EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 31st day of August,
2005, by and between HearUSA, Inc., a Delaware corporation (the “Company”), and Xxxx X. Xxxxx,
M.D. (“Employee”).
Background:
(a) Employee has been serving as the Chairman of the Board of Directors of the Company prior
to the date hereof pursuant to the terms of a five-year Employment Agreement dated effective May
12, 2003.
(b) The Company and Employee wish to continue their relationship, but pursuant to the terms
and conditions provided herein.
Agreement
In consideration of the mutual promises hereinafter set forth, it is hereby agreed as
follows:
1. Employment. Employee shall continue to be employed by the Company, with such
continued employment to be under the terms and conditions set forth herein, and Employee hereby
accepts such continued employment upon the terms and conditions set forth herein. The Employment
Agreement between the parties dated effective May 12, 2003, is hereby superseded in its entirety
by this Agreement.
2. Term of Employment. The term of this Agreement shall commence on the date first
set forth above and shall end on the fifth anniversary of such date (the “Initial Employment
Period”), and shall continue in effect for successive periods of five years thereafter unless
either the Company or Employee gives written notice of non-renewal prior to the end of the then
current term of this Agreement, or unless sooner terminated as provided in Section 6 or Section 7
hereof. The Initial Employment Period and any renewal terms of this Agreement are referred to
herein as the “Term of Employment.”
3. Location of Employment. Employee will continue to be located at the Company’s
corporate offices in West Palm, Florida.
4. Duties.
(a) Employee shall serve in a full-time capacity with the title of Chairman of the Board,
reporting to the Board of Directors of the Company, and the Employee shall have the authority,
duties, responsibilities and status (including office, title and reporting requirement) associated
with the office of Chairman of the Board (including those contemplated by the Company’s bylaws).
(b) Employee shall be authorized by the Board of Directors to employ reasonable discretion in
performing Employee’s responsibilities.
(c) Employee shall have such further duties and responsibilities, not inconsistent with such
position, as shall be assigned to the Employee by the Board of Directors of the Company.
(d) Employee shall devote his full business time and attention and such skill, energy and best
efforts as may be necessary for the faithful performance of duties assigned to Employee.
5. Compensation.
(a) During the Term of Employment, the Company shall pay Employee, as compensation for his
services during the Employment Period, a base salary (the “Base Salary”) at a rate of Two Hundred
Forty Thousand Dollars ($240,000.00) per year, such Base Salary to be payable in accordance with
the Company’s usual payment practices and to be subject to adjustment from time to time as may be
agreed between the Employee and the Company. Employee shall be entitled to participate in the
Company’s current employee benefit plans, and will in the future be entitled to participate in any
new employee benefit plans that are put in place for the Company executive officers, provided that
any such plans shall be subject to the approval of the Board of Directors. Additionally, Employee
shall be entitled to such prerogatives of office as are the Company’s current practice, subject to
the right of the Company to revise such practices.
(b) The Employee will be eligible to participate in the Company’s stock plan and bonus plan,
subject to the discretion of the Board of Directors of the Company.
(c) All compensation shall be subject to customary withholding taxes and other employment
taxes as required with respect thereto.
6. Termination of Employment by the Company. This Agreement and Employee’s employment
may be terminated by the Company as follows:
(a) At the election of the Company, upon thirty days’ prior written notice to Employee in the
event Employee becomes disabled and such disability continues for a period exceeding three (3)
consecutive months. In the event of a disagreement concerning the existence of any such
disability, the matter shall be resolved by a disinterested licensed physician chosen by the
Company.
