EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1998, by and between
AMERICAN ELECTROMEDICS CORP., a Delaware corporation (the
"Company"), and XXXXXXX X. XXXXXXXXX (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Executive has been employed by the Company, and
the Company and the Executive desire to assure continuity of the
Executive's services upon the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements hereinafter set forth, the parties
hereto, intending to be legally bound, agree as follows:
1. Retention of Employment.
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The Company hereby employs the Executive as President of the
Company, and the Executive hereby accepts such employment, all
upon and subject to the terms and conditions hereinafter set
forth.
2. Term.
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The Term (the "Term") of the employment under this Agreement
shall be for an initial period commencing on January 1, 1998 and
terminating on December 31, 2001 and automatically renewed for
additional one (1) year periods thereafter unless either party
gives the other written notice of termination not less than sixty
(60) days prior to the end of the Initial Term.
3. Position, Duties and Representations.
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3.01 Service with the Company.
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The Executive shall serve as President of the Company. Subject
to the Board appointing other persons the Executive will act as
Chief Financial Officer and Secretary. The Executive agrees to
perform such executive employment duties for the Company
consistent with the positions specified above, and as the Board,
the Executive Committee, or the Chairman of the Board shall
assign to him from time to time consistent with his position with
the Company.
3.02 Scope of Services.
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The Executive agrees to serve the Company faithfully and to the
best of his ability and to devote his full business time,
attention, and efforts to advance the business of the Company
during the Term of this Agreement. If requested, the Executive
shall serve as a director of the Company and officer and/or
director of any subsidiary of the Company without any additional
compensation hereunder.
4. Compensation.
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4.01 Annual Salary.
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The Executive shall receive an annual base salary ("Base Salary")
of $125,000 per year payable in accordance with the Company's
normal payroll practices. In addition, on an annual basis the
Board or the Compensation Committee shall review the Executive's
compensation with a view towards increases in the Base Salary,
and/or payment of a bonus, based on the Executive's performance
during the preceding year or pursuant to guidelines established
by the Compensation Committee. Payment of a bonus shall be
entirely at the discretion of the Board of Directors.
4.02 Participation in Benefit Plans.
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The Executive shall also be entitled, to the extent his position,
tenure, salary, age, health and other qualifications make him
eligible, to participate in all employee benefit plans or
programs (including, but not limited to, medical/dental
insurance, disability, stock option, retirement and pension plans
and vacation time, sick leave and holidays) of the Company
currently in existence on the date hereof or as may hereafter be
instituted from time to time. The Executive's participation in
any such plan or program shall be subject to the provisions,
rules and regulations applicable thereto.
4.03 Stock Options.
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The Company shall grant to the executive stock options (the
"Options") under its 1996 Stock Options Plan for the purchase of
250,000 shares of Common Stock as an exercise price of one dollar
($1.00) per share. The Options to the maximum extent possible
shall be "incentive" stock options, as defined in Section 422 of
the Internal Revenue Service Code of 1986, as amended, and vest
as follows: 150,000 shares initially upon grant, and the balance
of the 250,000 shares by July 31, 1998 or sooner, subject to
acceleration as provided herein. If during any fiscal year
during the Term hereof the Company issues any shares of Common
Stock (other than pursuant to compensation or employee benefit
plans), the Options Committee shall immediately grant stock
options to the Executive in order that the Executive would
beneficially own (as determined in accordance with Rule 13d-2
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") six and one-half percent (6.5%) of the
outstanding common stock of the Company. For purposes of the
immediately preceding sentence, all Options granted to the
Executive, including Options not yet vested, and also all shares
of Common Stock sold by the Executive during the term shall be
included in the calculation of beneficial ownership.
4.04 Bonus Shares.
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The Company hereby agrees to issue to the Executive 50,000 shares
(the "Bonus Shares") of the company's Common Stock as reported on
the OTC Bulletin Board or other national market quote system or
exchange where the Common Stock is then traded (the "Trading
Price") equals or exceeds $20.00 per share for a period of three
(3) trading days during the Term. In the event of any increase
in shares outstanding, stock split, stock dividend,
reorganization or other change in the Common Stock, the number of
Bonus Shares and or the Trading price shall be proportionately
adjusted. The Company shall immediately register the Bonus
Shares under the Securities Act of 1933, as amended, after the
issuance thereof, subject to the availability of audited
financial information and regulatory review.
4.05 Automobile.
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The Company shall provide the Executive with (i) the use of an
automobile or (ii) an allowance or reimbursement for the use by
the Executive of his personal automobile for Company purposes,
provided the cost to the Company does not exceed $700 per month.
4.06 Expenses.
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In accordance with the Company's policies established from time
to time, the Company shall pay or reimburse the Executive for all
reasonable and necessary out-of-pocket expenses incurred by him
in the performance of his duties under this Agreement, subject to
the presentment of appropriate vouchers and receipts.
5. Non-disclosure of Confidential Information: Non-
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Competition.
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5.01 Confidentiality.
