EMPLOYMENT AGREEMENT - LHOFFMAN

EMPLOYMENT AGREEMENT
---------------------


THIS EMPLOYMENT AGREEMENT DATED AS OF MAY 14, 2002, IS ENTERED INTO BY
SERVO MAGNETICS ACQUISITION, INC., A DELAWARE CORPORATION (THE "COMPANY"), AND
LESLIE HOFFMAN, AN INDIVIDUAL (THE "EMPLOYEE").

1. EMPLOYMENT.
1.1 TITLE
-----
.. THE COMPANY HEREBY EMPLOYS EMPLOYEE, AND EMPLOYEE HEREBY AGREES TO ACCEPT
EMPLOYMENT FROM THE COMPANY AS ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER
REPORTING DIRECTLY TO THE CEO OF RESMED INC. EMPLOYEE AGREES TO USE HIS BEST
EFFORTS TO PROMOTE THE INTERESTS OF THE COMPANY AND TO DEVOTE HIS FULL BUSINESS
TIME AND ENERGIES TO THE BUSINESS AND AFFAIRS OF THE COMPANY, UNLESS OTHERWISE
AUTHORIZED BY THE BOARD OF DIRECTORS OF RESMED INC., THE PARENT CORPORATION OF
THE COMPANY ("RESMED").

2. TERM OF EMPLOYMENT.
2.1
YOU AGREE TO REMAIN EMPLOYED BY THE COMPANY FOR A PERIOD OF THREE (3) YEARS
AFTER THE DATE OF THIS AGREEMENT. NEVERTHELESS AND SUBJECT TO THE PROVISIONS
BELOW, THE COMPANY MAY TERMINATE YOUR EMPLOYMENT AT ANY TIME FOR ANY REASON,
WITH OR WITHOUT CAUSE, BY GIVING YOU WRITTEN NOTICE OF SUCH TERMINATION.

3. COMPENSATION.
3.1 CASH COMPENSATION
------------------
.. AS COMPENSATION FOR SERVICES PROVIDED TO THE COMPANY, EMPLOYEE SHALL RECEIVE
A SALARY AT THE ANNUAL RATE OF $250,000, TO BE PAID BI-WEEKLY, LESS SUCH PAYROLL
AND WITHHOLDING TAXES AS REQUIRED BY LAW TO BE DEDUCTED AND SUCH OTHER
DEDUCTIONS AS EMPLOYEE SHALL AUTHORIZE IN WRITING (THE "BASE COMPENSATION").
THE SALARY SHALL BE PRO-RATED FOR ANY PARTIAL WEEK AT EITHER THE COMMENCEMENT OR
TERMINATION OF THE EMPLOYMENT, OR AS OTHERWISE PERMITTED BY APPLICABLE LAW WITH
RESPECT TO EXEMPT EMPLOYEES.
3.2 BONUS COMPENSATION
-------------------
.. EMPLOYEE WILL QUALIFY FOR A BONUS BASED ON 50% OF HIS BASE COMPENSATION UNDER
THE RESMED SENIOR EXECUTIVE BONUS PROGRAM.
3.3 COMPANY CAR
------------
.. DURING THE TERM OF THIS AGREEMENT, THE COMPANY WILL PROVIDE EMPLOYEE WITH THE
USE OF A CAR SUBSTANTIALLY SIMILAR TO THE CAR CURRENTLY LEASED AND ON
SUBSTANTIALLY SIMILAR TERMS TO THOSE SET FORTH IN THE MASTER LEASE AGREEMENT BY
AND BETWEEN WELLS FARGO BANK, N.A. AND SERVO MAGNETICS INCORPORATED, DATED
NOVEMBER 15, 2000, AS SUPPLEMENTED BY THAT CERTAIN SUPPLEMENT TO MASTER LEASE,
DATED NOVEMBER 15, 2000.

4. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES.
4.1 BENEFIT PLANS
--------------
.. DURING THE TERM OF THIS AGREEMENT, EMPLOYEE SHALL BE PROVIDED WITH VACATION
BENEFITS, SICK LEAVE BENEFITS, HOLIDAYS, AND OTHER BENEFITS WHICH ARE NOT LESS
THAN, AND ON TERMS NO LESS FAVORABLE THAN, THOSE THAT THE COMPANY PROVIDES
GENERALLY TO ITS OTHER EXECUTIVE EMPLOYEES, IF ANY. EMPLOYEE (AND ANY
DEPENDENTS) MUST MEET THE ELIGIBILITY REQUIREMENTS OF ANY SUCH PLANS AS A
CONDITION TO HIS (AND THEIR) PARTICIPATION. IN ADDITION, THE COMPANY AGREES TO
PROVIDE CONTINUED COVERAGE FOR THE EMPLOYEE AND HIS SPOUSE UNDER THEIR EXISTING
HEALTH INSURANCE POLICY WITH BLUE CROSS OF CALIFORNIA.
4.2 REIMBURSEMENT OF BUSINESS EXPENSES
-------------------------------------
.. DURING THE TERM OF THIS AGREEMENT, THE COMPANY SHALL REIMBURSE EMPLOYEE
PROMPTLY FOR ALL REASONABLE EXPENSES INCURRED BY EMPLOYEE IN THE COURSE OF
PERFORMING SERVICES FOR THE COMPANY, WHICH EXPENSES MAY INCLUDE, BUT ARE NOT
LIMITED TO, TRAVEL, ENTERTAINMENT/MEETINGS, PARKING, PUBLICATIONS, ASSOCIATION
DUES, AND CONFERENCES, PROVIDED THAT EMPLOYEE PROVIDES PROPER EVIDENCE OF SUCH
EXPENSES AND SUBMITS HIS REQUESTS FOR REIMBURSEMENT IN ACCORDANCE THE POLICIES
AND PROCEDURES OF THE COMPANY THEN IN EFFECT.