(b) At the election of the Company, for “Cause” immediately upon notice by the Company to the
Employee. “Cause” shall mean:
(i) willful or prolonged absence from work by the Employee (other than by reason of
disability) or failure, neglect or refusal by the Employee to perform his duties and
responsibilities hereunder;
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(ii) material breach by the Employee of any of the covenants contained in this Agreement;
(iii) the Employee’s commission of fraud or dishonesty against the Company, its
subsidiaries, parent, affiliates or their respective officers, directors, stockholders or
employees; conduct intended to injure or having the effect of injuring the reputation, business
or business relationships of the Company, its subsidiaries, parent or affiliates or their
respective officers, directors or employees;
(iv) upon a charge by a governmental entity against the Employee of any crime involving
moral turpitude or which could reflect unfavorably upon the Company or upon the filing of any
civil action involving the Employee and a charge of embezzlement, theft, fraud or other similar
act; or
(v) failure or refusal of Executive to materially comply with the policies, standards and
regulations of the Company as from time to time may be made known to Executive.
(c) At the election of the Company, at any time, without Cause immediately upon notice by the
Company to Employee.
(d) Upon termination of this Agreement by the Company, all rights and obligations of the
parties hereunder shall cease, except: (i) if this Agreement is terminated without Cause by the
Company prior to the end of the Term of this Agreement; or (ii) if the Company gives written notice
of non-renewal of this Agreement pursuant to Section 2 above; or (iii) if there is a Change in
Control of the Company (as defined below) and this Agreement is terminated without Cause by the
Company, then (x) Employee shall receive a lump sum equal to his Base Salary times three plus any
bonus or other long term incentive compensation to which the Employee would have been entitled
absent the termination, (y) Employee’s health and life insurance benefits shall continue for a
period of 36 months after such termination, and (z) all of Employee’s unvested options shall
immediately vest and may be exercised by Employee for such post-termination period as is prescribed
by such option agreements and related stock plan(s). Termination of employment pursuant to this
Section 6 or otherwise shall not terminate or otherwise affect the rights and obligations of the
parties pursuant to Sections 9 through 12 and Section 15 hereof.
(e) Nothing contained herein will be construed to prevent Employee from seeking or obtaining
other employment in the event the employment of Employee is terminated by the Company without
Cause.
7. Termination of Employment by Employee. Employee may terminate his employment with
the Company at any time and for any reason, such termination to be effective immediately upon
notice by Employee to the Company. Upon such termination by Employee, all rights and obligations
of the parties hereunder shall cease, except: if Employee terminates his employment under this
Agreement for Good Reason (as defined below) within one year of a Change in Control (as defined
below), (i) Employee shall receive a lump sum equal to his Base Salary times three plus any bonus
or other long term incentive compensation to which the Employee would have
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been entitled absent the termination, (ii) Employee’s health and life insurance benefits shall
continue for a period of 36 months after such termination, and (iii) all of Employee’s unvested
options shall immediately vest and may be exercised by Employee for such post-termination period as
is prescribed by such option agreements and related stock plan(s). Termination of employment
pursuant to this Section 7 or otherwise shall not terminate or otherwise affect the rights and
obligations of the parties pursuant to Sections 9 through 12 and Section 15 hereof.
8. Change in Control. For the purposes of this Agreement,
(a) “Change in Control” shall mean the effective date of any of the following events
occurring during the term of Employee’s employment: (a) consummation of any consolidation, merger,
statutory share exchange or other business combination as a result of which persons who were
stockholders of the Company immediately prior to the effective date thereof beneficially own less
than 50% of the combined voting power in the election of directors of the surviving or resulting
entity following the effective date; (b) individuals who, as of the date hereof, constitute the
Board of Directors of the Company cease for any reason to constitute at least a majority of the
Board of Directors of the Company, provided that any person who is elected as a director subsequent
to the date hereof by a vote of, or upon the recommendation of, at least a majority of the
directors comprising the current Board (other than an individual whose initial assumption of office
is in connection with an actual or threatened election contest relating to the election of the
directors of the Company) shall be considered a member of the current Board for these purposes; (c)
consummation of any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company; (d) shareholder
approval of any plan or proposal for the liquidation or dissolution of the Company; or (e)
acquisition of beneficial ownership by any “person” or “group” (as such term is used Sections 13(d)
and 14(d)(2) of the Exchange Act) of securities representing twenty percent (20%) or more of the
combined voting power in the election of the Company’s directors, provided such acquisition has not
been approved by at least a majority of the members of the Board of Directors in office immediately
prior to the acquisition.
