Exhibit 10.38

 

AGREEMENT REGARDING CERTAIN

MATTERS RELATING TO EMPLOYMENT

 

THIS AGREEMENT REGARDING CERTAIN MATTERS RELATING TO EMPLOYMENT (this
“Agreement”) is made and entered into this 20 day of July, 2004 by and between
RESPIRONICS, INC., a Delaware corporation (the “Company”), and JAMES W. LIKEN,
of Pittsburgh, Pennsylvania (“Executive”).

 

RECITALS

 

A. The Company and Executive are parties to that certain Employment Agreement
dated as of October 1, 1999, as amended pursuant to Amendment No. 1 to
Employment Agreement dated as of August 26, 2002 (as amended, the “Employment
Agreement”). Capitalized terms used herein and not defined are used as defined
in the Employment Agreement.

 

B. The Company and Executive desire to set forth certain agreements they have
reached relating to Executive’s employment with the Company, including
expiration of the Term of the Employment Agreement in accordance with its terms,
Executive’s bonus for fiscal year, and an opportunity for Executive to remain an
employee of the Company after expiration of the Term of the Employment
Agreement, and mutual release of certain claims the parties may have.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, and intending to be legally bound, the Company and Executive hereby
agree as follows:

 

ARTICLE I

Certain Acknowledgments and Agreements

 

1.01 Expiration of Term of Employment Agreement. The Company hereby gives
notice, and Executive hereby acknowledges receipt of such notice, pursuant to
Section 1.02(b) of the Employment Agreement that the Term of the Employment
Agreement shall expire on September 30, 2004. The parties acknowledge and agree
that the Extended Term shall not go into effect and that there shall not be any
extensions, rollovers or “evergreen” extensions of the Term of the Employment
Agreement.

 

1.02 Certain Obligations of Executive Under Employment Agreement.

 

(a) The provisions of the Employment Agreement which by their terms survive
expiration of the Term of the Employment Agreement, including without limitation
Executive’s obligations under Article IV of the Employment Agreement, shall
survive in accordance with their respective terms. Executive hereby acknowledges
and agrees that his obligations under Article IV of the Employment Agreement and
the related provisions in Articles III, V and VI thereof shall survive
expiration of the Term and that he shall remain subject to such provisions in
accordance with their terms.

 

(b) In addition, in consideration of the willingness of the Company to provide
the extended employment arrangement set forth in Article II of this Agreement
and the other agreements of the Company set forth herein, Executive hereby
acknowledge and agrees that he shall continue to be subject to the obligations
set forth in Article IV of the Employment Agreement and the related provisions
in Articles III, V and VI thereof for so long as he remains an employee of the
Company pursuant to Article II hereof and for the respective periods after
termination of such extended employment period as set forth in Article IV of the
Employment Agreement (substituting termination of such extended employment
arrangement for references to termination of employment under the Employment
Agreement where applicable).

 

1.03 Bonus for Fiscal Year 2004. The parties hereby agree that Executive will be
eligible to participate in the Company’s bonus plan for fiscal year 2004. A
bonus, if any, is based upon corporate performance versus plan and is funded and
distributed annually, typically in September, solely by action of the
Compensation Committee and the Board of Directors. The parties hereby agree that
Executive’s individual target potential bonus for fiscal year 2004 will be
5/12ths of his Base Salary of $600,000, which equals a target potential bonus of
$250,000. After fiscal year 2004, Executive will no longer participate in any of
the Company’s bonus plans.

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1.04 Certain Acknowledgements Regarding Company’s Succession Planning. The
parties hereby acknowledge and agree that, effective December 1, 2003, as part
of the Company’s succession plan, John L. Miclot became President and Chief
Executive Officer of the Company. Executive hereby acknowledges and agrees that,
notwithstanding anything contained in the Employment Agreement, Executive’s
change in title and position in connection with this succession plan were
mutually agreed upon and that such changes did not trigger any termination or
other compensation provision for Executive under the Employment Agreement,
including without limitation any right for Executive to terminate the Employment
Agreement pursuant to the third sentence of Section 2.04(a) thereof and receive
the payments contemplated thereby.

