-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ENV9pbvGWi/Ey+U7vHClGHFTZuLOaqAGUrOVf36e+FzdI1L0GQkKhrectCMYSLcA est7z56lRGhuqND97UWNuA== 0000950123-02-002415.txt : 20020415 0000950123-02-002415.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950123-02-002415 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020127 FILED AS OF DATE: 20020312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOVAMETRIX MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0000310450 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 060977422 STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08969 FILM NUMBER: 02573556 BUSINESS ADDRESS: STREET 1: 5 TECHNOLOGY DRIVE CITY: WALLINGFORD STATE: CT ZIP: 06492 BUSINESS PHONE: 2032657701 MAIL ADDRESS: STREET 1: 5 TECHNOLOGY DRIVE CITY: WALLINGFORD STATE: CT ZIP: 06492 10-Q 1 y58349e10-q.txt NOVAMETRIX MEDICAL SYSTEMS INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 27, 2002 ----------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . --------------------------------------------- Commission file number 20-8969 ------- NOVAMETRIX MEDICAL SYSTEMS INC. ------------------------------- (Exact name of registrant as specified in its charter) Delaware 06-0977422 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5 Technology Drive, Wallingford, CT 06492 ----------------------------------------- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code: (203) 265-7701 -------------- -------------------------------------------------------------------------- (Former name, former address and former fiscal year if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value: 8,809,906 shares issued and outstanding as of February 28, 2002 Page 1 of 50 Index to Exhibits at Page 15 NOVAMETRIX MEDICAL SYSTEMS INC. INDEX
PAGE PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. FINANCIAL STATEMENTS (Unaudited) Condensed Consolidated Statements of Income - Quarters ended January 27, 2002 and January 28, 2001 3 Nine months ended January 27, 2002 and January 28, 2001 4 Condensed Consolidated Balance Sheets - January 27, 2002 and April 29, 2001 5 Condensed Consolidated Statements of Cash Flows - Nine months ended January 27, 2002 and January 28, 2001 7 Notes to Condensed Consolidated Financial Statements - January 27, 2002 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 PART II. OTHER INFORMATION - -------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13 SIGNATURES 14 - ----------
Page 2 of 50 PART I - FINANCIAL INFORMATION NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
QUARTER ENDED QUARTER ENDED JANUARY 27, 2002 JANUARY 28, 2001 ---------------- ---------------- Net sales $ 12,503,448 $ 14,101,411 Costs and expenses: Cost of products sold 5,774,258 6,401,002 Research and product development 1,131,091 1,102,540 Selling, general and administrative 3,974,287 5,030,862 Interest expense 73,278 274,495 Goodwill amortization 74,138 Transaction costs 1,266,737 Other expense 2,844 39,321 ---------- ---------- 12,222,495 12,922,358 ---------- ---------- Income before income taxes 280,953 1,179,053 Income taxes 99,700 419,000 ---------- ---------- Net income $ 181,253 $ 760,053 ========== ========== Per common share amounts: Basic $ 0.02 $ 0.09 Diluted $ 0.02 $ 0.09
See notes to condensed consolidated financial statements (unaudited). Page 3 of 50 NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
NINE MONTHS ENDED NINE MONTHS ENDED JANUARY 27, 2002 JANUARY 28, 2001 ---------------- ---------------- Net sales $ 37,292,459 $ 40,228,266 Costs and expenses: Cost of products sold 17,044,499 18,190,597 Research and product development 3,417,263 3,259,317 Selling, general and administrative 12,224,752 13,957,947 Interest expense 315,405 746,924 Goodwill amortization 229,294 Transaction costs 1,266,737 Other expense 72,567 102,939 ------------- ------------- 34,341,223 36,487,018 ------------- ------------- Income before income taxes 2,951,236 3,741,248 Income taxes 1,047,700 1,328,000 ------------- ------------- Net income $ 1,903,536 $ 2,413,248 ============= ============= Per common share amounts: Basic $ 0.22 $ 0.28 Diluted $ 0.21 $ 0.27
See notes to condensed consolidated financial statements (unaudited). Page 4 of 50 NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS JANUARY 27, 2002 APRIL 29, 2001 ------ ---------------- -------------- CURRENT ASSETS Cash and cash equivalents $ 211,545 $ 156,065 Accounts receivable, less allowance for losses of $300,000 14,887,217 17,215,256 Current portion of notes receivable 836,713 565,421 Inventories: Finished products 4,092,029 4,412,049 Work in process 3,366,888 1,896,426 Materials 2,405,723 4,357,400 ------------- ------------- 9,864,640 10,665,875 Deferred income taxes 2,063,975 2,485,775 Prepaid expenses 551,138 764,625 ------------- ------------- TOTAL CURRENT ASSETS 28,415,228 31,853,017 Notes receivable, less current portion 827,879 1,160,711 Equipment, less accumulated depreciation of $9,517,386 and $8,630,057, respectively 3,023,405 3,423,423 License, technology, patents and other costs less accumulated amortization of $5,853,070 and $5,192,694, respectively 4,965,499 5,122,462 Goodwill 7,138,519 7,138,519 Deferred income taxes 437,828 633,828 ------------- ------------- $ 44,808,358 $ 49,331,960 ============= =============
See notes to condensed consolidated financial statements (unaudited). Page 5 of 50 NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY JANUARY 27, 2002 APRIL 29, 2001 - ------------------------------------ ---------------- -------------- CURRENT LIABILITIES Current portion of long-term debt 3,020,000 7,205,600 Accounts payable 2,280,383 1,916,323 Other accrued expenses 3,754,364 4,827,349 Accrued product warranty expense 868,586 948,995 ----------- ----------- TOTAL CURRENT LIABILITIES 9,923,333 14,898,267 Long-term debt, less current portion 1,430,000 3,320,000 SHAREHOLDERS' EQUITY Common Stock, $.01 par value, authorized 20,000,000 shares, issued 9,608,761 at January 27, 2002 and 9,514,052 shares at April 29, 2001, including treasury shares 96,088 95,141 Additional paid-in capital 35,662,747 35,225,898 Retained earnings (deficit) 1,503,251 (400,285) Treasury stock, at cost - 799,355 shares (3,807,061) (3,807,061) ----------- ----------- 33,455,025 31,113,693 ----------- ----------- $ 44,808,358 $ 49,331,960 ============ ============
See notes to condensed consolidated financial statements (unaudited). Page 6 of 50 NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED NINE MONTHS ENDED JANUARY 27, 2002 JANUARY 28, 2001 ---------------- ---------------- OPERATING ACTIVITIES Net income $ 1,903,536 $ 2,413,248 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation 889,658 860,511 Amortization 660,376 839,978 Deferred income taxes 617,800 978,000 Changes in operating assets and liabilities: Accounts and notes receivable 2,389,579 (2,934,382) Inventories 801,235 (3,663,450) Prepaid expenses 213,487 (410,922) Accounts payable 364,060 1,568,646 Accrued expenses (1,153,394) 81,027 NET CASH PROVIDED (USED) BY ----------- ----------- OPERATING ACTIVITIES 6,686,337 (267,344) INVESTING ACTIVITIES Purchases of equipment (489,640) (1,150,562) Purchases of licenses, technology, patents and other (503,413) (754,678) ----------- ----------- NET CASH USED BY INVESTING ACTIVITIES (993,053) (1,905,240) FINANCING ACTIVITIES Revolving line of credit, net (repayments) borrowings (4,175,000) 3,920,000 Principal payments on other debt (1,900,600) (1,919,883) Proceeds from Common Stock issued under stock purchase plan and stock option exercises 437,796 176,198 NET CASH (USED) PROVIDED BY ----------- ----------- FINANCING ACTIVITIES (5,637,804) 2,176,315 CHANGE IN CASH AND ----------- ----------- CASH EQUIVALENTS 55,480 3,731 Cash and cash equivalents at beginning of period 156,065 283,262 ----------- ----------- Cash and cash equivalents at end of period $ 211,545 $ 286,993 =========== ===========
See notes to condensed consolidated financial statements (unaudited). Page 7 of 50 NOVAMETRIX MEDICAL SYSTEMS INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 27, 2002 NOTE 1 -- BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements of Novametrix Medical Systems Inc. (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended April 29, 2001. NOTE 2 - RESTRUCTURING AND OTHER CHARGES: During the fourth quarter of fiscal 2001, approximately $4.25 million was charged against earnings as a result of certain strategic and operating changes initiated by the Company's management and the write-off of an uncollectible account receivable. The restructuring and other charges consisted primarily of a write-down of inventory of $2.3 million, $700,000 of severance costs, $500,000 to settle certain existing litigation, $300,000 for the closing costs associated with the Company's Redmond, Washington facility and $280,000 for an uncollectible account receivable. Approximately $1.2 million remained in accrued liabilities as of April 29, 2001. During the first nine months of fiscal 2002, the Company paid approximately $367,000 of accrued severance costs and terminated an additional 15 employees. Also, approximately $189,000 of litigation related expenses and $118,000 of miscellaneous other costs have been paid. The remaining accrued liability is approximately $535,000 as of January 27, 2002. NOTE 3 - TRANSACTION COSTS: On December 12, 2001, the Company announced that it had entered into a definitive merger agreement with Respironics, Inc.under which Respironics would acquire the Company in a stock-for-stock transaction. A meeting of the Company's stockholders to vote on the proposed merger is scheduled for April 9, 2002. In conjunction with the proposed merger, the Company incurred expenses of $1,266,737 during the third quarter of fiscal year 2002. These expenses are primarily comprised of investment banking fees and legal expenses. NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS: In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (FAS 142). Under this statement, goodwill is no longer amortized but rather subjected to annual impairment tests. The Company adopted the statement in the first quarter of fiscal 2002, and as such, discontinued the amortization of its goodwill. Had the Company applied the Page 8 of 50 non-amortization provisions of the statement at the beginning of the first quarter of fiscal 2001, net income for the nine months ended January 28, 2001 would have been $148,000 or $0.02 per diluted share higher than reported. There has been no impairment of goodwill to date. The Company also adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133) and its related amendments. This statement requires companies to recognize all derivative financial instruments in their financial statements at fair value regardless of the purpose or intent for holding the instrument. The adoption of FAS 133 had a nominal effect on the Company's financial statements. NOTE 5 -- PER SHARE AMOUNTS: The calculation of basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. The calculation of diluted earnings per share excludes anti-dilutive options and warrants whose exercise price exceeds the average market price. The following table sets forth the denominators used in the calculation of basic and diluted earnings per share:
JANUARY 27, 2002 JANUARY 28, 2001 ---------------- ---------------- Quarter Nine Months Quarter Nine Months Ended Ended Ended Ended ----- ----- ----- ----- Denominator for basic earnings per share: Weighted average shares outstanding 8,784,888 8,759,257 8,689,323 8,676,358 Effect of dilutive stock options and warrants 633,662 339,245 74,423 183,831 ----------- ---------- ----------- ----------- Denominator for diluted earnings per share 9,418,550 9,098,502 8,763,746 8,860,189 =========== ========== =========== ===========
Page 9 of 50 NOVAMETRIX MEDICAL SYSTEMS INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Results for the third quarter of fiscal 2002 were affected by the Company's pending merger with Respironics, Inc. (NASDAQ:RESP). Net income for the third quarter was approximately $181,000 or $0.02 per diluted share, including transaction charges, compared to approximately $760,000 or $0.09 per diluted share reported for the third quarter of fiscal 2001. Transaction expenses of approximately $1,267,000 consisted primarily of investment banking and legal fees. Without the transaction expenses, net income for the third quarter of fiscal 2002 would have have been $998,000 or $0.11 per diluted share. Net income for the first nine months of fiscal 2002 was approximately $1,904,000 or $0.21 per diluted share ($2,721,000 or $0.30 per diluted share before transaction expenses) compared to net income of approximately $2,413,000 or $0.27 per diluted share reported for the first nine months of the prior fiscal year. Net income for the quarter and nine months ended January 28, 2001 would have been $808,000 or $0.09 per diluted share and $2,561,000 or $0.29 per diluted share, respectively, had the Company adopted FAS 142 eliminating the amortization of goodwill at the start of fiscal 2001. Net sales for the third quarter of fiscal 2002 were $12.5 million compared to net sales of approximately $14.1 million for the third quarter of fiscal 2001. Domestic sales were planned to be below prior year levels as the Company realigned its resources to focus on its more profitable cardiopulmonary products which provide a substantial growth opportunity. As expected, this strategic change contributed to increased net income before transaction expenses compared to the third quarter of the prior year. International sales also decreased slightly from the third quarter of the prior year. Sales to Original Equipment Manufacturer ("OEM") customers for the third quarter of fiscal 2002 decreased from the prior year due to the temporary reduction in demand of one customer due to an inventory reduction initiative by that partner. OEM sales to this customer, and as a whole, have returned to normal levels. Sales of Children's Medical Ventures ("ChMV") products continued to produce solid growth increasing by 26% for the third quarter of fiscal 2002 compared to the prior year. Net sales for the first nine months of fiscal 2002 were approximately $37.3 million compared to approximately $40.2 million for the first nine months of the prior year. Decreases in domestic and international sales were partially offset by increases in ChMV and OEM sales. Cost of products sold as a percentage of net sales was 46% for both the third quarter and first nine months of fiscal 2002 compared to 45% for the corresponding periods of fiscal 2001. The increase in cost of products sold as a percentage of sales was primarily product mix related resulting from reduced sales in the domestic hospital marketplace as planned. The Company is continuing its efforts to reduce costs and enhance its gross profit as a percentage of sales through manufacturing efficiencies, purchasing alternatives and redesign initiatives. Page 10 of 50 Research and product development ("R&D") spending increased by $29,000 or 3% to approximately $1,131,000 for the third quarter of fiscal 2002 compared to the third quarter of the prior year. R&D spending increased by approximately $158,000 or 5% to $3,417,000 for the first nine months of fiscal 2002 compared to the first nine months of the prior fiscal year. The increase in R&D expense for both periods was primarily attributable to increased salaries and related benefits and spending for clinical research. Partially offsetting these increases were decreases in facilities costs resulting from the closing of the Company's Redmond, Washington office during June 2001, as well as travel and entertainment expenses and outside professional services. Selling, general and administrative ("S,G&A") spending decreased approximately $1.1 million or 21% for the third quarter of the current fiscal year compared to the third quarter of the prior year. S,G&A expenses for the nine months ended January 27, 2002 decreased by approximately $1.7 million or 12% compared to the first nine months of the prior year. Reductions in S,G & A expenses for both the three month and nine month periods were achieved in all areas including sales, marketing, service and general and administrative with the greatest impact coming from the reorganization of the domestic sales force at the beginning of the fiscal year in conjunction with our strategic product refocus. The Company has continued to improve its operating efficiencies overall. Salaries, commissions and related benefits, travel and entertainment, legal and accounting and other professional services were primarily responsible for the reductions in expenses for both periods. Interest expense decreased by approximately $201,000 or 73% and $432,000 or 58%, respectively, for the quarter and nine months ended January 27, 2002 compared to the corresponding periods of the prior year. The reduction in interest expense is related to lower levels of outstanding debt and reduced interest rates. The Company has reduced its debt by $7.7 million during the past twelve months primarily from operating results, and improvements in accounts receivable and inventory management. Goodwill amortization decreased by approximately $74,000 and $229,000, respectively, for the quarter and nine months ended January 27, 2002 as compared to the corresponding periods of the prior fiscal year. During the first quarter of fiscal 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which eliminates the requirement to amortize goodwill. Income tax expense for both the third quarter and first nine months of fiscal 2002 and fiscal 2001 reflects an estimated effective tax rate of 35.5%. The effective tax rate includes benefits from R&D tax credits and the Company's Foreign Sales Corporation. LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $18.5 million at January 27, 2002 compared to $17.0 million at April 29, 2001 and current ratios of 2.9 to 1 and 2.1 to 1, respectively. The increase in working capital was primarily attributable to cash generated by operating activities of $6.7 million partially offset by repayments toward the revolving credit line facility aggregating $4.2 million in the nine month period. Page 11 of 50 Cash provided by operating activities was approximately $6.7 million for the nine months ended January 27, 2002 compared to cash used of approximately $267,000 for the first nine months of the prior fiscal year. The improvement in cash from operations of approximately $7.0 million is primarily related to decreases in accounts receivable and inventories, partially offset by decreases in accrued expenses, which includes accrued restructuring costs. The Company believes that continued operating improvements will lead to further increases in cash from operations during the remainder of fiscal 2002. Cash provided by operations is expected to be the principal source of capital and sufficient to fund the Company's requirements for the remainder of fiscal 2002 and the next fiscal year. In addition, approximately $3.2 million of proceeds have been realized subsequent to the end of the third quarter from the exercise of the Company's Class B Warrants. The warrants were exercisable at $5.85 per share and expired on March 8, 2002. The Company also has a $10 million revolving credit agreement with $9.5 million of borrowings available as of January 27, 2002. Management believes that additional funds, if needed, are obtainable on commercially acceptable terms. FORWARD LOOKING INFORMATION This Quarterly Report contains forward looking statements about the Company's projected operating results and the proposed merger with Respironics, Inc. The Company's ability to achieve its projected results and to consummate the proposed merger transaction is dependent upon a variety of factors, many of which are outside of management's control, including without limitation, global economic changes, an unanticipated slowdown in the healthcare industry, unanticipated technological developments which affect the competitiveness of the Company's products, an unanticipated delay or loss of business, or unanticipated market conditions that may impact the proposed merger. The Company does not intend to update publicly any of the forward looking statements contained herein. Page 12 of 50 PART II- OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits: The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the attached Index to Exhibits. (b) Current Reports on Form 8-K: On December 18, 2001, the Company filed a Current Report on Form 8-K to report that it had entered into an Agreement and Plan of Merger with Respironics Holdings, Inc., a subsidiary of Respironics, Inc., pursuant to which the Company would be acquired. Page 13 of 50 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NOVAMETRIX MEDICAL SYSTEMS INC. Dated: March 12, 2002 s/William J. Lacourciere -------------- ------------------------ William J. Lacourciere Chairman of the Board and Chief Executive Officer Dated: March 12, 2002 s/Joseph A. Vincent -------------- ------------------- Joseph A. Vincent, CMA Executive Vice President and Chief Financial Officer Page 14 of 50 INDEX TO EXHIBITS
Page ---- 4(a) Novametrix Medical Systems Inc. 2000 Long Term Incentive Plan (incorporated by -- reference to Exhibit 4(i) of the Company's Registration Statement on Form S-8, dated September 14, 2001). 4(b) Novametrix Medical Systems Inc. 1999 Incentive Plan (incorporated by reference to -- Exhibit 4(iv) to the Company's Registration Statement on Form S-8, dated September 14, 2001). 10(a) Letter Agreement dated September 20, 2001 by and between the Company and William 16 J. Lacourciere. 10(b) Letter Agreement dated September 20, 2001 by and between the Company and Thomas 17 M. Patton. 10(c) Letter Agreement dated September 20, 2001 by and between the Company and Jeffery 18 A. Baird. 10(d) Letter Agreement dated September 20, 2001 by and between the Company and Philip 19 F. Nuzzo. 10(e) Letter Agreement dated September 20, 2001 by and between the Company and Joseph 20 A. Vincent. 10(f) Letter Agreement dated December 14, 2001 by and between the Company and Thomas M. 21 Patton. 10(g) Employment Agreement dated as of December 14, 2001 by and among Respironics, the 24 Company and William J. Lacourciere. 10(h) Employment Agreement dated as of December 14, 2001 by and among Respironics, the 37 Company and Philip F. Nuzzo.
