EMPLOYMENT AGREEMENT
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AGREEMENT, dated as of May 11, 1998, by and between EQUIDYNE
SYSTEMS, INC., a California corporation (the "Company"), and
XXXXXXXX X. XXXXXXXX (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 was acquired by and has become a wholly-owned
subsidiary of American Electromedics Corp. ("AEC"); and
WHEREAS, this Agreement is a condition to the closing of the
merger of ESI Acquisition Corporation, a wholly-owned subsidiary
of AEC, with and into the Company; and
WHEREAS, 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. The Company hereby employs
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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. The term (the "Term") of the employment under
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this Agreement shall be for an initial period commencing on May
11, 1998 and terminating on November 30, 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 or
any renewal Term.
3. Position, Duties and Representations.
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3.01 Service with the Company. The Executive shall
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serve as President of the Company. The Executive agrees to
perform such executive employment duties for the Company
consistent with such position, and as the Board of Directors, 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. The Executive agrees to serve
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the Company faithfully and to the best of his ability and to
devote his full business time, attention and efforts necessary to
advance the business and affairs of the Company during the Term
of this Agreement. If requested, the Executive shall serve as a
director of the Company and an 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. The Executive shall receive an
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annual base salary ("Base Salary") of One Hundred Twenty Five
Thousand Dollars ($125,000) per year, payable in accordance with
the Company's normal payroll practices. In addition, on an
annual basis the Board of Directors or the Compensation Committee
shall review the Executive's compensation with a view toward
increases in the Base Salary, and/or payment of a bonus, based
upon the Executive's performance during the preceding year or
pursuant to guidelines established by the Compensation Committee
of AEC. Payment of a bonus shall be entirely at the discretion
of the Board of Directors.
4.02 Participation in Benefit Plans. The Executive
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shall also be entitled, to the extent that his position, title,
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. The Company shall cause AEC to
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grant to the Executive stock options (the "Options") under AEC's
1996 Stock Option Plan for the purchase of an aggregate of One
Hundred Thousand (100,000) shares AEC's Common Stock, Fifty
Thousand (50,000) Options of which at an exercise price of One
Dollar ($1.00) per share, with Five Thousand (5,000) of such
Options to vest immediately and Forty Five Thousand (45,000) of
such Options to vest ratably over the term of this Agreement, and
the remaining Fifty Thousand (50,000) Options of which at an
exercise price of Three Dollars ($3.00) per share, with Five
Thousand (5,000) of such Options to vest immediately and Forty
Five Thousand (45,000) of such Options to vest ratably over the
term of this Agreement. All Options not so vested at the
termination of employment of the Executive pursuant to Section
6.0 hereof, shall be canceled simultaneous to such termination of
employment and have no further force or effect. The Options, to
the maximum extent possible, shall be "incentive" stock options,
as defined in Section 422 of the Internal Revenue Code of 1986,
as amended and shall be evidenced by a separate option agreement
which shall govern.
4.04 Expenses. In accordance with the Company's
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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. Except as may be in furtherance
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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, trade
secrets or other interests of the Company (including customers
and clients of the Company) which is confidential and valuable to
the Company or AEC or any of their 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. The Executive agrees that,
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upon the termination of his employment with the Company for any
reason, he shall forthwith deliver to the Company any and all
documents and other material however recorded or stored in any
medium or by any method, 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. The Executive recognizes that
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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
of America and/or the Federal Republic of Germany, 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.
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 pursuant to Section 6.04 hereof.
5.04 Remedies. The Executive agrees that any breach or
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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. If the Executive is determined to be
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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. If the Executive shall die during the Term
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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. The Executive may
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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 receipt of
written notice thereof to the Company.
6.04 By the Company for Cause. The Company may
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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 gross negligence having a material adverse effect on
the Company, including wilfully aiding the competition, (iv)
willful misrepresentation at any time during the term hereof by
the Executive to the Board of Directors of the Company of any
material information, (v) the Executive's failure or refusal to
perform specific directives of the Company's Board of Directors
or Chairman of the Board, which directives are consistent with
the scope and nature of the Executive's duties and
responsibilities, and which are not remedied by the Executive
within ten (10) days after the receipt of written notice thereof,
or (vi) the breach by the Executive of any of his material
obligations under this Agreement without proper justification,
which breach is not cured within ten (10) days after receipt of
written notice thereof. 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. Upon termination of
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employment (i) upon the disability of the Executive pursuant to
Section 6.01 hereof, (ii) by the Executive's death pursuant to
Section 6.02 hereof, or (iii) by the Executive, 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 current Term, (B) other than in connection with
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. (a) If, at
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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 two (2) 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, if the amount to be paid or
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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 non-deductible under Section
280G of the Code. For purposes of this Section 6.06, present
value shall be determined in accordance with Section 280G(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 Securities Exchange
Act of 1934 (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. All notices, requests, demands or other
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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: Xxxxxxx X. Xxxxxxxxx, President
If to Executive:
Xxxxxxxx X. Xxxxxxxx
Equidyne Systems, Inc.
00000 Xxxxxxxx Xxxxxx Xxxx, Xxxxx X
Xxx Xxxxx, Xxxxxxxxxx 00000
8. Entire Agreement. This Agreement contains the entire
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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. This Agreement
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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. The waiver by either party of
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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. Heading; Interpretations. The headings and captions
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used in this Agreement are for convenience only and shall not be
construed in interpreting this Agreement.
12. Governing Law. All matters concerning the validity and
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interpretation of and performance under this Agreement shall be
governed by the laws of the State of California 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.
EQUIDYNE SYSTEMS, INC.
by: AMERICAN ELECTROMEDICS CORP.
by: /s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxxx X. Xxxxxxxx
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Xxxxxxxx X. Xxxxxxxx
