a broker
designated by Executive within three (3) business days of notice (confirmed by
PNC Bank or other satisfactory evidence) of repayment of the PNC Loan.
-5-
6. Extension of Term of Employment Agreement. The Company hereby
-----------------------------------------
irrevocably waives its right to advise Executive pursuant to Section 1.02 of the
Employment Agreement that the Term of the Employment Agreement shall not be
extended effective February 11, 2001, it being the intent of the parties that,
unless the Employment Agreement is further extended or is otherwise terminated
in accordance with its terms, Executive's Term of employment shall continue
until February 11, 2004. The Company further agrees it shall take any and all
actions necessary to effect such extension.
7. Miscellaneous. Except as amended hereby, the Employment Agreement
-------------
is hereby ratified and confirmed in all respects, including without limitation
the obligations of Executive under Article IV of the Employment Agreement. The
parties agree and acknowledge that the provisions contained in Article VI of the
Employment Agreement shall also be applicable to this Amendment and during the
Extended Employment Agreement. Executive also ratifies and confirms his
obligations under the Supplemental Employment Agreement dated as of November 11,
1997.
[Remainder of this page left intentionally blank]
-6-
IN WITNESS WHEREOF, the parties hereto executed this Amendment or
caused this Amendment to be duly executed as of the day and year first written
above.
WITNESS: CRAIG B. REYNOLDS
By: /s/ James C. Woll /s/ Craig B. Reynolds
------------------------------ ----------------------------------
Title: VP & CONTROLLER
--------------------------
ATTEST: RESPIRONICS, INC.
Secretary: /s/ Dorita A. Pishko By: /s/ James W. Liken
----------------------- -------------------------------
Corporate Seal: Title: PRESIDENT & CEO
----------------------------
-7-