 

1.05 Additional Payment. In consideration of the agreements and acknowledgments
set forth in this Agreement, the Company shall pay to Executive, within three
(3) days of the expiration of seven-day revocation period set forth in Section
3.03, the sum of $50,000.00.

 

ARTICLE II

Extended Employment Arrangements

 

2.01 Extended Employment Arrangements.

 

(a) Extended Employment Period. Commencing simultaneously with the expiration of
the Term of the Employment Agreement on September 30, 2004, subject to the
remaining provisions of this Section 2.01 and assuming that Executive does not
die or become disabled prior to that date, Executive shall remain in the employ
of the Company for a period of 24 months after September 30, 2004 (the “Extended
Employment Period”).

 

(b) Services and Payment. During the Extended Employment Period, Executive shall
perform general advisory duties for the Company for one (1) eight (8) hour day
per calendar month or as mutually agreed upon by Executive and the Company. It
is acknowledged and agreed that Executive shall not be an executive officer of
the Company during the Extended Employment Period. During the Extended
Employment Period, Executive will not be required to travel from his place of
employment in Pittsburgh, Pennsylvania (or such other location as Executive may
designate in writing from time to time) on Company business without Executive’s
consent, which shall not be unreasonably withheld. The compensation to be paid
to Executive for his services during the Extended Employment Period (“Additional
Employment Payment”) shall be $6,250 per month or as mutually agreed upon by
Executive and the Company. Executive shall receive the Additional Employment
Payments provided for in this Section 2.01(b) during the Extended Employment
Period regardless of whether the Company requests Executive to perform services
during any particular month. Executive shall not be entitled to and shall not
participate in any employee benefit plan or program of the Company during the
Extended Employment Period other than health insurance for Executive and his
spouse under the Company’s health insurance program.

 

(c) Termination of Extended Employment Period. Executive may terminate his
employment during the Extended Employment Period by giving the Company at least
thirty (30) days prior written notice of his intent to terminate the Extended
Employment Period. The Company may not terminate Executive during the Extended
Employment Period for any reason other than upon the death or disability of
Executive or for cause (as defined in the Employment Agreement).

 

(d) Outstanding Stock Options. It is the intention of the parties that Executive
shall remain an employee of the Company during the Extended Employment Period
and that, accordingly, any and all stock options or awards granted to Executive
which are outstanding on September 30, 2004 (collectively, “Outstanding
Options”) under any stock option plan, stock incentive plan or similar plan or
program maintained by the Company or any of its predecessors (collectively,
“Option Plans”) shall remain in full force and effect during the Extended
Employment Period and shall continue to vest and be exercisable during the
Extended Employment Period in accordance with the terms of the applicable Option
Plan. The Company makes no representation or warranty with respect to the tax
treatment of the Outstanding Options upon the exercise of such Outstanding
Options by Executive; however, the Company agrees that it will at all times
recognize and treat Executive as an employee during the term of the Extended
Employment Period.

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(e) Treatment of Outstanding Options Upon Termination of Extended Employment
Period. If Executive dies or becomes disabled during the Extended Employment
Period, then all Outstanding Options outstanding on the date of Executive’s
death or disability shall immediately vest and shall be exercisable by Executive
or his estate or legal representative for a period of one (1) year from the date
of his death or disability (but in no event after the expiration date of any of
the Outstanding Options) as provided in the applicable Option Plan. If Executive
voluntarily terminates his employment during the Extended Employment Period, or
if the Company terminates Executive’s employment during the Extended Employment
Period for cause, then all Outstanding Options (whether vested or unvested)
shall automatically and immediately terminate as provided in the applicable
Option Plan. If Executive does not die or become disabled during the Extended
Employment Period, Executive does not voluntarily terminate his employment
during the Extended Employment Period and the Company does not terminate
Executives employment during the Extended Employment Period for cause, then at
the end of the Extended Employment Period, all unvested Outstanding Options
shall immediately terminate as provided in the applicable Option Plan, and all
vested Outstanding Options shall be exercisable after termination of employment
for the periods provided in the applicable Option Plan.

