AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the lst day of January, 2000, by and between
AMERICAN ELECTROMEDICS CORP., a Delaware corporation (the "Company"), and XXXXXX
X. XXXXXXXX (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has employed the Executive in the capacity of Chairman
of the Board of Directors, and the Executive has rendered such services,
pursuant to Employment Agreements, dated as of February 5, 1997 and January 1,
1998 (the "Original Agreements"); and
WHEREAS, the Company and the Executive desire to amend their Original
Agreements to assure the continuity of their relationship, all subject to the
terms and conditions contained herein.
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 continues the employment
of the Executive as Chairman of the Board of Directors of the Company, and the
Executive hereby accepts the continuation of such employment, all upon and
subject to the terms and conditions hereinafter set forth.
2. Term. The term of the employment under this Amended Agreement shall be
for a period commencing on January 1, 2000 and terminating on December 31, 2003
(the "Initial Term"), and shall be automatically renewed for additional one (1)
year periods thereafter (the "Renewal Term"), 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 (collectively, the "Term").
3. Position, Duties and Representations.
3.01. Service with the Company. The Executive shall serve as
Chairman of the Board of Directors of the Company. The Executive agrees to
perform such executive employment duties for the Company consistent with the
position specified above, and as the Board of Directors shall assign to him from
time to time consistent with his position with the Company. The Company agrees
to include the Executive on the management slate of directors at any
stockholders meeting held or consent in lieu of a meeting executed during the
Term at which directors are to be elected.
3.02. Scope of Services. The Executive agrees to serve the Company
faithfully and to the best of his ability, and to devote the time, attention and
efforts necessary to advance the business and affairs of the Company during the
Term. If requested, the Executive shall serve as an officer and/or director of
any subsidiary of the Company, without any additional compensation hereunder.
During the Term, the Executive may render services to other entities, provided
such services do not violate Sections 5.01 and 5.03 hereof and do not interfere
with his obligations to the Company hereunder.
4. Compensation.
4.01. Annual Salary. The Executive will receive an annual base
salary ("Base Salary") at an annual rate of $75,000 for the Initial Term paid in
accordance with the Company's normal payroll practices. In addition, on an
annual basis the Board of Directors or a committee thereof (the "Compensation
Committee") shall review the Executive's compensation with a view towards
increasing the Base Salary and granting stock options to the Executive, based on
the Executive's performance during the preceding year established by the
Compensation Committee.
4.02. Bonus. (a) In further consideration of the Executive's
agreement to perform services hereunder, the Executive shall be entitled to an
annual cash bonus (the "Profits Bonus") in an amount equal to five percent (5%)
of the Company's consolidated pre-tax profits (the "Company Profits") in excess
of $500,000 (the "Threshold") for the first two fiscal years during the Term
commencing with fiscal year ending July 31, 2000. This annual Profits Bonus
shall not exceed $275,000 in the first fiscal year and $785,000 in the second
fiscal year.
(b) The Profits Bonus amount shall be calculated initially by the
Chief Financial Officer of the Company based upon the Company's audited
financial statements for the relevant fiscal year. Promptly after completion of
the Profits Bonus calculation for each fiscal year, a report of the calculation
shall be sent to the Board of Directors. The Board of Directors will then
present the proposed Profits Bonus to the Executive. Within thirty (30) days
after receipt thereof, the Executive may object to the calculation by requesting
that the accounting firm then auditing the financial statements of the Company
review the calculation. The results of such accountants' review shall be final
and binding on the Executive and the Company. Any Profits Bonus shall be paid to
the Executive within thirty (30) days after the Executive receives the Profits
Bonus calculation, except that if he objects thereto, the payment shall be made
as soon as practicable after the resolution of the objection. The Executive
shall bear the cost of the accounting firm's review, except if upon such review
of the Profits Bonus calculation the accounting firm determines that the amount
of the Profits Bonus should be increased by ten percent (10%) or more from the
amount calculated by the Company, in which case the Company shall bear the cost
of the accounting firm's review.
(c) In the event the period of the Term for which a Profits Bonus is
being determined is less than the entire fiscal year being used for the
calculation, the Profits Bonus, if any, and the Threshold for such period shall
be multiplied by a fraction, the numerator of which shall be the number of whole
months during such fiscal year that the Executive was an employee of the Company
and the denominator of which shall be 12.