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Except as may be in the furtherance of the Executive's
performance of his functions as a senior executive officer of the
Company, the Executive shall not, throughout the Term of this
Agreement and thereafter, disclose to any third party or use or
authorize any third party to use any information relating to the
business, business plans, work-in-progress, trade secrets or
other interests of the Company (including customers and clients
of the Company) which is confidential and valuable to the Company
or any of its subsidiaries or any third party (including
customers and clients of the Company) and which is not known to
the public (the "Confidential Information"). The Confidential
Information is and will remain the sole and exclusive property of
the Company, and during the Term of this Agreement, the
Confidential Information, when entrusted to the Executive's
custody, shall be deemed to remain at all times in the Company's
sole possession and control. Notwithstanding the foregoing, the
Executive may, after prior written notice to the Company (to the
extent such notice is possible under the circumstances) disclose
such Confidential Information pursuant to subpoena or other legal
process, and promptly thereafter shall advise the Company in
writing as to the Confidential Information which was disclosed
and the circumstances of such disclosure.
5.02 Return of Documents.
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The Executive agrees that, upon the expiration of his employment
with the Company for any reason, he shall forthwith deliver up to
the Company any and all documents and other material, and all
copies thereof, in his possession or under his control relating
to any Confidential Information which is otherwise the property
of the Company.
5.03 Non-Competition.
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The Executive recognizes that the services to be performed by him
for the Company are special and unique. The Executive further
recognizes that the nature of the Company's business is such that
the Executive will have full knowledge of the Company's business
plans and practices. The parties therefore confirm that, in
order to protect the Company's goodwill, and in consideration of
the Company entering into this Agreement providing for a fixed
term of employment of the Executive, it is necessary that the
Executive agree, and the Executive hereby does agree that he will
not in the United States, for a period of two (2) years after the
termination of this Agreement, become employed by, a consultant
to or a director of, or hold any equity interest as a partner,
member or shareholder (to the extent of 5% or more of the equity
interest thereof), of any sole proprietorship, partnership, joint
venture, corporation or other business entity which engages in a
business directly competitive to any business that the Company is
engaged (or has formulated plans to engage) in at the time of
termination of this Agreement, and the Executive's primary duties
with such entity relate directly to the competitive entity. This
Section shall not be applicable if the Executive terminates this
Agreement pursuant to Section 6.03 hereof or if the Company
terminates this Agreement other than for "cause" as defined in
Section 6.04 hereof.
5.04 Remedies.
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The Executive agrees that any breach or threatened breach by him
of any provision of this Section 5 shall entitle the Company, in
addition to any other legal remedies available to it, to apply to
any court of competent jurisdiction to enjoin such breach or
threatened breach. The parties understand and intend that each
restriction agreed to by the Executive hereinabove shall be
construed as separable and divisible from every other
restriction, and that the unenforceability, in whole or in part,
of any restriction, will not affect the enforceability of the
remaining restrictions and that one or more or all of such
restrictions may be enforced in whole or in part as the
circumstances warrant. No waiver of any breach of the
restrictions contained in this Section 5 shall be deemed a waiver
of any future breach.
6. Termination.
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6.01 Disability.
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If the Executive is determined to be disabled (as defined below),
the Company shall have the option to terminate this Agreement by
written notice to the Executive stating the date of termination,
which date may be any time subsequent to the date of such
determination. The Executive shall be considered disabled if,
due to illness or injury, either physical or mental, he is unable
to perform his customary duties and responsibilities as required
by this Agreement for more than two (2) months in the aggregate
out of any period of six (6) consecutive months. The
determination that the Executive is disabled shall be made by the
Board of Directors of the Company (with the Executive abstaining
from the decision if he is then a member of the Board), based
upon an examination and certification by a physician selected by
the Company subject to the Executive's approval, which approval
shall not be unreasonably withheld. The Executive agrees to
submit timely to any required medical or other examination,
provided that such examination shall be conducted at a location
convenient to the Executive and that if the examining physician
is other than the Executive's personal physician, the Executive
shall have the right to have such personal physician present at
such examination.
6.02 Death.
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If the Executive shall die during the Term of this Agreement,
this Agreement and the Executive's employment hereunder shall
terminate immediately upon the Executive's death.
6.03 By the Executive for Cause.
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The Executive may terminate this Agreement for "cause" at any
time. For purposes of this Section 6.03, the term "cause" shall
be the failure of the Company to perform in a material respect of
its material obligations under this Agreement without proper
justification after notice thereof from the Executive and, if
curable, the opportunity to cure, within ten (10) days after the
giving of written notice thereof to the Company.
6.04 By the Company for Cause.
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The Company may terminate this Agreement for cause at any time.
For purposes of this Section 6.04, the term "cause" shall be
limited to (i) conviction of a felony or equivalent crime under
the laws of the United States or any state, (ii) conviction of a
felony or equivalent crime under the laws of any other country or
political subdivision thereof involving moral turpitude, (iii)
action involving willful gross misconduct having a material
adverse effect on the Company including wilfully aiding the
competition, or (iv) the breach by the Executive of any of his
material obligations under this Agreement without proper
justification, which breach is not cured within thirty (30) days
after written notice thereof from the Company. Upon termination
of employment by the Company pursuant to this Section, the
Executive shall receive any accrued Base Salary through the
termination date, less any amounts by reason of claims the
Company may have against the Executive.