Page 15 of 50 EX-10.A 3 y58349ex10-a.txt LETTER AGREEMENT EXHIBIT 10(a) September 20, 2001 Mr. William J. Lacourciere 577 Jarvis Street Cheshire, CT 06410 Dear Bill: Reference is made to the Employment Agreement, as amended to date, between you and the Company (the "Agreement"). In the event of a Change of Control of the Company (as that term is defined in the Agreement), within the next year (a "Transaction"), the Company will pay you a one-time bonus equal to 125% of your annual base salary (the "Success Bonus.") The Success Bonus will be paid in consideration of your continued employment through the date of the closing of the Transaction and the extraordinary services that you will be asked to provide the Company prior to that date. (The Success Bonus will also be paid if your employment is terminated by the Company within three months prior to the Transaction for any reason other than Cause, as that term is defined in the Agreement.) The Success Bonus will be payable in cash on the date of the closing of the Transaction and will not change your rights and obligations under the Agreement or any other agreement you may have with the Company regarding compensation or severance. This letter supersedes any prior letter or other document between you and the Company relating to the Success Bonus. We appreciate your continued and loyal service to the business. Sincerely, Thomas M. Patton President and COO ACCEPTED: /s/ William J. Lacourciere - --------------------------- William J. Lacourciere Page 16 of 50 EX-10.B 4 y58349ex10-b.txt LETTER AGREEMENT EXHIBIT 10(b) September 20, 2001 Mr. Thomas M. Patton 25 Andy Lane Guilford, CT 06437 Dear Tom: Reference is made to the Employment Agreement, as amended to date, between you and the Company (the "Agreement"). In the event of a Change of Control of the Company (as that term is defined in the Agreement), within the next year (a "Transaction"), the Company will pay you a one-time bonus equal to 100% of your annual base salary (the "Success Bonus.") The Success Bonus will be paid in consideration of your continued employment through the date of the closing of the Transaction and the extraordinary services that you will be asked to provide the Company prior to that date. (The Success Bonus will also be paid if your employment is terminated by the Company within three months prior to the Transaction for any reason other than Cause, as that term is defined in the Agreement.) The Success Bonus will be payable in cash on the date of the closing of the Transaction and will not change your rights and obligations under the Agreement or any other agreement you may have with the Company regarding compensation or severance. This letter supersedes any prior letter or other document between you and the Company relating to the Success Bonus. We appreciate your continued and loyal service to the business. Sincerely, William J. Lacourciere Chairman of the Board and Chief Executive Officer ACCEPTED: /s/ Thomas M. Patton - --------------------------- Thomas M. Patton Page 17 of 50 EX-10.C 5 y58349ex10-c.txt LETTER AGREEMENT EXHIBIT 10(c) September 20, 2001 Mr. Jeffery A. Baird 764 North Greenbrier Drive Orange, CT 06477 Dear Jeff: Reference is made to the Employment Agreement, as amended to date, between you and the Company (the "Agreement"). In the event of a Change of Control of the Company (as that term is defined in the Agreement), within the next year (a "Transaction"), the Company will pay you a one-time bonus equal to $44,000 (the "Success Bonus.") The Success Bonus will be paid in consideration of your continued employment through the date of the closing of the Transaction and the extraordinary services that you will be asked to provide the Company prior to that date. (The Success Bonus will also be paid if your employment is terminated by the Company within three months prior to the Transaction for any reason other than Cause, as that term is defined in the Agreement.) The Success Bonus will be payable in cash on the date of the closing of the Transaction and will not change your rights and obligations under the Agreement or any other agreement you may have with the Company regarding compensation or severance. This letter supersedes any prior letter or other document between you and the Company relating to the Success Bonus. We appreciate your continued and loyal service to the business. Sincerely, Thomas M. Patton President and COO ACCEPTED: /s/ Jeffery A. Baird - --------------------------- Jeffery A. Baird Page 18 of 50 EX-10.D 6 y58349ex10-d.txt LETTER AGREEMENT EXHIBIT 10(d) September 20, 2001 Mr. Philip F. Nuzzo 716 Paddock Avenue Meriden, CT 06450 Dear Phil: Reference is made to the Employment Agreement, as amended to date, between you and the Company (the "Agreement"). In the event of a Change of Control of the Company (as that term is defined in the Agreement), within the next year (a "Transaction"), the Company will pay you a one-time bonus equal to $55,000 (the "Success Bonus.") The Success Bonus will be paid in consideration of your continued employment through the date of the closing of the Transaction and the extraordinary services that you will be asked to provide the Company prior to that date. (The Success Bonus will also be paid if your employment is terminated by the Company within three months prior to the Transaction for any reason other than Cause, as that term is defined in the Agreement.) The Success Bonus will be payable in cash on the date of the closing of the Transaction and will not change your rights and obligations under the Agreement or any other agreement you may have with the Company regarding compensation or severance. This letter supersedes any prior letter or other document between you and the Company relating to the Success Bonus. We appreciate your continued and loyal service to the business. Sincerely, Thomas M. Patton President and COO ACCEPTED: /s/ Philip F. Nuzzo - --------------------------- Philip F. Nuzzo Page 19 of 50 EX-10.E 7 y58349ex10-e.txt LETTER AGREEMENT EXHIBIT 10(e) September 20, 2001 Mr. Joseph A. Vincent 25 Sheffield Circle Stratford, CT 06614 Dear Joe: Reference is made to the Employment Agreement, as amended to date, between you and the Company (the "Agreement"). In the event of a Change of Control of the Company (as that term is defined in the Agreement), within the next year (a "Transaction"), the Company will pay you a one-time bonus equal to 50% of your annual base salary (the "Success Bonus.") The Success Bonus will be paid in consideration of your continued employment through the date of the closing of the Transaction and the extraordinary services that you will be asked to provide the Company prior to that date. (The Success Bonus will also be paid if your employment is terminated by the Company within three months prior to the Transaction for any reason other than Cause, as that term is defined in the Agreement.) The Success Bonus will be payable in cash on the date of the closing of the Transaction and will not change your rights and obligations under the Agreement or any other agreement you may have with the Company regarding compensation or severance. This letter supersedes any prior letter or other document between you and the Company relating to the Success Bonus. We appreciate your continued and loyal service to the business. Sincerely, Thomas M. Patton President and COO ACCEPTED: /s/ Joseph A. Vincent - --------------------------- Joseph A. Vincent Page 20 of 50 EX-10.F 8 y58349ex10-f.txt LETTER AGREEMENT EXHIBIT 10(f) NOVAMETRIX MEDICAL SYSTEMS INC. 5 Technology Drive Wallingford, CT 06492 December 14, 2001 Thomas M. Patton 25 Andy Lane Guilford, CT 06437 Dear Tom: Reference is made to the Employment Agreement (the "Employment Agreement") dated May 22, 2000 by and between you and Novametrix Medical Systems Inc. (the "Company"), the Stock Option Agreement (the "Stock Option Agreement") dated as of May 22, 2000 by and between you and the Company and to the Letter Agreement dated September 20, 2001 between you and the Company (the "Letter Agreement") concerning the Success Bonus (as such term is defined in the Letter Agreement) payable to you in the event of a change of control transaction. In order to induce Respironics Holdings, Inc., a Delaware corporation ("Holdings"), and the Company to enter into an Agreement and Plan of Merger pursuant to which Holdings will merge with and into the Company (the "Merger"), and in further consideration of the Success Bonus to be paid to you pursuant to the Letter Agreement upon the closing of the Merger and severance payments to be paid to you pursuant to Section 10(d)(ii) of the Employment Agreement, you and the Company have agreed as follows: 1. Notwithstanding anything to the contrary in the Employment Agreement, for a period of one year following any termination by you or the Company of your employment with the Company within three months after the closing of the Merger, you shall not (whether as employee, agent, servant, owner, partner, consultant, independent contractor, representative, stockholder or in any other capacity whatsoever) knowingly perform material services for, or knowingly have any material involvement with, any person or entity (including a separate division of an entity) that competes directly and materially with any business (a "Material Business") which accounted for more than 10% of the revenues of the Company during the fiscal year prior to such termination; provided, however, that you may in any event (i) perform services that do not directly relate to business activities that compete directly and materially with a Material Business, and (ii) own up to 3% of the outstanding securities of any publicly-traded entity; and further provided that an entity (including a separate division of an entity) shall be deemed to be in direct and material competition with a Material Business only if the entity (or such division) derived more than 10% of its revenues during its most recent fiscal year from substantially similar businesses. Page 21 of 50 2. You and the Company agree that 50% of the Success Bonus and 50% of the severance payments to be paid under Section 10(d)(ii) of the Employment Agreement shall be allocated to the covenant not to compete described above. 3. Notwithstanding anything to the contrary in the Employment Agreement or the Stock Option Agreement, to the extent vested immediately after the Merger, your stock options shall continue to be exercisable by you, or in the event of your death, by your estate, for the following periods: (a) Options for 60,000 shares that are fully vested as of the date hereof shall remain exercisable for the full term of the options; (b) Options for 60,000 shares shall remain exercisable for three (3) years after the closing of the Merger; (c) Options for 180,000 shares shall remain exercisable for ninety (90) days after the closing of the Merger; and (d) Options for 75,000 shares referred to in Section 3.1(c) of the Stock Option Agreement shall remain exercisable for ninety (90) days after the closing of the Merger. 