5. TERMINATION OF EMPLOYMENT.
5.1 AUTOMATIC TERMINATION
----------------------
.. THIS AGREEMENT WILL AUTOMATICALLY TERMINATE IN THE EVENT OF EMPLOYEE'S DEATH
OR DISABILITY WHICH PREVENTS EMPLOYEE FROM PERFORMING THE SUBSTANTIAL MAJORITY
OF HIS DUTIES AND RESPONSIBILITIES FOR A PERIOD OF 90 DAYS IN ANY TWELVE-MONTH
PERIOD, UNLESS SUCH TERMINATION IS PROHIBITED BY APPLICABLE LAW. THE COMPANY
SHALL HAVE NO FURTHER OBLIGATIONS TO EMPLOYEE OR HIS ESTATE UPON SUCH AUTOMATIC
TERMINATION, OTHER THAN TO DISTRIBUTE TO EMPLOYEE, HIS ESTATE OR HIS SURVIVORS,
AS THE CASE MAY BE, ANY UNPAID SALARY, ACCRUED BUT UNPAID BENEFITS OR
UNREIMBURSED EXPENSES OWED THE EMPLOYEE AT THE DATE OF THE TERMINATION.
5.2 BY THE COMPANY WITHOUT CAUSE
--------------------------------
.. THE COMPANY MAY TERMINATE THIS AGREEMENT WITHOUT "CAUSE" (AS HEREINAFTER
DEFINED) AT ANY TIME FOLLOWING THE EFFECTIVE DATE, UPON THIRTY (30) DAYS'
WRITTEN NOTICE TO EMPLOYEE, SUBJECT TO COMPLIANCE BY THE COMPANY WITH THE
PROVISIONS OF SECTION 5.6 HEREOF. UPON DELIVERY OF SUCH NOTICE THE COMPANY MAY,
IN ITS SOLE DISCRETION, GIVE THE TERMINATION IMMEDIATE OR SUCH EARLIER EFFECT AS
IT SPECIFIES BY PAYING TO EMPLOYEE IN A LUMP SUM ANY SALARY THAT WOULD BE
PAYABLE BETWEEN SUCH DATE AND THE DATE OF TERMINATION STATED IN THE NOTICE, BUT
IN NO EVENT MORE THAN ONE MONTH'S SALARY, PLUS OUTSTANDING EXPENSES AND ANY
ACCRUED BUT UNUSED VACATION, LESS ANY DEDUCTIONS REQUIRED BY LAW OR AUTHORIZED
BY EMPLOYEE.
5.3 BY EMPLOYEE WITHOUT GOOD REASON
-----------------------------------
.. EMPLOYEE MAY TERMINATE THIS AGREEMENT WITHOUT "GOOD REASON" (AS HEREINAFTER
DEFINED) AT ANY TIME FOLLOWING THE EFFECTIVE DATE, UPON THIRTY (30) DAYS'
WRITTEN NOTICE TO THE COMPANY. UPON RECEIPT OF SUCH NOTICE THE COMPANY MAY, IN
ITS SOLE DISCRETION, GIVE THE TERMINATION IMMEDIATE OR SUCH EARLIER EFFECT AS IT
SPECIFIES BY PAYING TO EMPLOYEE IN A LUMP SUM ANY SALARY THAT WOULD BE PAYABLE
BETWEEN SUCH DATE AND THE DATE OF TERMINATION STATED IN THE NOTICE, BUT IN NO
EVENT MORE THAN ONE MONTH'S SALARY, PLUS OUTSTANDING EXPENSES AND ANY ACCRUED
BUT UNUSED VACATION, LESS ANY DEDUCTIONS REQUIRED BY LAW OR AUTHORIZED BY
EMPLOYEE.
5.4 BY THE COMPANY FOR CAUSE
----------------------------
.. THE COMPANY MAY TERMINATE EMPLOYEE'S EMPLOYMENT FOR "CAUSE" AT ANY TIME, UPON
WRITTEN NOTICE TO EMPLOYEE. FOR PURPOSES OF THIS AGREEMENT, "CAUSE" SHALL MEAN:
(A) EMPLOYEE'S CONVICTION OF, OR PLEA OF NOLO CONTENDERE TO, A FELONY OR ANY
CRIME INVOLVING MORAL TURPITUDE OR INVOLVING THE COMPANY;
(B) EMPLOYEE'S COMMISSION OF ANY ACT OF THEFT, EMBEZZLEMENT OR
MISAPPROPRIATION AGAINST THE COMPANY OR AN ASSIGNEE OF THIS AGREEMENT, OR ANY OF
THEIR RESPECTIVE PARENTS, AFFILIATES, SUBSIDIARIES OR SUCCESSORS;
(C) THE GROSS NEGLECT, MALFEASANCE OR NONFEASANCE OF EMPLOYEE IN THE
PERFORMANCE OF THE SERVICES CONTEMPLATED HEREUNDER;
(D) A MATERIAL BREACH OF THIS AGREEMENT BY EMPLOYEE, WHICH IF CURABLE, HAS
NOT BEEN CURED WITHIN TEN (10) DAYS AFTER WRITTEN NOTICE OF SUCH BREACH TO