(b) “Good Reason” shall mean, without Employee’s consent, (1) the scope of Employee’s
responsibilities and/or discretion is/are materially diminished; or (2) the Company requires
Employee to relocate to a location greater than 100 miles from the Company’s current corporate
headquarters in Xxxx Xxxx Xxxxx, Xxxxxxx; or (3) Employee’s Base Salary is reduced by an amount
greater than twenty-five percent (25%) and such reduction is not pursuant to a Company-wide
employee salary reduction plan or program.
9. Third-Party Confidentiality. Employee acknowledges that the Company has disclosed
that the Company is now, and may be in the future, subject to duties to third parties to maintain
information in confidence and secrecy. By executing this Agreement, Employee consents to be bound
by any such duty owed by the Company to any third party.
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10. Confidentiality; Return of Property.
(a) Employee acknowledges that Employee’s work for the Company is expected to bring him into
close contact with various confidential business data of the Company, its
contracting parties, affiliates and customers not readily available to the public.
Accordingly, Employee:
(i) covenants and agrees that (A) during the Term of Employment, except pursuant to
appropriate safeguards on confidentiality and only in connection with the business of the
Company and (B) after the Term of Employment, on any basis for any reason, Employee shall not
use or disclose to anyone except authorized personnel of the Company or the Company’s Affiliates
(as defined below), whether or not for his benefit or otherwise, any confidential matters
(collectively, “Confidential Matters”) concerning the Company or its suppliers, consultants,
agents, other contracting parties or customers, whether such customers are deemed former,
current or potential customers (collectively, the “Clients”), including without limitation all
confidential technical information of the Company, secrets, trade secrets, proprietary software,
copyrights, Client lists, lists of employees, confidential evaluations, mailing lists, details
of consultant contracts, pricing policies, sales data and reports, margins, operational methods
and processes, plans, financial information and other confidential business affairs, learned by
Employee concerning the Company, its Clients or a third party, including without limitation any
subsidiaries, partners, affiliates, shareholders, employees, lenders, suppliers, consultants,
agents or joint venture partners of the Company (collectively, “Affiliates”); and
(ii) covenants and agrees that (A) all confidential memoranda, notes, lists (including,
without limitation, mailing and Client lists), records and other confidential documents, whether
in written, electronic or other form (and all copies thereof) made or compiled by Employee or
made available to him concerning the Company, its Clients and any Affiliates are the sole
property of the Company, and (B) if such documents are in the possession or control of the
Employee, the Employee shall deliver them, without retaining any copies thereof, to the Company
promptly at the time of the Employee’s termination of employment or at any other time upon
request by the Company.
(b) Section 10 shall not apply to any information that: (i) is publicly available or becomes
publicly available through no act or fault of Employee; (ii) is made known to Employee by a third
party who did not obtain it directly or indirectly from the Company; (iii) is independently
developed by Employee without use of the Company’s information as evidenced by credible written
records of Employee; or (iv) is information required to be disclosed by operation of law,
governmental regulation or court order provided that, if Employee determines that such disclosure
might be required, Employee will promptly notify the Company and provide the Company, to the extent
practicable, an opportunity to seek a protective order or other appropriate remedy to prevent such
disclosure.
(c) Upon the termination of the Employee’s employment hereunder for any reason, the Employee
shall promptly return to the Company any property owned by the Company or furnished to the Employee
by the Company for use in connection with Employee’s services hereunder.
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11. Noncompetition/Conflicts of Interest.
(a) The Employee covenants and agrees that the Employee shall not, directly or indirectly, as
a principal, employee, partner, consultant, agent or otherwise, compete or assist in a Competitive
Activity anywhere in the United States during the Term of Employment and for a period of two years
after the termination of this Agreement (except termination without Cause by the Company or at the
end of a term hereof) (the “Restricted Period”) without the express prior written consent of the
Company; provided, however, that the running of the Restricted Period shall be
tolled during any period of time in which Employee violates the provisions of this Section.