4. The Employment Agreement, the Stock Option Agreement and the Letter Agreement remain in full force and effect except as modified by this Agreement. * * * Page 22 of 50 Please indicate your agreement with the foregoing by signing the enclosed copy of this letter, whereupon this will constitute a binding agreement between you and the Company. Very truly yours, NOVAMETRIX MEDICAL SYSTEMS INC. By: /s/ William J. Lacourciere -------------------------- Accepted and Agreed: By: /s/ Thomas M. Patton ------------------------- Thomas M. Patton Page 23 of 50 EX-10.G 9 y58349ex10-g.txt EMPLOYMENT AGREEMENT EXHIBIT 10(g) EMPLOYMENT AGREEMENT (William J. Lacourciere) THIS AGREEMENT, made as of December 14, 2001, is by and among RESPIRONICS, INC., a Delaware corporation (the "Company"), NOVAMETRIX MEDICAL SYSTEMS INC., a Delaware corporation ("Novametrix"), and WILLIAM J. LACOURCIERE ("Employee"). This Employment Agreement will not become effective and will be null and void in its entirety if the Company's currently contemplated acquisition of Novametrix does not occur. W I T N E S S E T H: WHEREAS, the Company is engaged in the business of the design, development, manufacture, marketing and sale principally of cardiopulmonary and other medical equipment and services around the world; WHEREAS, Employee has been employed by Novametrix and will be employed by the Company after the Company acquires Novametrix (the "Merger"); WHEREAS, Novametrix and Employee agree that their existing Employment Agreement, including any amendments thereto, will become null and void in all respects effective upon the closing of the Merger (the "Closing Date") so that no "Change in Control" occurs for purposes of said Employment Agreement, in consideration of, among other things, the Company completing the Merger and Employee's employment with the Company; WHEREAS, Novametrix and Employee further agree that, other than any Success Bonus earned pursuant to the September 20, 2001 letter agreement between Employee and Novametrix, neither Novametrix nor the Company will owe Employee any monies as a result of Employee's change in employment from Novametrix to the Company other than as expressly set forth either herein or in the offer letter dated December 13, 2001 provided to Employee by the Company (the "Offer Letter"); WHEREAS, Employee possesses valuable knowledge and skills that will contribute to the successful operation of the Company's business; WHEREAS, the Company and Employee have agreed to execute and deliver this Agreement, which is ancillary to and a condition of the Merger, in consideration, among other things, of (i) the access Employee will have to confidential or proprietary information of the Company, (ii) the access Employee will have to confidential or proprietary information to be acquired hereafter by the Company, (iii) the willingness of the Company to make valuable benefits available hereafter to Employee, (iv) the options, consideration and equity appreciation Employee will receive as a result Page 24 of 50 of the Merger, and (v) Employee's receipt of compensation from time to time from the Company; and WHEREAS, the Company desires to retain the services of Employee, and Employee is willing to accept employment with the Company, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, intending to be legally bound, the Company agrees to employ Employee, and Employee hereby agrees to be employed by the Company, upon the following terms and conditions: ARTICLE I EMPLOYMENT 1.01. Office. Effective at the Closing Date, Employee will be employed as President, Cardiopulmonary Monitoring of the Company and in such other capacities commensurate with such position as the President of the Hospital Division of the Company may from time to time determine, and in such capacity or capacities shall use his best energies or abilities in the performance of his duties hereunder and as prescribed in the By-Laws of the Company. 1.02. Term. Subject to the terms and provisions of Article II hereof, Employee shall be employed by the Company for a period of one year (the "Term"), commencing on the Closing Date. Subject to the terms and provisions of Article II hereof, the Term shall automatically be extended for an additional year (i.e., a rolling one-year Term) unless, not less than ninety (90) days prior to the expiration of the then-current year of the Term, either Employee or the Company shall advise the other that the Term will not be further extended. 1.03. Base Salary. During his employment hereunder, compensation shall be paid to Employee by the Company at the rate of $250,000 per annum (the "Base Salary"), payable every other week in equal installments. The Base Salary to be paid to Employee may be adjusted upward or downward (but not below the amount specified in the preceding sentence) by the Board of Directors or the President of the Company at any time (but not less frequently than annually) based upon Employee's contribution to the success of the Company and on such other factors as the Board of Directors or the President of the Company shall deem appropriate. 1.04. Employee Benefits. During his employment hereunder, Employee shall have the right to participate in and receive benefits under and in accordance with the then-current provisions of the other incentive, profit sharing, 401(K), stock option and stock purchase plans, life, health, disability and accident insurance, hospitalization and other incentive and benefit plans or programs (except for any such plan in which Employee may not participate pursuant to the terms of such plan or Employee's geographic location) which are outlined in the Offer Letter, Employee's participation to be on a basis commensurate with other employees considering their respective Page 25 of 50 responsibilities and compensation. The parties recognize, as outlined in the Offer Letter, there will be a transition period in converting Employee to certain Company plans. Employee shall also be entitled to be reimbursed for all reasonable expenses incurred by him in the performance of his duties hereunder. Service with Novametrix will constitute service for purposes of Company policies like vacation. 1.05. Principal Place of Business. The headquarters and principal place of business of the Company is located in Pittsburgh, Pennsylvania. For Employee's convenience, Employee's principal place of business will be in Wallingford, Connecticut, and he will reside within a reasonable distance thereof. ARTICLE II TERMINATION 2.01. Illness, Incapacity. If, during the Term of Employee's employment hereunder, Employee shall be prevented from effectively performing his duties hereunder by reason of illness or disability and such failure so to perform shall have continued for a period of not less than three months, then the Company may, by written notice to Employee, terminate Employee's employment hereunder effective at any time after such three month period and after fifteen (15) business days advance written notice of intent to do so. Upon expiration of the fifteen (15) days notice, together with payment of any salary accrued and unpaid under Section 1.03 hereof, Employee's employment and all obligations of the Company under Articles I and II hereof shall forthwith terminate, provided, however, that the Employee shall be deemed to have retired from the Company on the date of termination of his employment and shall be entitled to receive the retirement benefit provided for in Section 2.07. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.01. 2.02. Death. If Employee dies during the Term of his employment hereunder, Employee's employment hereunder shall terminate and all obligations of the Company hereunder, other than any obligations with respect to the payment of accrued and unpaid salary under Section 1.03 and any payments under Section 2.07, shall terminate. 2.03. Company Termination. (a) For Cause. In the event that, in the reasonable judgment of the President of the Hospital Division, and after Employee has been given five business days to offer any explanation for his actions, Employee shall have (a) been guilty of any act of dishonesty material with respect to the Company, (b) been convicted of a crime involving moral turpitude, (c) intentionally disregarded the provisions of this Agreement in any material respect or (d) intentionally disregarded express instructions of the Board of Directors or the President of the Hospital Division with respect to material matters of policy, continuing in the case of clause (d) for a period of not less than five (5) days after notice of such disregard, the Company may terminate this Agreement effective at such date as it shall specify in a written notice to Employee after providing Employee ten (10) business days notice of intent to terminate and an Page 26 of 50 opportunity during that ten (10) day period to explain his actions. Any such termination by the Company shall be deemed to be termination "for cause". Upon termination, assuming payment of any salary accrued and unpaid under Section 1.03 hereof, Employee's employment and all obligations of the Company under Articles I and II hereof shall forthwith terminate. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.03(a). (b) Without Cause. Notwithstanding the duration of the Term hereof, Employee's employment hereunder may be terminated at any time by the Company without cause if the President of the Hospital Division so determines, after fifteen (15) business days advance notice of intent to do so. Subject to the payment of any salary accrued and unpaid under Section 1.03, all obligations of the Company under Articles I and II cease upon termination except as set forth in Section 2.05. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.03(b). 2.04. Employee Termination. Employee agrees to give the Company ninety (90) days prior written notice of the termination of his employment with the Company. Simultaneously with such notice, Employee shall inform the Company in writing as to his employment/consulting plans following the termination of his employment with the Company. In the event Employee has terminated his employment with the Company because there has been: (a) a decrease in Employee's salary below $250,000 per year or a material adverse change in his duties or responsibilities, (b) a change in Employee's principal place of business to a location not within 30 miles of its present location, (c) any significant and prolonged increase in the traveling requirements applicable to the discharge of Employee's responsibilities, or (d) a material breach of this Agreement by the Company, Employee shall be entitled to the compensation provided for in Section 2.05 upon such termination; provided that Employee must provide notice of termination within thirty (30) days of the occurrence of a change Employee believes to be covered by clause (a), (b), (c) or (d) herein in order to claim that the termination is because of such change. The Company in turn has thirty (30) days to correct any such action and, if it does so, Employee shall not be entitled to terminate his employment under this Section. Otherwise, all obligations of the Company under Articles I and II cease upon termination, except for the payment of any salary accrued and unpaid under Section 1.03. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.04. 2.05. Termination Payments. Notwithstanding the remaining time in the Term, if the Company terminates Employee's employment without cause pursuant to Section 2.03(b), or Employee terminates his employment pursuant to the third sentence of Section 2.04, or the Company gives Employee a notice of non-extension pursuant to Section 1.02, Employee shall be paid at a rate of $9,207.69 every other week for thirty-six (36) months from the date of termination (the "Salary Continuation Period"). In addition to these termination payments, until the earlier of (i) the end of the Salary Continuation Period and (ii) the time when Employee obtains employment with such Page 27 of 50 coverage, the Company will provide Employee with health and dental insurance coverage as though Employee remained an employee. Employee will be required to pay the same portion of the premium for such insurance coverage as if Employee remained an employee. Employee shall be under no obligation to seek subsequent employment and upon obtaining subsequent employment shall be under no obligation to offset any amounts earned from such subsequent employment (whether as an employee, a consultant or otherwise) against the termination payments. Employee agrees to inform the Company of his employment/consulting jobs during the period of time which Employee is receiving money under this Section. 2.06. Intentionally Left Blank. 2.07 Retirement. (a) The Employee may retire from the Company upon, or at any time subsequent to, his attaining age 65. In the event of retirement of the Employee as provided in this Section 2.07, the Company shall pay the Employee a Retirement Benefit in an amount (the "Normal Retirement Benefit") equal to three times the higher of (a) $250,000 or (b) the Employee's average annual cash compensation (salary and bonus, excluding any Success Bonus) during the five (5) most recent taxable years ending prior to the date of retirement. The Company's taxable year will be used as the measuring period for each of the five years even though Employee may have been employed by Novametrix for some of the years. (b) The Employee may also retire from the Company upon, or at any time subsequent to, his attaining age 62, and prior to his attaining age 65, upon six (6) months prior notice to the Company. In the event of retirement of the Employee as provided in this Section 2.07(b), the Company shall pay the Employee a Retirement Benefit in an amount equal to the Applicable Percentage (as determined below) of the Normal Retirement Benefit:
If Retirement Occurs Applicable Percentage Upon or after attaining age 62 90.00% but before attaining age 63 Upon or after attaining age 63 93.33% but before attaining age 64 Upon or after attaining age 64 96.66% but before attaining age 65