EMPLOYEE;
(E) ANY WILLFUL MISCONDUCT OR UNETHICAL BEHAVIOR OF OR INSUBORDINATION BY
EMPLOYEE;
(F) THE SEXUAL OR OTHER HARASSMENT BY EMPLOYEE OF ANY EMPLOYEE, INDEPENDENT
CONTRACTOR OR CUSTOMER OF THE COMPANY OR AN ASSIGNEE OF THIS AGREEMENT, OR ANY
OF THEIR RESPECTIVE PARENTS, AFFILIATES, SUBSIDIARIES OR SUCCESSORS;
(G) EMPLOYEE'S USE OF ILLEGAL DRUGS OR ABUSE OF ALCOHOL OR LEGALLY
PRESCRIBED DRUGS; AND
(H) EMPLOYEE'S FAILURE TO CONSISTENTLY DISCHARGE HIS DUTIES TO THE COMPANY
OR AN ASSIGNEE OF THIS AGREEMENT, OR ANY OF THEIR RESPECTIVE PARENTS,
AFFILIATES, SUBSIDIARIES OR SUCCESSORS UNDER THIS AGREEMENT OR OTHERWISE.
5.5 BY EMPLOYEE FOR GOOD REASON
-------------------------------
.. EMPLOYEE MAY TERMINATE HIS EMPLOYMENT FOR "GOOD REASON" AT ANY TIME, UPON
WRITTEN NOTICE TO THE COMPANY. FOR PURPOSES OF THIS AGREEMENT, "GOOD REASON"
SHALL MEAN:
(A) THE COMPANY'S FAILURE TO TIMELY MAKE ANY PAYMENTS REQUIRED UNDER THIS
AGREEMENT AFTER TEN (10) DAYS WRITTEN NOTICE AND OPPORTUNITY TO CURE;
(B) THE COMPANY'S MATERIAL BREACH OF THIS AGREEMENT, WHICH, IF CURABLE, HAS
NOT BEEN CURED WITHIN TEN (10) DAYS AFTER WRITTEN NOTICE OF SUCH BREACH TO THE
COMPANY;
(C) THE COMPANY'S REDUCTION OF EMPLOYEE'S ANNUAL BASE COMPENSATION BELOW
$250,000 OR THE COMPANY'S REDUCTION OF THE PERCENTAGE OF BASE COMPENSATION ON
WHICH EMPLOYEE'S BONUS IS BASED BELOW 50%, EXCEPT FOR ACROSS-THE-BOARD
COMPENSATION REDUCTIONS SIMILARLY AFFECTING ALL MANAGEMENT PERSONNEL OF RESMED.
5.6 TERMINATION PAYMENT
--------------------
.. IN THE EVENT THAT EMPLOYEE'S EMPLOYMENT IS TERMINATED PURSUANT TO SECTIONS
5.1 THROUGH 5.5, EMPLOYEE SHALL CONTINUE TO RENDER SERVICES TO THE COMPANY
PURSUANT TO THE TERMS OF THIS AGREEMENT UNTIL THE DATE OF TERMINATION AND HE OR
HIS ESTATE (AS APPLICABLE) SHALL BE PAID ANY AMOUNTS EARNED THROUGH THE DATE OF
TERMINATION. IN THE EVENT THAT THIS AGREEMENT IS TERMINATED PURSUANT TO
SECTIONS 5.2 OR 5.5, EMPLOYEE SHALL RECEIVE SEVERANCE IN AN AMOUNT EQUAL TO THE
EMPLOYEE'S BASE COMPENSATION FOR A PERIOD EQUAL TO THE LESSER OF (I) TWELVE (12)
MONTHS OR (II) THE REMAINING TERM OF THIS AGREEMENT UNDER SECTION 2 ABOVE, LESS
APPLICABLE WITHHOLDING, (THE "SEVERANCE PAYMENT") IN A SINGLE LUMP SUM PAYABLE
ON THE TENTH (10TH) DAY AFTER EXECUTION OF THE RELEASE DESCRIBED BELOW. EXCEPT
AS PROVIDED IN THIS SECTION 5.6, EMPLOYEE SHALL NOT BE ENTITLED TO ANY OTHER
PAYMENTS OR BENEFITS IN CONNECTION WITH HIS EMPLOYMENT AND/OR THE TERMINATION
THEREOF, AND SHALL HAVE NO FURTHER RIGHT TO RECEIVE COMPENSATION, BENEFITS OR
OTHER CONSIDERATION FROM THE COMPANY, OR HAVE ANY OTHER REMEDY WHATSOEVER
AGAINST THE COMPANY, AS A RESULT OF THE TERMINATION OF THIS AGREEMENT OR THE
TERMINATION OF EMPLOYEE.
TO BE ELIGIBLE TO RECEIVE THE SEVERANCE PAYMENT UNDER THIS SECTION 5.6,
EMPLOYEE MUST EXECUTE AND DELIVER (AND NOT REVOKE, IF A REVOCATION PERIOD IS
REQUIRED BY LAW) THE WAIVER AND RELEASE THAT IS ATTACHED TO THIS AGREEMENT AS
APPENDIX A.