(d) Notwithstanding any Profits Bonus which may be paid to the
Executive pursuant to this Section 4.02, for each fiscal year during the Term
the Compensation Committee may award the Executive a supplemental bonus based
upon factors other than the Company Profits for such fiscal year, as determined
by such Committee.
4.03. Bonus Shares. The Company hereby agrees to issue to the
Executive 100,000 shares (the "Bonus Shares") of the Company's Common Stock, as
presently constituted, in the event that the closing price 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 $6.20 per share for a period of three (3) consecutive
trading days during the Term. In the event of any increase in the number of
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.
4.04. Participation in Benefit Plans. The Executive 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.
4.05. Expenses. 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 expenses incurred by him in the performance of
his duties under this Agreement, subject to the presentment of appropriate
vouchers and receipts.
4.06. Insurance. The Executive acknowledges and agrees that the
Company may obtain a life insurance policy on the life of the Executive in the
amount of at least $1,000,000 with the Company named as the beneficiary. The
Executive shall cooperate fully with the Company's efforts to obtain such
insurance policy, including making himself available for physical examinations.
5. Non-Disclosure of Confidential Information; Non-Competition.
5.01. Confidentiality. Except as may be in 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, 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.
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, 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. 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, 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 he ceases to be employed by the Company, engage in or hold any equity
interest or act as a sole proprietor, partner, co-venturer, principal, director
or shareholder (to the extent of 5% or more of the equity interest thereof),
directly or indirectly, of any sole proprietorship, partnership, joint venture,
corporation or other business entity engaged in or plans to engage in the
business of the research, development, manufacture and sale of automatic
injection devices or in any other business in which the Company engages in (or
has formulated plans to engage) at the time during the six (6) month period
preceding his termination of employment; provided, however, that should the
Executive's employment be terminated pursuant to Section 6.04 hereof or by the
Company other than pursuant to Section 6.01 or 6.03 hereof, the foregoing
restriction shall not be effective.
5.04. Remedies. 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 one breach of the
restrictions contained in this Section 5 shall be deemed a waiver of any future
breach.
6. Termination.
6.01. Disability. (a) 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
Executive Committee or, if there is no Executive Committee, by the Board of
Directors of the Company (with the Executive abstaining from the decision if he
is then a member of such Committee or 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 theexamining physician is other than the Executive's
personal physician, the Executive shall have the right to have such personal
physician present at such examination. (b) If the Executive is determined to be
disabled pursuant to this Section 6.01, 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.
6.02. Death. 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 Company for Cause. The Company may terminate this
Agreement for cause at any time. For purposes of this Agreement, 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 willfully
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 "for cause," 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.
6.04. By the Executive for Cause. The Executive may terminate this
Agreement for "cause" at any time. For purposes of this Section 6.04, the term
"cause" shall be the failure of the Company to perform, in a material respect,
its material obligation under this Agreement without proper justification after
notice thereof from the Executive and, if curable, the opportunity to cure,
within thirty (30) days after the giving of written notice thereof to the
Company.
6.05. Termination Benefit. Upon termination of employment (i) by the
Company other than for "cause" pursuant to Section 6.03 hereof, (ii) upon the
disability of the Executive pursuant to Section 6.01 hereof, (iii) by the
Executive's death pursuant to Section 6.02 hereof, or (iv) by the Executive for
"cause" pursuant to Section 6.04 hereof, the Executive (or his estate or
representative) shall receive a severance payment equal to the greater of (i)
the amount of the then current annual Base Salary or (ii) the continuation of
the then Base Salary for the balance of the Term.
6.06. Change in Control of the Company. (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 average annual Base Salary for (x) the period from commencement of his
employment with the Company or (y) the last five (5) years, whichever is
shorter, 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 stock options and other equity based awards granted to
the Executive by the Company shall become fully vested and exercisable subject
to their respective terms; provided, however, 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 the
maximum 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 the Securities Exchange Act of 1934, as amended (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 twenty
percent (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 communications
hereunder shall be deemed to have been given if delivered in writing personally
or by registered mail or national overnight courier or by facsimile to either
party at the address set forth below, or at such other address as either 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:
Xxxxxx X. Xxxxxxxx
000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
8. Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof, supersedes any prior
agreement 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 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
or which acquires the Company, subject to the Executive's rights under Section
6.06 hereof.
10. Waiver and Severability. 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. Heading; Interpretations. The headings and captions 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 interpretation
of and performance under this Agreement shall be governed by the laws of the
Commonwealth of Massachusetts 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:
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Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
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Xxxxxx X. Xxxxxxxx