Page 28 of 50 (c) The Retirement Benefit shall be payable in thirty-six (36) equal monthly installments commencing on the first day of the month following the month in which the date of retirement occurs and continuing thereafter on the first day of each succeeding month until paid in full. The Employee may elect to have the Retirement Benefit paid over a longer period than thirty-six (36) months (but not exceeding one hundred twenty (120) months), such election to be made by notice to the Company given not later than the date of retirement. If the Employee dies following commencement of payment of the Retirement Benefit but before payment of all installments of the Retirement Benefit, the remaining installments shall be paid by the Company to the Employee's spouse or, if she shall not be then living or if she dies before payment of all such installments, to the Employee's estate, until paid in full. (d) In the event of the death of the Employee after the date hereof while employed by the Company and prior to commencement of payment of the Retirement Benefit, and notwithstanding the provisions of Section 2.02 of this Agreement, the Company shall pay a Survivor's Retirement Benefit to the Employee's spouse or, if she shall not be then living, to the Employee's estate. The Survivor's Retirement Benefit shall be in the same amount as the Retirement Benefit which would have been payable to the Employee if he had retired on the date of his death. The Survivor's Retirement Benefit shall be payable in thirty-six (36) equal monthly installments commencing on the first day of the month following the month in which the date of death of the Employee occurs and continuing thereafter on the first day of each succeeding month until paid in full. If the Employee's spouse dies before payment of all installments of the Survivor's Retirement Benefit, the remaining installments shall be paid by the Company to the Employee's spouse's estate, until paid in full. (e) The obligation of the Company to pay the Retirement Benefit to the Employee, his spouse or his or her estate is an unfunded promise of the Company. Payment of the Retirement Benefit shall be made from the general assets of the Company. No person shall have or acquire any interest in any specific assets of the Company as a result of this Agreement. The rights of the Employee, his spouse and his estate under this Agreement shall be no greater than the rights of an unsecured general creditor of the Company. (f) The Employee, his spouse and his estate shall not have any power or right to transfer, assign, anticipate, hypothecate or otherwise encumber any part or all of the Retirement Benefit payable hereunder. The Retirement Benefit shall not be subject to seizure Page 29 of 50 by any creditor of the Employee, his spouse or his estate, by a proceeding at law or in equity. The Retirement Benefit is not transferable by operation of law in the event of the bankruptcy or insolvency of the Employee, his spouse or his estate. Any such attempted assignment or transfer shall be void. (g) Notwithstanding the fact that the Company may have delivered a notice of intent to terminate under Section 2.03, Employee may elect to retire before the effective date of termination. For purposes of clarity, if Employee or his wife or estate receives a benefit under this Section 2.07, he, she or it shall not receive payments under any other Section of this Agreement, because retirement would preclude a termination. 2.08. Benefit Terms. Employee's rights after termination from employment, if any, with respect to stock options, and his rights under Company pension and welfare benefit plans and programs, shall be determined in accordance with the provisions of the applicable plan or program. ARTICLE III EMPLOYEE'S ACKNOWLEDGMENTS Employee recognizes and acknowledges that: (a) in the course of Employee's employment by the Company it will be necessary for Employee to acquire information including, without limitation, information concerning the Company's sales, sales volume, sales methods, sales proposals, customers and prospective customers, identity of customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, amount or kind of customer's purchases from the Company, the Company's sources of supply, the Company's computer programs, system documentation, special hardware, product hardware, related software development, the Company's manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the Company's affairs (collectively referred to herein as the "Confidential Information"); (b) for purposes of this Employment Agreement, confidential information of an affiliate of the Company or of a person or entity with which the Company explores or conducts business is considered to be Confidential Information; (c) the Confidential Information is the property of the Company; (d) the use, misappropriation or disclosure of the Confidential Information would constitute a breach of trust and could cause irreparable injury to the Company; and (e) it is essential to the protection of the Company's good will and to the maintenance of the Company's competitive position that the Confidential Information be kept secret and that Employee not disclose the Confidential Information to others or use the Confidential Information to Employee's own advantage or the advantage of others. For purposes of this Agreement, Confidential Information shall not include any information that is in the public domain, so long as such information is not in the public domain as a result of any Page 30 of 50 action or inaction by Employee which would constitute a violation of this Agreement or the Company's policies with respect to such information. Employee further recognizes and acknowledges that it is essential for the proper protection of the business of the Company that Employee be restrained, but only to the extent hereinafter provided (a) from soliciting or inducing any employee of the Company to leave the employ of the Company, (b) from hiring or attempting to hire any employee of the Company, (c) from soliciting the trade of or trading with the customers and suppliers of the Company, and (d) from competing against the Company for a reasonable period following the termination of Employee's employment with the Company. Employee further recognizes and understands that his duties at the Company may include the preparation of materials, including written or graphic materials, and that any such materials conceived or written by him shall be done as "work made for hire" as defined and used in the Copyright Act of 1976, 17 USC Section 1 et seq. In the event of publication of such materials, Employee understands that the Company will solely retain and own all rights in said materials, including right of copyright, and that the Company may, at its discretion, on a case-by-case basis, grant Employee by-line credit on such materials as the Company may deem appropriate. For purposes of interpreting Article III and Article IV hereof, the acknowledgments, covenants and obligations of Employee with respect to the Company apply equally with respect to its affiliates. ARTICLE IV EMPLOYEE'S COVENANTS AND AGREEMENTS 4.01. Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company, its successors and assigns and agrees that he shall not, without the prior written consent of the Company, misappropriate or disclose or make available to anyone for use outside the Company's organization at any time, either during his employment with the Company or subsequent to the termination of his employment with the Company for any reason, including without limitation termination by the Company for cause or without cause, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company. 4.02. Disclosure of Works and Inventions/Assignment of Patents and Other Rights. (a) Employee shall disclose promptly to the Company or its nominee any and all works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of employment and related to the business, prospective business or activities of the Company, and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments, and otherwise cooperate with the Company at no expense to Employee, to Page 31 of 50 assist the Company in applying for and obtaining Letters Patent or Copyrights of the United States or any foreign country or to otherwise protect the Company's interest therein. Such obligations shall continue beyond the termination of employment with respect to works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of employment, and shall be binding upon Employee's assigns, executors, administrators and other legal representatives. (b) Employee agrees that in the event of publication by Employee of written or graphic materials the Company will retain and own all rights in said materials, including right of copyright. 4.03. Duties. Employee agrees to be a loyal employee of the Company. Employee agrees to devote his best efforts full time to the performance of his duties for the Company, to give proper time and attention to furthering the Company's business, and to comply with all rules, regulations and instruments established or issued by the Company. Employee further agrees that during the term of this Agreement, Employee shall not, directly or indirectly, engage in any business which would detract from Employee's ability to apply his best efforts to the performance of his duties hereunder. Employee also agrees that he shall not usurp any corporate opportunities of the Company. Employee is not prohibited from serving on the Board of Directors of community, civic or charitable organizations not involving any conflict of interest or interference with the performance of his duties for the Company. 4.04. Return of Materials. Upon the termination of Employee's employment with the Company for any reason, including without limitation termination by the Company for cause or without cause, Employee shall promptly deliver to the Company all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts, programs, proposals and any documents concerning the Company's customers or concerning products or processes used by the Company and, without limiting the foregoing, will promptly deliver to the Company any and all other documents or materials containing or constituting Confidential Information. 4.05. Restrictions on Competition. Employee covenants and agrees that during the period of Employee's employment hereunder, plus a period of (i) three (3) years following the termination of Employee's employment or (ii) such longer period during which Employee is receiving payments pursuant to Section 2.05 herein, including without limitation retirement, termination by the Company for cause or without cause, Employee shall not, in the United States of America or in any other country of the world in which the Company has done business at any time during the last three years prior to termination of Employee's employment with the Company, engage, directly or indirectly, whether as principal or as agent, officer, director, employee, consultant, shareholder, or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business. For purposes of this Agreement, the term "Competing Business" shall mean and include any person, corporation or other entity which develops, manufactures, sells, markets or attempts to develop, manufacture, sell or market any product or services which are the same as, similar to or compete with the Products and Page 32 of 50 services (i) sold by the Company at any time and from time to time during the last three years prior to the termination of Employee's employment hereunder or (ii) which are active research and development projects of the Company of which Employee is aware at the time of termination. 4.06. Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment with the Company he shall not, directly or indirectly, solicit the trade of, or trade with, any customer, prospective customer, supplier, or prospective supplier of the Company for any business purpose other than for the benefit of the Company, with respect to any products competitive with those of the Company. Employee further agrees that for two years following termination of his employment with the Company, including without limitation termination by the Company for cause or without cause, Employee shall not, directly or indirectly, solicit the trade of, or trade with, any customers or suppliers, or prospective customers or suppliers, of the Company with respect to any products competitive with those of the Company. 4.07. Non-Solicitation of Employees. Employee agrees that, during his employment with the Company and for two years following termination of Employee's employment with the Company, including without limitation termination by the Company for cause or without cause, Employee shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the Company to leave the Company for any reason whatsoever, or hire any employee of the Company. ARTICLE V EMPLOYEE'S REPRESENTATIONS AND WARRANTIES 5.01. No Prior Agreements. Employee represents and warrants that he is not a party to or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability perform his obligations hereunder, including without limitation any contract, agreement or understanding containing terms and provisions similar in any manner to those contained in Article IV hereof. Employee further represents and warrants that his employment with the Company will not require him to disclose or use any confidential information belonging to prior employers, other than Novametrix and its subsidiaries, or other persons or entities. 