“Competitive Activity” means the promotion, marketing or sale of hearing care products and
services.
(b) During the Restricted Period, Employee shall not, directly or indirectly, alone or in
concert with others, solicit or encourage any employee of the Company, or an employee of any person
or entity with which the Company has an agreement through which the Company and the person or
entity are to act in concert with respect to the business of the Company, to leave their respective
employment or hire any employee of the Company.
12. Acknowledgment Regarding Restrictions. Employee recognizes and agrees that the
restraints contained in Section 11 are reasonable in view of the Company’s legitimate interests in
protecting its business. Employee further acknowledges that the limitations contained in Section
11 are reasonable as to the duration in time, as to geographic scope and as to the nature of the
activities restricted. However, in the event an appropriate court determines that the provisions
of Section 11 are excessively broad as to duration, geographic scope, prohibited activities or
otherwise, the parties agree that Section 11 may be reduced or curtailed to the extent necessary to
render it enforceable.
13. Vacation and Holidays. The Employee shall be entitled to vacation allowance and
holidays in accordance with the policies of the Company as in effect from time to time for its
employees.
14. Non-Waiver of Rights. The Company’s failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the Employee of any of the
provisions hereof shall in no way be construed to be a waiver of such provisions or to affect
either the validity of this Agreement, or any part of it, or the right of the Company thereafter to
enforce each and every provision in accordance with the terms of this Agreement.
15. The Company’s Right to Injunctive Relief. In the event of a breach or threatened
breach of any of Employee’s duties and obligations under the terms and provisions of Section 10 or
Section 11, Employee agrees that the Company shall be entitled to a temporary restraining order and
a preliminary and permanent injunction to prevent such breach or threatened breach because the harm
which might result to the Company’s business as a result of any noncompliance by Employee with any
of the provisions of Section 10 or Section 11 may be irreparable. Employee acknowledges that the
Company’s entitlement to injunctive relief shall be in addition to the Company’s entitlement to
damages.
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16. Assignments. This Agreement shall be freely assignable by the Company and shall
inure to the benefit of, and be binding upon, the Company, its successors and assigns and/or any
other corporate entity which shall succeed to the business being operated by the Company, but,
being a contract for personal services, neither this Agreement nor any rights hereunder are
assignable by the Employee.
17. Governing Law. This Agreement shall be interpreted in accordance with and
governed by the laws of the State of Delaware without regard to its conflict of law rules.
18. Amendments. No modification, amendment or waiver of any of the provisions of this
Agreement shall be effective unless in writing and signed by the parties hereto.
19. Notices. Any notices to be given by either party hereunder shall be in writing
and shall be deemed to have been duly given if delivered or mailed, certified or registered mail,
postage prepaid, as follows: to the Company at 0000 Xxxxxxxxxx Xxxxxxx, Xxxx Xxxx Xxxxx, Xxxxxxx
00000, Attention: Board of Directors; and to Employee at the address set forth beneath his
signature below; or to such other address as may have been furnished to the other party in writing.
20. Entire Agreement. This Agreement is the entire agreement between the parties and
supersedes any previous oral or written agreement or understanding between the Company and the
Employee with respect to the subject matter hereof. There are no representations, warranties,
promises or undertakings between the parties relating to the subject matter of this Agreement other
than those set forth herein.
21. Severability. If any provision of this Agreement shall be determined to be
illegal or unenforceable, the remaining provisions of this Agreement shall remain in full force and
effect, and this Agreement shall be construed as if the illegal or unenforceable provision were not
a part hereof, so long as the remaining provisions of this Agreement shall be sufficient to carry
out the overall intent of the parties as expressed herein.
22. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
23. Headings. The headings in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Employment agreement.
IN WITNESS WHEREOF, the parties have executed this Employment agreement as of the date first
above written.
| HearUSA, Inc. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxxxxx | |||
| Title: | President and CEO | |||
| EMPLOYEE |
||||
| /s/ Xxxx X. Xxxxx, M.D. | ||||
| Xxxx X. Xxxxx, M.D. | ||||
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