6. NONCOMPETITION, CONFIDENTIALITY AND CONFLICTS OF INTEREST.
6.1 NONCOMPETITION
--------------
.. EMPLOYEE AGREES AND UNDERSTANDS THAT, DUE TO THE NATURE OF HIS POSITION WITH
THE COMPANY, HE WILL GAIN POSSESSION OF CONFIDENTIAL INFORMATION ABOUT THE
COMPANY AND THE WAY IT CONDUCTS ITS BUSINESS. IN CONJUNCTION WITH THE EXECUTION
OF, AND AS PART OF THE CONSIDERATION GIVEN FOR, THIS AGREEMENT, EMPLOYEE WILL
NOT DIVULGE ANY CONFIDENTIAL INFORMATION ABOUT THE COMPANY WITH REGARD TO SALES,
ENGINEERING, OPERATIONS, OR SERVICE TO ANY OUTSIDE INTERESTS FROM THE COMPANY.
THIS CONFIDENTIALITY SHALL SURVIVE TERMINATION OF HIS EMPLOYMENT WITH THE
COMPANY. EMPLOYEE ACKNOWLEDGES THAT A REMEDY AT LAW FOR ANY BREACH OR
THREATENED BREACH BY HIM WOULD BE INADEQUATE TO PROTECT THE COMPANY AGAINST THE
CONSEQUENCES OF SUCH BREACH, AND HE THEREFORE AGREES THAT THE COMPANY SHALL BE
ENTITLED TO INJUNCTIVE RELIEF IN CASE OF ANY SUCH BREACH OR THREATENED BREACH.
THE COMPANY WILL NOT PREVENT EMPLOYEE FROM CONTINUING TO USE THE KNOWLEDGE AND
INFORMATION THAT HE POSSESSED PRIOR TO COMMENCING EMPLOYMENT HEREUNDER, OR ANY
NON-CONFIDENTIAL INFORMATION HE ACQUIRED DURING HIS EMPLOYMENT, IN ANY LAWFUL
MANNER FOLLOWING TERMINATION OF HIS EMPLOYMENT HEREUNDER.
6.2 RESTRICTIVE COVENANT
---------------------
.. DURING THE TWELVE (12) MONTH PERIOD FOLLOWING THE TERMINATION DATE OF
EMPLOYEE'S EMPLOYMENT UNDER THIS AGREEMENT, EMPLOYEE SHALL NOT, WITHOUT FIRST
OBTAINING THE PRIOR WRITTEN APPROVAL OF THE COMPANY, DIRECTLY OR INDIRECTLY
ENGAGE IN ANY ACTIVITIES IN COMPETITION WITH THE COMPANY, OR ACCEPT EMPLOYMENT
OR ESTABLISH A BUSINESS RELATIONSHIP WITH A BUSINESS ENGAGED IN COMPETITION WITH
THE COMPANY AND SUCH OTHER BUSINESSES AS THE COMPANY COMES TO BE ACTIVELY
ENGAGED IN DURING THE TERM OF THIS AGREEMENT, IN ANY GEOGRAPHICAL AREA IN WHICH
THE COMPANY, AS OF THE TERMINATION DATE, EITHER IS CONDUCTING OR HAS MADE KNOWN
TO EMPLOYEE PRIOR TO HIS TERMINATION BONA FIDE PLANS TO CONDUCT BUSINESS. THIS
PROVISION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
6.3 CONFLICTS OF INTEREST
-----------------------
.. DURING HIS EMPLOYMENT, EMPLOYEE AGREES NOT TO ACQUIRE, ASSUME OR PARTICIPATE
IN, DIRECTLY OR INDIRECTLY, ANY POSITION, INVESTMENT OR INTEREST KNOWN BY HIM TO
BE ADVERSE OR ANTAGONISTIC TO THE COMPANY, ITS BUSINESS OR PROSPECTS, FINANCIAL
OR OTHERWISE. HOWEVER, EMPLOYEE MAY OWN, SOLELY AS A PASSIVE INVESTOR, UNLESS
OTHERWISE AGREED TO BY THE COMPANY IN WRITING, SECURITIES OF OTHER COMPANIES,
PROVIDED HIS BENEFICIAL OWNERSHIP OF THE STOCK OF ANY ONE SUCH CORPORATION DOES
NOT EXCEED 1% OF SUCH CORPORATION'S VOTING STOCK.
6.4 NON-INTERFERENCE
----------------
.. WHILE EMPLOYED BY THE COMPANY, AND FOR A PERIOD OF ONE (1) YEAR IMMEDIATELY
FOLLOWING THE TERMINATION OF HIS EMPLOYMENT, EMPLOYEE WILL NOT INTERFERE WITH
THE BUSINESS OF THE COMPANY BY:
(A) SOLICITING, ATTEMPTING TO SOLICIT, INDUCING OR OTHERWISE CAUSING ANY
EMPLOYEE OF THE COMPANY TO TERMINATE HIS OR HER EMPLOYMENT IN ORDER TO BECOME AN
OWNER, PARTNER, SOLE PROPRIETOR IN OR A COMPETITOR OF OR AN EMPLOYEE,
CONSULTANT, LENDER OR CONTRACTOR TO OR FOR ANY COMPETITOR OF THE COMPANY; OR
(B) DIRECTLY OR INDIRECTLY SOLICITING THE BUSINESS OF ANY CUSTOMER OF THE
COMPANY WHICH AT THE TIME OF TERMINATION OR ONE YEAR PRIOR THERETO WAS LISTED ON
THE COMPANY'S CUSTOMER LIST, WHICH SOLICITATION, IF SUCCESSFUL, WOULD RESULT IN
THE LOSS OF BUSINESS OR POTENTIAL BUSINESS FOR THE COMPANY SO LONG AS THE
POTENTIAL BUSINESS IS WITHIN THE COMPANY'S CORE BUSINESS OR IS A LOGICAL
EXTENSION OF SUCH BUSINESS AS IT EXISTS AT THE TIME OF THE EMPLOYEE'S
TERMINATION.
THE PROVISIONS OF THIS SECTION 6.4 SHALL SURVIVE THE TERMINATION OF THIS
AGREEMENT.