5.02. Employee's Abilities. Employee represents that his experience and capabilities are such that the provisions of Article IV will not prevent him from earning his livelihood, and acknowledges that it would cause the Company serious and irreparable injury and cost if Employee were to use his ability and knowledge in competition with the Company or to otherwise breach the obligations contained in Article IV. 5.03. Remedies. In the event of a breach by Employee of the terms of this Agreement, the Company shall be entitled, if it shall so elect, to institute legal proceedings to obtain damages for any such breach, or to enforce the specific Page 33 of 50 performance of this Agreement by Employee and to enjoin Employee from any further violation of this Agreement and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law. Employee acknowledges, however, that the remedies at law for any breach by him of the provisions of this Agreement may be inadequate and that the Company shall be entitled to injunctive relief against him in the event of any breach. ARTICLE VI MISCELLANEOUS 6.01. Authorization to Modify Restrictions. It is the intention of the parties that the provisions of Article IV hereof shall be enforceable to the fullest extent permissible under applicable law, but that the unenforceability (or modification to conform to such law) of any provision or provisions hereof shall not render unenforceable, or impair, the remainder thereof. If any provision or provisions hereof shall be deemed invalid or unenforceable, either in whole or in part, this Agreement shall be deemed amended to modify, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it valid and enforceable or, if necessary, to delete the offending provision. 6.02. Tolling Period. The non-competition, non-disclosure and non-solicitation obligations contained in Article IV hereof shall be extended by the length of time during which Employee shall have been in breach of any of the provisions of such Article IV. 6.03. Entire Agreement. This Agreement, along with the Offer Letter, represents the entire agreement of the parties with respect to the subject matter herein and supercedes any prior or contemporaneous written or oral representations, understandings, discussions or agreements concerning the subjects covered herein. This Agreement may be amended only by a writing signed by both parties. 6.04. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to conflict of law principles. 6.05. Consent to Jurisdiction; Venue. Employee hereby irrevocably submits to the personal jurisdiction of the United States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in any action or proceeding arising out of or relating to this Agreement, and Employee hereby irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in either such court. Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Agreement brought in the United States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania and any objection on the ground that any such action or proceeding in either of such Courts has been brought in an Page 34 of 50 inconvenient forum. Nothing in this Section 6.05 shall affect the right of the Company to bring any action or proceeding against Employee or his property in the courts of other jurisdictions where the Employee resides or has his principal place of business or where such property is located. 6.06. Service of Process. Employee hereby irrevocably consents to the service of any summons and complaint and any other process which may be served in any action or proceeding arising out of or related to this Agreement brought in the United States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County by the mailing by certified or registered mail of copies of such process to Employee at his address as set forth on the signature page hereof. 6.07. Agreement Binding. The obligations of Employee under this Agreement shall continue after the termination of his employment with the Company for any reason, with or without cause, and shall be binding on, and inure to the benefit of, his heirs, executors, legal representatives and assigns. If the Employee should die while any amounts are still payable to him hereunder, including under Section 2.05, all such amounts shall be paid in accordance with the terms of this Agreement to the Employee's devisee, legatee, or designee or, if there be no such designee, to the Employee's estate. This Agreement also shall be binding upon, and inure to the benefit of, any successors and assigns of the Company. 6.08. Successor to the Company. 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 Employee, 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 Employee to terminate the Employee's employment and to receive the payments and other benefits set forth in Section 2.05 as if Employee had been terminated without cause . 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. 6.09. Counterparts, Section Headings. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The section headings of this Agreement are for convenience of reference only and shall not affect the construction or interpretation of any of the provisions hereof. 6.10. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (a) hand delivered, (b) mailed, registered mail, first class postage paid, return receipt requested, (c) Page 35 of 50 sent via an established overnight delivery service or courier, delivery acknowledgment requested: if to the Company: 1501 Ardmore Boulevard Pittsburgh, PA 15221-4401 Attn: General Counsel if to Employee, at the address set forth on the signature page hereof or to such other address or to such other person as either party hereto shall have last designated by notice to the other party. Employee acknowledges that he has read and understands the foregoing provisions and that such provisions are reasonable and enforceable. IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement to be executed the day and year first above written. Witness: /s/ Kristen Daly /s/ William J. Lacourciere - ----------------------------------- ------------------------------------- WILLIAM J. LACOURCIERE Address: 577 Jarvis Street Cheshire Connecticut 06410 /s/ Kristen Daly /s/ Thomas M. Patton - ----------------------------------- ------------------------------------- NOVAMETRIX MEDICAL SYSTEMS, INC. Attest RESPIRONICS, INC. /s/ Dorita A. Pishko By:/s/ Daniel J. Bevevino - ----------------------------------- ---------------------------------- Secretary Print Name: Daniel J. Bevevino Title: V.P. & C.F.O. ------------------------------- Page 36 of 50 EX-10.H 10 y58349ex10-h.txt EMPLOYMENT AGREEMENT EXHIBIT 10(h) EMPLOYMENT AGREEMENT (Philip F. Nuzzo) THIS AGREEMENT, made as of December 14, 2001, is by and among RESPIRONICS, INC., a Delaware corporation (the "Company"), NOVAMETRIX MEDICAL SYSTEMS INC., a Delaware corporation ("Novametrix"), and PHILIP F. NUZZO ("Employee"). This Employment Agreement will not become effective and will be null and void in its entirety if the Company's currently contemplated acquisition of Novametrix does not occur. W I T N E S S E T H: WHEREAS, the Company is engaged in the business of the design, development, manufacture, marketing and sale principally of cardiopulmonary and other medical equipment and services around the world; WHEREAS, Employee has been employed by Novametrix and will be employed by the Company after the Company acquires Novametrix (the "Merger"); WHEREAS, Novametrix and Employee agree that their existing Employment Agreement, including any amendments thereto, will become null and void in all respects effective upon the closing of the Merger (the "Closing Date") so that no "Change in Control" occurs for purposes of said Employment Agreement, in consideration of, among other things, the Company completing the Merger and Employee's employment with the Company; WHEREAS, Novametrix and Employee further agree that, other than any Success Bonus earned pursuant to the September 20, 2001 letter agreement between Employee and Novametrix, neither Novametrix nor the Company will owe Employee any monies as a result of Employee's change in employment from Novametrix to the Company other than as expressly set forth either herein or in the offer letter dated December 13, 2001 provided by the Company to Employee (the "Offer Letter"); WHEREAS, Employee possesses valuable knowledge and skills that will contribute to the successful operation of the Company's business; WHEREAS, the Company and Employee have agreed to execute and deliver this Agreement, which is ancillary to and a condition of the Merger, in consideration, among other things, of (i) the access Employee will have to confidential or proprietary information of the Company, (ii) the access Employee will have to confidential or proprietary information to be acquired hereafter by the Company, (iii) the willingness of the Company to make valuable benefits available hereafter to Employee, (iv) the options, consideration and equity appreciation Employee will receive as a result Page 37 of 50 of the Merger, and (v) Employee's receipt of compensation from time to time from the Company; and WHEREAS, the Company desires to retain the services of Employee, and Employee is willing to accept employment with the Company, upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, intending to be legally bound, the Company agrees to employ Employee, and Employee hereby agrees to be employed by the Company, upon the following terms and conditions: ARTICLE I EMPLOYMENT 1.01. Office. Effective at the Closing Date, Employee will be employed as Vice President of Product and Business Development, Cardiopulmonary Monitoring of the Company and in such other capacities commensurate with such position as the President of the Hospital Division of the Company may from time to time determine, and in such capacity or capacities shall use his best energies or abilities in the performance of his duties hereunder and as prescribed in the By-Laws of the Company. 1.02. Term. Subject to the terms and provisions of Article II hereof, Employee shall be employed by the Company for a period of one year (the "Term"), commencing on the Closing Date. Subject to the terms and provisions of Article II hereof, the Term shall automatically be extended for an additional year (i.e., a rolling one-year Term) unless, not less than ninety (90) days prior to the expiration of the then-current year of the Term, either Employee or the Company shall advise the other that the Term will not be further extended. 1.03. Base Salary. During his employment hereunder, compensation shall be paid to Employee by the Company at the rate of $158,000 per annum (the "Base Salary"), payable every other week in equal installments. The Base Salary to be paid to Employee may be adjusted upward or downward (but not below the amount specified in the preceding sentence) by the Board of Directors or the President of the Hospital Division at any time (but not less frequently than annually) based upon Employee's contribution to the success of the Company and on such other factors as the Board of Directors or the President of the Hospital Division shall deem appropriate. 1.04. Employee Benefits. During his employment hereunder, Employee shall have the right to participate in and receive benefits under and in accordance with the then-current provisions of all incentive, profit sharing, 401(K), stock option and stock purchase plans, retirement annuity, life, health, disability and accident insurance, hospitalization and other incentive and benefit plans or programs as outlined in the Offer Letter (except for any such plan in which Employee may not participate pursuant to the terms of such plan or Employee's geographic location) which the Company may at any Page 38 of 50 time or from time to time have in effect for similarly situated employees of the Company, Employee's participation to be on a basis commensurate with other employees considering their respective responsibilities and compensation . The parties recognize, as outlined in the Offer Letter, there will be a transition period in converting Employee to certain Company plans. Employee shall also be entitled to be reimbursed for all reasonable expenses incurred by him in the performance of his duties hereunder. Service with Novametrix will constitute service for purposes of Company policies like vacation. 1.05. Principal Place of Business. The headquarters and principal place of business of the Company is located in Pittsburgh, Pennsylvania. For Employee's convenience, Employee's principal place of business will be in Wallingford, Connecticut, and he will reside within a reasonable distance thereof. ARTICLE II TERMINATION 2.01. Illness, Incapacity. If, during the Term of Employee's employment hereunder, the President of the Hospital Division shall determine that Employee shall be prevented from effectively performing his duties hereunder by reason of illness or disability and such failure so to perform shall have continued for a period of not less than three months, then the Company may, by written notice to Employee, terminate Employee's employment hereunder effective at any time after such three month period. Upon delivery to Employee of such notice, together with payment of any salary accrued and unpaid under Section 1.03 hereof, Employee's employment and all obligations of the Company under Articles I and II hereof shall forthwith terminate. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.01. 2.02. Death. If Employee dies during the Term of his employment hereunder, Employee's employment hereunder shall terminate and all obligations of the Company hereunder, other than any obligations with respect to the payment of accrued and unpaid salary under Section 1.03, shall terminate. 2.03. Company Termination. (a) For Cause. In the event that, in the reasonable judgment of the President of the Hospital Division, and after Employee has been given five (5) business days to offer any explanation for his action, Employee shall have (a) been guilty of any act of dishonesty material with respect to the Company, (b) been convicted of a crime involving moral turpitude, (c) intentionally disregarded the provisions of this Agreement or d) intentionally disregarded express instructions of the Board of Directors or the President of the Hospital Division with respect to matters of policy continuing (in the case of clause (d)) for a period of not less than five (5) days after notice of such disregard, the Company may terminate this Agreement effective at such date as it shall specify in a written notice to Employee. Any such termination by the Company shall be deemed to be termination "for cause". Upon delivery to Employee of such notice of termination, together with payment of any salary accrued and unpaid under Page 39 of 50 Section 1.03 hereof, Employee's employment and all obligations of the Company under Articles I and II hereof shall forthwith terminate. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.03(a). (b) Without Cause. Notwithstanding the duration of the Term hereof, Employee's employment hereunder may be terminated at any time by the Company without cause if the President of the Hospital Division so determines. Subject to the payment of any salary accrued and unpaid under Section 1.03, and except as set forth in Section 2.05, all obligations of the Company under Articles I and II cease upon termination. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.03(b). 2.04. Employee Termination. Employee agrees to give the Company ninety (90) days prior written notice of the termination of his employment with the Company. Simultaneously with such notice, Employee shall inform the Company in writing as to his employment/consulting plans following the termination of his employment with the Company. In the event Employee has terminated his employment with the Company because there has been: (a) a decrease in Employee's salary below $158,000 per year or a material adverse change in his duties or responsibilities, (b) a change in Employee's principal place of business to a location not within 30 miles of its present location, (c) any significant and prolonged increase in the traveling requirements applicable to the discharge of Employee's responsibilities, or (d) a material breach of this Agreement by the Company, Employee shall be entitled to the compensation provided for in Section 2.05 upon such termination; provided that Employee must provide notice of termination within ninety (90) days of the occurrence of a change Employee believes to be covered by clause (a), (b), (c) or (d) herein in order to claim that the termination is because of such change. The Company in turn has thirty (30) days to correct any such action and, if it does so, Employee shall not be entitled to terminate his employment under this Section. Otherwise, all obligations of the Company under Articles I and II cease upon termination, except for the payment of any salary accrued and unpaid under Section 1.03. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.04. 2.05. Termination Payments. Notwithstanding the remaining time in the Term, if the Company terminates Employee's employment without cause pursuant to Section 2.03(b), or Employee terminates his employment pursuant to the third sentence of Section 2.04, or the Company gives Employee a notice of non-extension pursuant to Section 1.02, Employee shall be paid for twelve (12) months (the "Salary Continuation Period") the Base Salary then in effect. In addition to these termination payments, until the earlier of (i) the end of the Salary Continuation Period and (ii) the time when Employee obtains employment with such coverage, the Company will provide Employee with health and dental insurance coverage as though Employee remained an employee. Employee shall be under no obligation to seek subsequent employment and upon obtaining subsequent employment shall be under no obligation to offset any amounts earned from such subsequent employment (whether as an employee, a consultant or Page 40 of 50 otherwise) against the termination payments. Employee will be required to pay the same portion of the premium for such insurance coverage as if Employee remained an employee. Employee agrees to inform the Company of his employment/consulting jobs during the period of time which Employee is receiving money under this Section. 2.06. Termination Payments - After Change of Control. (a) Change of Control shall mean the occurrence of any of the following events: (i) Individuals who on December 1, 1999 constitute the Board of Directors ("Board") of the Company (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to December 1, 1999, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection by such Incumbent Directors to such nomination) shall be deemed to be an Incumbent Director. (ii) Any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the combined voting power of the Company's then outstanding securities eligible to vote for the election of the Board ("Company Voting Securities"); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change of Control by virtue of any of the following acquisitions: (A) by the Company or any subsidiary, (B) by any employee benefit plan sponsored or maintained by the Company or any subsidiary, or by any employee stock benefit trust created by the Company or any subsidiary or (C) by any underwriter temporarily holding securities pursuant to an offering of such securities. (iii) Consummation of any merger, consolidation, stock-for-stock exchange or similar transaction (collectively, "Business Combination") involving the Company or any of its subsidiaries that requires the approval of the Company's Page 41 of 50 shareholders (whether for such transaction or the issuance of securities in the transaction), in which the holders of Company Voting Securities immediately prior to consummation of the Business Combination own, as a group, immediately after consummation of the Business Combination, voting securities of the Company (or, if the Company does not survive the Business Combination, voting securities of the corporation surviving the Business Combination) having less than 50% of the total voting power in an election of directors of the Company (or such other surviving corporation), excluding securities received by any holders of Company Voting Securities in the Business Combination which represent disproportionate percentage increases in their shareholdings in comparison to other holders of Company Voting Securities. (iv) Consummation of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions, excluding any Business Combination) of all or substantially all of the assets of the Company to a person or entity which is not controlled by or under common control with the Company. (b) If Employee is terminated without cause upon or within eighteen (18) months after a Change of Control, or if Employee provides notice (as provided for in Section 2.04) to the Company upon or within eighteen (18) months after the occurrence of a Change of Control that he is terminating employment with the Company because there has been: (i) a decrease in Employee's salary below $158,000 per year or a material adverse change in his duties or responsibilities (ii) a change in Employee's principal place of business to a location not within 30 miles of its present location, (iii) any significant and prolonged increase in the traveling requirements applicable to the discharge of Employee's responsibilities, or (iv) a material breach of this Agreement by the Company. Employee shall be entitled to the payments and other benefits provided for in Section 2.05 upon such termination. Otherwise, all obligations of the Company under Articles I and II cease upon termination, except for the payment of any salary accrued and unpaid under Section 1.03 hereof. The obligations of Employee under Article IV hereof shall continue notwithstanding termination of Employee's employment pursuant to this Section 2.06. For purposes of clarity, the Merger is not considered to be a Change of Control. Page 42 of 50 2.07. Benefit Terms. Employee's rights after termination from employment, if any, with respect to stock options, and his rights under Company pension and welfare benefit plans and programs, shall be determined in accordance with the provisions of the applicable plan or program. ARTICLE III EMPLOYEE'S ACKNOWLEDGMENTS Employee recognizes and acknowledges that: (a) in the course of Employee's employment by the Company it will be necessary for Employee to acquire information including, without limitation, information concerning the Company's sales, sales volume, sales methods, sales proposals, customers and prospective customers, identity of customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, amount or kind of customer's purchases from the Company, the Company's sources of supply, the Company's computer programs, system documentation, special hardware, product hardware, related software development, the Company's manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the Company's affairs (collectively referred to herein as the "Confidential Information"); (b) for purposes of this Employment Agreement, confidential information of an affiliate of the Company or of a person or entity with which the Company explores or conducts business is considered to be Confidential Information; (c) the Confidential Information is the property of the Company; (d) the use, misappropriation or disclosure of the Confidential Information would constitute a breach of trust and could cause irreparable injury to the Company; and (e) it is essential to the protection of the Company's good will and to the maintenance of the Company's competitive position that the Confidential Information be kept secret and that Employee not disclose the Confidential Information to others or use the Confidential Information to Employee's own advantage or the advantage of others. For purposes of this Agreement, Confidential Information shall not include any information that is in the public domain, so long as such information is not in the public domain as a result of any action or inaction by Employee which would constitute a violation of this Agreement or the Company's policies with respect to such information. Employee further recognizes and acknowledges that it is essential for the proper protection of the business of the Company that Employee be restrained, but only to the extent hereinafter provided (a) from soliciting or inducing any employee of the Company to leave the employ of the Company, (b) from hiring or attempting to hire any employee of the Company, (c) from soliciting the trade of or trading with the customers and suppliers of the Company, and (d) from competing against the Company for a reasonable period following the termination of Employee's employment with the Company. Employee further recognizes and understands that his duties at the Company may include the preparation of materials, including written or graphic Page 43 of 50 materials, and that any such materials conceived or written by him shall be done as "work made for hire" as defined and used in the Copyright Act of 1976, 17 USC Section 1 et seq. In the event of publication of such materials, Employee understands that the Company will solely retain and own all rights in said materials, including right of copyright, and that the Company may, at its discretion, on a case-by-case basis, grant Employee by-line credit on such materials as the Company may deem appropriate. For purposes of interpreting Article III and Article IV hereof, the acknowledgments, covenants and obligations of Employee with respect to the Company apply equally with respect to its affiliates. ARTICLE IV EMPLOYEE'S COVENANTS AND AGREEMENTS 4.01. Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company, its successors and assigns and agrees that he shall not, without the prior written consent of the Company, misappropriate or disclose or make available to anyone for use outside the Company's organization at any time, either during his employment with the Company or subsequent to the termination of his employment with the Company for any reason, including without limitation termination by the Company for cause or without cause, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company. 4.02. Disclosure of Works and Inventions/Assignment of Patents and Other Rights. (a) Employee shall disclose promptly to the Company or its nominee any and all works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of employment and related to the business, prospective business or activities of the Company, and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments, and otherwise cooperate with the Company at no expense to Employee, to assist the Company in applying for and obtaining Letters Patent or Copyrights of the United States or any foreign country or to otherwise protect the Company's interest therein. Such obligations shall continue beyond the termination of employment with respect to works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of employment, and shall be binding upon Employee's assigns, executors, administrators and other legal representatives. (b) Employee agrees that in the event of publication by Employee of written or graphic materials the Company will retain and own all rights in said materials, including right of copyright. 4.03. Duties. Employee agrees to be a loyal employee of the Company. Employee agrees to devote his best efforts full time to the performance of his duties for Page 44 of 50 the Company, to give proper time and attention to furthering the Company's business, and to comply with all rules, regulations and instruments established or issued by the Company. Employee further agrees that during the term of this Agreement, Employee shall not, directly or indirectly, engage in any business which would detract from Employee's ability to apply his best efforts to the performance of his duties hereunder. Employee also agrees that he shall not usurp any corporate opportunities of the Company. Employee is not prohibited from serving on the Board of Directors of community, civic or charitable organizations not involving any conflict of interest or interference with the performance of his duties for the Company. 4.04. Return of Materials. Upon the termination of Employee's employment with the Company for any reason, including without limitation termination by the Company for cause or without cause, Employee shall promptly deliver to the Company all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts, programs, proposals and any documents concerning the Company's customers or concerning products or processes used by the Company and, without limiting the foregoing, will promptly deliver to the Company any and all other documents or materials containing or constituting Confidential Information. 4.05. Restrictions on Competition. Employee covenants and agrees that during the period of Employee's employment hereunder plus a period of one (1) year following the termination of Employee's employment, including without limitation termination by the Company for cause or without cause, Employee shall not, in the United States of America or in any other country of the world in which the Company has done cardiopulmonary monitoring business at any time during the last three years prior to termination of Employee's employment with the Company, engage, directly or indirectly, whether as principal or as agent, officer, director, employee, consultant, shareholder, or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business. For purposes of this Agreement, the term "Competing Business" shall mean and include any person, corporation or other entity which develops, manufactures, sells, markets or attempts to develop, manufacture, sell or market any product or services which are the same as, similar to or compete with the Products and services (i) sold by the Company at any time and from time to time during the last three years prior to the termination of Employee's employment hereunder or (ii) which are active research and development projects of the Company of which Employee is aware at the time of termination. 4.06. Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment with the Company he shall not, directly or indirectly, solicit the trade of, or trade with, any customer, prospective customer, supplier, or prospective supplier of the Company for any business purpose other than for the benefit of the Company, with respect to any products competitive with those of the Company. Employee further agrees that for two years following termination of his employment with the Company, including without limitation termination by the Company for cause or without cause, Employee shall not, directly or indirectly, solicit the trade of, or trade Page 45 of 50 with, any customers or suppliers, or prospective customers or suppliers, of the Company with respect to any products competitive with those of the Company. 4.07. Non-Solicitation of Employees. Employee agrees that, during his employment with the Company and for two years following termination of Employee's employment with the Company, including without limitation termination by the Company for cause or without cause, Employee shall not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the Company to leave the Company for any reason whatsoever, or hire any employee of the Company. ARTICLE V EMPLOYEE'S REPRESENTATIONS AND WARRANTIES 5.01. No Prior Agreements. Employee represents and warrants that he is not a party to or otherwise subject to or bound by the terms of any contract, agreement or understanding which in any manner would limit or otherwise affect his ability perform his obligations hereunder, including without limitation any contract, agreement or understanding containing terms and provisions similar in any manner to those contained in Article IV hereof. Employee further represents and warrants that his employment with the Company will not require him to disclose or use any confidential information belonging to prior employers, other than Novametrix and its subsidiaries, or other persons or entities. 5.02. Employee's Abilities. Employee represents that his experience and capabilities are such that the provisions of Article IV will not prevent him from earning his livelihood, and acknowledges that it would cause the Company serious and irreparable injury and cost if Employee were to use his ability and knowledge in competition with the Company or to otherwise breach the obligations contained in Article IV. 5.03. Remedies. In the event of a breach by Employee of the terms of this Agreement, the Company shall be entitled, if it shall so elect, to institute legal proceedings to obtain damages for any such breach, or to enforce the specific performance of this Agreement by Employee and to enjoin Employee from any further violation of this Agreement and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law. Employee acknowledges, however, that the remedies at law for any breach by him of the provisions of this Agreement may be inadequate and that the Company shall be entitled to injunctive relief against him in the event of any breach. ARTICLE VI MISCELLANEOUS Page 46 of 50 6.01. Authorization to Modify Restrictions. It is the intention of the parties that the provisions of Article IV hereof shall be enforceable to the fullest extent permissible under applicable law, but that the unenforceability (or modification to conform to such law) of any provision or provisions hereof shall not render unenforceable, or impair, the remainder thereof. If any provision or provisions hereof shall be deemed invalid or unenforceable, either in whole or in part, this Agreement shall be deemed amended to modify, as necessary, the offending provision or provisions and to alter the bounds thereof in order to render it valid and enforceable or, if necessary, to delete the offending provision. 6.02. Tolling Period. The non-competition, non-disclosure and non-solicitation obligations contained in Article IV hereof shall be extended by the length of time during which Employee shall have been in breach of any of the provisions of such Article IV. 6.03. Entire Agreement. This Agreement, along with the Offer Letter, represents the entire agreement of the parties with respect to the employment of Employee by the Company and supercedes any prior written or oral representations, discussions or agreements concerning the subjects covered herein. This Agreement may be amended only by a writing signed by each of them. 6.04. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to conflict of law principles. 6.05. Consent to Jurisdiction; Venue. Employee hereby irrevocably submits to the personal jurisdiction of the United States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in any action or proceeding arising out of or relating to this Agreement, and Employee hereby irrevocably agrees that all claims in respect of any such action or proceeding may be heard and determined in either such court. Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Agreement brought in the United States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania and any objection on the ground that any such action or proceeding in either of such Courts has been brought in an inconvenient forum. Nothing in this Section 6.05 shall affect the right of the Company to bring any action or proceeding against Employee or his property in the courts of other jurisdictions where the Employee resides or has his principal place of business or where such property is located. 6.06. Service of Process. Employee hereby irrevocably consents to the service of any summons and complaint and any other process which may be served in any action or proceeding arising out of or related to this Agreement brought in the United States District Court for the Western District of Pennsylvania or the Court of Common Page 47 of 50 Pleas of Allegheny County by the mailing by certified or registered mail of copies of such process to Employee at his address as set forth on the signature page hereof. 6.07. Agreement Binding. The obligations of Employee under this Agreement shall continue after the termination of his employment with the Company for any reason, with or without cause, and shall be binding on, and inure to the benefit of, his heirs, executors, legal representatives and assigns. If the Employee should die while any amounts are still payable to him hereunder, including under Section 2.05, all such amounts, , shall be paid in accordance with the terms of this Agreement to the Employee's devisee, legatee, or designee or, if there be no such designee, to the Employee's estate. This Agreement also shall be binding upon, and inure to the benefit of, any successors and assigns of the Company. 6.08. Successor to the Company. 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 Employee, 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 Employee to terminate the Employee's employment and to receive the payments and other benefits set forth in Section 2.06(b) as if Employee had been terminated without cause upon a Change of Control. 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. 6.09. Counterparts, Section Headings. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The section headings of this Agreement are for convenience of reference only and shall not affect the construction or interpretation of any of the provisions hereof. 6.10. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (a) hand delivered, (b) mailed, registered mail, first class postage paid, return receipt requested, (c) sent via overnight delivery service or courier, delivery acknowledgment requested, or (d) sent via any other delivery service with proof of delivery: if to the Company: 1501 Ardmore Boulevard Pittsburgh, PA 15221-4401 Attn: General Counsel Page 48 of 50 if to Employee, at the address set forth on the signature page hereof or to such other address or to such other person as either party hereto shall have last designated by notice to the other party. Employee acknowledges that he has read and understands the foregoing provisions and that such provisions are reasonable and enforceable. Page 49 of 50 IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement to be executed the day and year first above written. Witness: /s/ Kristen Daly /s/ Philip F. Nuzzo Philip F. Nuzzo Address: 716 Paddock Avenue Meriden, CT 06450 /s/ Kristen Daly /s/ William J. Lacourciere - ------------------------------------- ---------------------------------- NOVAMETRIX MEDICAL SYSTEMS, INC. Attest RESPIRONICS, INC. /s/ Dorita A. Pishko By: /s/ Daniel J. Bevevino - ------------------------------------- ------------------------------ Secretary Print Name: Daniel J. Bevevino Title: V.P. & C.F.O. -------------------------- Page 50 of 50 -----END PRIVACY-ENHANCED MESSAGE-----