 

(f) Services as a Director. Nothing contained in this Agreement shall affect or
limit Executive’s duties and obligations as a member of the Board of Directors
of the Company or any Committee thereof.

 

ARTICLE III

Release

 

3.01 Release. (a) In consideration of the matters described in Articles I and II
above, Executive, on behalf of himself, his heirs, representatives,
administrators, estates, successors and assigns, does hereby irrevocably and
unconditionally remise, release and forever discharge the Company, the Company’s
predecessors, parents, subsidiaries, affiliates, benefit plans and their past,
present and future officers, directors, trustees, administrators, agents and
employees, as well as the heirs, successors and assigns of any of such persons
or such entities (hereinafter separately and collectively called “Released
Parties”) from all manner of suits actions, causes of action, damages and
claims, known or unknown, that he has, or may have, against any of the Released
Parties for any actions up to and including the date hereof and the continuing
effects thereof. Except for the performance of the provisions of this Agreement,
it is the intention of Executive to effect a general release of all such claims.

 

(b) This release includes, but is not limited to, claims which were asserted,
could have been asserted or could be asserted by Executive, or on his behalf,
arising out of his employment with the Company or the expiration of the Term of
the Employment Agreement, including but not limited to, claims relating to any
bonus or other amounts Executive may allege he is entitled to, claims relating
to Executive’s change of position to Vice Chairman, and any claims under the
federal Age Discrimination In Employment Act of 1967, as amended, Title VII of
the Federal Civil Rights Act of 1964, as amended, the Pennsylvania Human
Relations Act and other federal, state and local statutes, ordinances, executive
orders and regulations prohibiting age, race, sex, non-job-related disability
and other types of discrimination, the Employee Retirement Income Security Act
of 1974, as amended, and state or local law claims of any kind.

 

3.02 Certain Acknowledgements. (a) Executive acknowledges that he has been given
the opportunity to consider this Agreement for at least twenty one (21) days,
which Executive acknowledges is a reasonable period of time, and that he has
been advised to consult with an attorney in relation thereto, prior to executing
this Agreement. Executive further acknowledges that he has had a full and fair
opportunity to consult with an attorney and that he has carefully read and fully
understands all of the provisions of this Agreement intending to be legally
bound thereby.

 

(b) The Company acknowledges that it is not aware of any basis for any claims
against Executive as of the date of this Agreement.

 

3.03 Revocation Period. For a period of seven (7) days following the execution
of this Agreement, Executive may revoke this Agreement by delivery of a written
notice revoking the same, within that seven-day period, to the attention of
William Wilson at the Company. This Agreement shall not become effective or

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enforceable until that seven (7) day revocation period has expired. Once the
seven (7) day period has expired, this Agreement will be fully enforceable.
Notwithstanding any revocation hereof, the notice provided by the Company in
Section 1.01 shall constitute written notice from the Company of its intent not
to extend the Term of the Employment Agreement.

 

ARTICLE IV

Miscellaneous

 

4.01 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.

 

4.02 Counterparts. 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 agreement.

 

4.03 Notices. All notices under this Agreement shall be provided in the manner
set forth in Section 6.01 of the Employment Agreement. The Company hereby gives
notice that its current address for purposes of the Employment Agreement and
this Agreement is:

 

Respironics, Inc.

1010 Murry Ridge Lane

Murrysville, PA 15668

Attention: General Counsel

 

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/    SUSAN J. LIKEN               /s/    JAMES W. LIKEN              
  James W. Liken

 

Witness:

     

RESPIRONICS, INC.

/s/    WILLIAM R. WILSON               By:   /s/    SEAN MCDONALD            
VP, Human Resources      

Title:

  Chairman - Comp. Comm.

 

[Corporate Seal]