7. NOTICES.
ALL NOTICES, REQUESTS, DEMANDS, CLAIMS, AND OTHER COMMUNICATIONS HEREUNDER
WILL BE IN WRITING. ANY NOTICE, REQUEST, DEMAND, CLAIM, OR OTHER COMMUNICATION
HEREUNDER SHALL BE DEEMED DULY GIVEN IF (AND THEN TWO BUSINESS DAYS AFTER) IT IS
SENT BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID,
AND ADDRESSED TO THE INTENDED RECIPIENT AS SET FORTH BELOW:
IF TO EMPLOYEE: LESLIE HOFFMAN
6660 VARIEL AVENUE
CANOGA PARK, CA 91203
TELECOPY: (818) 346-6294

WITH A COPY TO:
- -----------------

FULBRIGHT & JAWORSKI L.L.P.
865. S. FIGUEROA STREET, 29TH FLOOR
LOS ANGELES, CALIFORNIA 90017
ATTN: DAVID A. EBERSHOFF, ESQ.
TELECOPY: (213) 680-4518

IF TO THE COMPANY: SERVO MAGNETICS ACQUISITION, INC.
RESMED INC.
14040 DANIELSON STREET
POWAY, CALIFORNIA 92064
ATTN: LEGAL DEPARTMENT
TELECOPY: (858) 746-2830

WITH A COPY TO:
- ------------------

LATHAM & WATKINS
650 TOWN CENTER DRIVE
20TH FLOOR
COSTA MESA, CALIFORNIA 92626
ATTN: PATRICK T. SEAVER, ESQ.
TELECOPY: (714) 755-8290

ANY PARTY MAY SEND ANY NOTICE, REQUEST, DEMAND, CLAIM, OR OTHER COMMUNICATION
HEREUNDER TO THE INTENDED RECIPIENT AT THE ADDRESS SET FORTH ABOVE USING ANY
OTHER MEANS (INCLUDING PERSONAL DELIVERY, EXPEDITED COURIER, MESSENGER SERVICE,
TELECOPY, TELEX, ORDINARY MAIL, OR ELECTRONIC MAIL), BUT NO SUCH NOTICE,
REQUEST, DEMAND, CLAIM, OR OTHER COMMUNICATION SHALL BE DEEMED TO HAVE BEEN DULY
GIVEN UNLESS AND UNTIL IT ACTUALLY IS RECEIVED BY THE INTENDED RECIPIENT. ANY
PARTY MAY CHANGE THE ADDRESS TO WHICH NOTICES, REQUESTS, DEMANDS, CLAIMS, AND
OTHER COMMUNICATIONS HEREUNDER ARE TO BE DELIVERED BY GIVING THE OTHER PARTIES
NOTICE IN THE MANNER HEREIN SET FORTH.

8. MODIFICATIONS; WAIVERS; APPLICABLE LAW.
NO PROVISION IN THIS AGREEMENT MAY BE MODIFIED, WAIVED OR DISCHARGED UNLESS
SUCH WAIVER, MODIFICATION OR DISCHARGE IS AGREED TO IN WRITING, SIGNED BY
EMPLOYEE AND BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY.

9. SEVERABILITY.
IF ANY PROVISION OF THIS AGREEMENT IS DETERMINED TO BE INVALID OR IS IN ANY
WAY MODIFIED BY ANY GOVERNMENTAL AGENCY, TRIBUNAL OR COURT OF COMPETENT
JURISDICTION, SUCH DETERMINATION SHALL BE CONSIDERED AS RELATING ONLY TO A
SEPARATE, DISTINCT, AND INDEPENDENT PART OF THIS AGREEMENT AND SHALL NOT AFFECT
THE VALIDITY OR ENFORCEABILITY OF ANY OF THE REMAINING PROVISIONS OF THIS
AGREEMENT.