6.05 Termination Benefit.
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Upon termination of employment (i) by the Company other than for
"cause" pursuant to Section 6.04 hereof, (ii) upon the disability
of the Executive pursuant to Section 6.01 hereof, (iii) by the
Executive's death, or (iv) by the Executive for "cause," pursuant
to Section 6.03 hereof, the Executive (or his estate or
representative) shall receive (A) a severance payment equal to
the greater of (i) the amount of the then current annual Base
Salary or (ii) the continuation of the Base Salary for the
balance of the Term, (B) other than termination upon the death of
the Executive, the continuation of his health benefits for a
period of one (1) year from the date of such termination, at the
Company's expense, subject to discontinuance of health benefits
upon the Executive becoming covered by a comparable plan offered
by a subsequent employer, and (C) all outstanding unvested stock
options granted to the Executive by the Company for the purchase
of shares of its Common Stock shall automatically vest and become
exercisable, subject to their respective terms.
6.06 Change in Control of the Company.
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(a) If, at anytime during the Term hereof, a change in control of
the Company (as defined in Subsection (b) below) occurs, then
within sixty (60) days after receipt of written notice of such
change in control of the Company, the Executive may, by written
notice to the Company (or its successor), terminate this
Agreement. In the event of said termination, (i) the Executive
shall receive a lump sum payment equal to 2.99 times his then
current Base Salary, payable within thirty (30) days after
termination of this Agreement, (ii) the Company (or its
successor) shall maintain, at its expense, the health plan
coverage of the Executive for a period of twelve (12) months
after such termination, subject to termination of such health
plan benefits upon the Executive becoming covered by a comparable
plan offered by a subsequent employer and also subject to any
changes in such plan as applicable to other executive officers
and (iii) all outstanding unvested stock options granted to the
Executive under a plan of the Company for the purchase of shares
of its Common Stock shall automatically vest and become
exercisable subject to their respective terms; provided, however,
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if the amount to be paid or distributed to the Executive pursuant
to this Section 6.06 (taken together with any amounts otherwise
to be paid or distributed to the Executive by the Company) (such
amounts collectively the "Section 6.06 Payment") would result in
the application of an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any
successor or similar provision thereto, the Section 6.06 Payment
shall not be paid or distributed in the amounts or at the times
otherwise required by this Agreement, but shall instead be paid
or distributed annually, beginning within thirty (30) days after
the termination date and thereafter on each anniversary thereof,
in the maximum substantially equal amounts and over the minimum
number of years that are determined to be required to reduce the
aggregate present value of Section 6.06 Payment to an amount that
will not cause any Section 6.06 Payment to be nondeductible under
Section 28OG of the Code. For purposes of this Section 6.06,
present value shall be determined in accordance with Section
28OG(d)(4) of the Code.
(b) "Change of control of the Company" shall be deemed
to have occurred if:
(i) any "person" or "group" (as "person" and "group" are
defined in Sections 13(d) and 14(d) of the Exchange Act, other
than (A) the Executive or a person controlled by him, (B) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (C) a person or group by reason of a
transaction with the Company approved by the Company Board of
Directors as constituted in accordance with Paragraph (ii) below,
or (D) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities; or
(ii) individuals who on the commencement date of this
Agreement constitute members of the Board of Directors, or
successors chosen by such individuals, shall cease for any reason
to constitute a majority of the whole Board of Directors.
7. Notices.
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All notices, requests, demands or other communications hereunder
shall be deemed to have been given if delivered in writing
personally or by registered mail to each party at the address set
forth below, or at such other address as each party may designate
in writing to the other:
If to the Company:
American Electromedics Corp.
00 Xxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Chairman
If to Executive:
Xxxxxxx X. Xxxxxxxxx
00 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
8. Entire Agreement.
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This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, supersedes any prior
agreement (oral or written) between the parties. No change,
termination or attempted waiver of any of the provisions hereof
shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced.
9. Successors and Assigns; Binding Effect.
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This Agreement will be binding upon and inure to the benefit of
the Company and its successors and assigns, and the Executive,
and his heirs and administrators. The Company may assign this
Agreement to any corporation which is in a consolidated group
with the Company, provided that the Company shall remain liable
hereunder.
10. Waiver and Severability.
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The waiver by either party of a breach of any terms or conditions
of this Agreement shall not operate or be construed as a waiver
of any subsequent breach by such party. In the event that any
one or more of the provisions of this Agreement shall be declared
to be illegal or unenforceable under any law, rule or regulation
of any government having jurisdiction over the parties hereto,
such illegality or unenforceability shall not affect the validity
and enforceability of the other provisions of this Agreement.
11. Headings; Interpretations.
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The headings and captions used in this Agreement are for
convenience only and shall not be construed in interpreting this
Agreement.
12. Governing Law.
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All matters concerning the validity and interpretation of and
performance under this Agreement shall be governed by the laws of
the State of New Hampshire without regard to the conflicts of law
principles thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AMERICAN ELECTROMEDICS CORP.
By: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx, Chairman
/s/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