10. SUCCESSOR RIGHTS AND ASSIGNMENT.
THIS AGREEMENT SHALL BIND, INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY
EMPLOYEE'S PERSONAL OR LEGAL REPRESENTATIVES, EXECUTORS, ADMINISTRATORS,
SUCCESSORS, HEIRS, DISTRIBUTEES, AND LEGATEES. THE RIGHTS AND OBLIGATIONS OF
THE COMPANY UNDER THIS AGREEMENT MAY BE ASSIGNED BY THE COMPANY, IN WHICH EVENT
IT SHALL BE BINDING UPON, AND INURE TO THE BENEFIT OF, THE PERSON(S) OR
ENTITY(IES) TO WHOM IT IS ASSIGNED. EMPLOYEE MAY NOT ASSIGN HIS DUTIES
HEREUNDER AND HE MAY NOT ASSIGN ANY OF HIS RIGHTS HEREUNDER WITHOUT THE WRITTEN
CONSENT OF THE COMPANY.

11. REPRESENTATIONS OF EMPLOYEE.
-----------------------------
EMPLOYEE REPRESENTS AND WARRANTS THAT HIS ENTRY INTO AND THE PERFORMANCE OF
THE DUTIES AND OBLIGATIONS CALLED FOR HEREIN DO NOT BREACH OR OTHERWISE VIOLATE
ANY LEGAL OBLIGATION OF EMPLOYEE, COMMON LAW, STATUTORY OR CONTRACTUAL.

12. ENTIRE AGREEMENT.
-----------------
THIS AGREEMENT CONTAINS ALL OF THE TERMS AND CONDITIONS AGREED UPON BY THE
PARTIES. ANY PRIOR DRAFTS, DISCUSSIONS OR NEGOTIATIONS ARE SUPERCEDED BY THIS
AGREEMENT.


IN WITNESS WHEREOF, EMPLOYEE AND THE COMPANY HEREBY EXECUTE THIS AGREEMENT AS OF
THE DATE FIRST ABOVE WRITTEN.
THE COMPANY

SERVO MAGNETICS ACQUISITION, INC.,
A DELAWARE CORPORATION
BY: /S/ W FLICKER
---------------
NAME: W FLICKER
------------
TITLE: SECRETARY
---------
EMPLOYEE
LESLIE HOFFMAN,
AN INDIVIDUAL

/S/ LESLIE HOFFMAN
- --------------------

APPENDIX A
WAIVER AND RELEASE OF CLAIMS

IN EXCHANGE FOR PAYMENT TO ME OF AMOUNTS PURSUANT TO SECTION 5.6 OF MY
EMPLOYMENT AGREEMENT (THE "AGREEMENT") WITH SERVO MAGNETICS ACQUISITION, INC.
(THE "COMPANY") AND FOR THE OTHER BENEFITS PROVIDED TO ME THEREIN, TO WHICH
AGREEMENT THIS FORM IS ATTACHED, I HEREBY FURNISH THE COMPANY WITH THE
FOLLOWING RELEASE AND WAIVER.

I HEREBY RELEASE AND FOREVER DISCHARGE THE COMPANY, ITS OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, STOCKHOLDERS, SUCCESSORS, ASSIGNS AND AFFILIATES,
OF AND FROM ANY AND ALL CLAIMS, LIABILITIES, DEMANDS, CAUSES OF ACTION, COSTS,
EXPENSES, ATTORNEYS' FEES, DAMAGES, INDEMNITIES AND OBLIGATIONS OF EVERY KIND
AND NATURE, IN LAW, EQUITY, OR OTHERWISE, KNOWN AND UNKNOWN, SUSPECTED AND
UNSUSPECTED, DISCLOSED AND UNDISCLOSED, ARISING AT ANY TIME PRIOR TO AND
INCLUDING MY EMPLOYMENT TERMINATION DATE WITH RESPECT TO ANY CLAIMS RELATING TO
MY EMPLOYMENT AND THE TERMINATION OF MY EMPLOYMENT, INCLUDING BUT NOT LIMITED
TO, CLAIMS PURSUANT TO ANY FEDERAL, STATE OR LOCAL LAW RELATING TO EMPLOYMENT
INCLUDING, BUT NOT LIMITED TO, DISCRIMINATION CLAIMS, TITLE VII OF THE CIVIL
RIGHTS ACT OF 1964, AS AMENDED, THE AMERICAN WITH DISABILITIES ACT, AS AMENDED,
CLAIMS UNDER THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AS AMENDED, AND THE
FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED ("ADEA"), OR
CLAIMS FOR WRONGFUL TERMINATION, BREACH OF THE COVENANT OF GOOD FAITH, CONTRACT
CLAIMS, TORT CLAIMS, AND WAGE OR BENEFIT CLAIMS, INCLUDING BUT NOT LIMITED TO,
CLAIMS FOR SALARY, BONUSES, COMMISSIONS, STOCK, STOCK OPTIONS, VACATION PAY,
FRINGE BENEFITS, SEVERANCE PAY OR ANY FORM OF COMPENSATION; PROVIDED HOWEVER,
THAT NOTHING IN THIS RELEASE SHALL AFFECT ANY RIGHTS I MAY HAVE (I) UNDER THAT
CERTAIN AGREEMENT AND PLAN OF MERGER, DATED AS OF MAY 14, 2002, BY AND AMONG ME,
SERVO MAGNETICS INCORPORATED, A CALIFORNIA CORPORATION, THE COMPANY, AND RESMED
INC., A DELAWARE CORPORATION, RELATING TO MATTERS OTHER THAN MY EMPLOYMENT WITH
THE COMPANY, OR (II) TO INDEMNIFICATION BY THE COMPANY FOR ANY ACTIONS OR CLAIMS
BROUGHT AGAINST ME IN MY CAPACITY AS OFFICER, DIRECTOR OR AGENT OF THE COMPANY,
WHETHER SUCH INDEMNIFICATION RIGHTS ARE PURSUANT TO THE BYLAWS OR THE
CERTIFICATE OF INCORPORATION OF THE COMPANY OR PURSUANT TO ANY INSURANCE POLICY
MAINTAINED BY THE COMPANY.

I ALSO ACKNOWLEDGE THAT I HAVE READ AND UNDERSTAND SECTION 1542 OF THE
CALIFORNIA CIVIL CODE WHICH READS AS FOLLOWS: "A GENERAL RELEASE DOES NOT
EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I HEREBY EXPRESSLY WAIVE
AND RELINQUISH ALL RIGHTS AND BENEFITS UNDER THAT SECTION AND ANY LAW OF ANY
JURISDICTION OF SIMILAR EFFECT WITH RESPECT TO ANY CLAIMS I MAY HAVE AGAINST THE
COMPANY.

I ACKNOWLEDGE THAT, AMONG OTHER RIGHTS, I AM WAIVING AND RELEASING ANY
RIGHTS I MAY HAVE UNDER ADEA, THAT THIS WAIVER AND RELEASE IS KNOWING AND
VOLUNTARY, AND THAT THE CONSIDERATION GIVEN FOR THIS WAIVER AND RELEASE IS IN
ADDITION TO ANYTHING OF VALUE TO WHICH I WAS ALREADY ENTITLED AS AN EMPLOYEE OF
THE COMPANY. I FURTHER ACKNOWLEDGE THAT IF I AM OVER 40 I HAVE BEEN ADVISED, AS
REQUIRED BY THE OLDER WORKERS BENEFIT PROTECTION ACT, THAT: (A) THE WAIVER AND
RELEASE GRANTED HEREIN DOES NOT RELATE TO CLAIMS WHICH MAY ARISE AFTER THIS
RELEASE IS EXECUTED; (B) I HAVE BEEN ADVISED OF MY RIGHT TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT (ALTHOUGH I MAY CHOOSE VOLUNTARILY
NOT TO DO SO); (C) I HAVE TWENTY-ONE (21) DAYS FROM THE DATE I RECEIVE THIS
AGREEMENT, IN WHICH TO CONSIDER THIS AGREEMENT (ALTHOUGH I MAY CHOOSE
VOLUNTARILY TO EXECUTE THIS AGREEMENT EARLIER AND THEREBY WAIVE ALL OR A PORTION
OF THE 21-DAY PERIOD); (D) I HAVE SEVEN (7) DAYS FOLLOWING THE EXECUTION OF THIS
AGREEMENT TO REVOKE MY CONSENT TO THE AGREEMENT; AND (E) THIS AGREEMENT SHALL
NOT BE EFFECTIVE UNTIL THE SEVEN (7) DAY REVOCATION PERIOD HAS EXPIRED.

DATE: MAY 14, 2002 BY: /S/ LESLIE HOFFMAN
-------------- --------------------
LESLIE HOFFMAN