Exhibit 10.11
EMPLOYMENT AGREEMENT
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AGREEMENT made as of the 5th day of February, 1997, 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:
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WHEREAS, the Company desires the Executive to employ
the Executive to serve in the capacities of Chairman of the Board
of the Directors, and the Executive desires to render such
services, and the Company and the Executive desire to enter an
agreement providing for the commencement of their relationship,
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
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retains the Executive as Chairman of the Board of the Directors
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
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under this Agreement shall be for an initial period commencing on
February 7, 1997 and terminating on January 31, 2000, 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
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shall serve as Chairman of the Board of the Directors of the
Company. The Executive agrees to perform such executive
employment duties for the Company consistent with the positions
specified above, and as the Board of Directors shall assign to
him from time to time consistent with his positions with the
Company.
3.02 Scope of Services. The Executive agrees to
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serve 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 an officer and/or director of any subsidiary of the Company,
without any additional compensation hereunder.
3.03 Representations. The Executive hereby
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represents to the Company that the Executive is not currently
bound by the terms of any non-competition, confidentiality or
similar agreement or understanding (written or oral) which would
prevent or restrict the Executive's employment with the Company
as contemplated hereunder, and that the Executive does not
possess confidential information arising out of his prior
employments which would be utilized in connection with his
employment by the Company.
4. Compensation.
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4.01 Annual Salary. The Executive will receive
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an annual base salary ("Base Salary") of $100,000 per year,
payable in accordance with the Company's normal payroll
practices. In addition, on an annual basis the Board of
Directors or a compensation committee thereof (the "Compensation
Committee") shall review the Executive's compensation with a view
toward increases in the Base Salary, based upon the Executive's
performance during the preceding year or pursuant to guidelines
established by the Compensation Committee.
4.02 Bonus. (a) In further consideration of the
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Executive's agreement to perform services hereunder, the
Executive shall be entitled to a cash bonus (the "Profits Bonus")
in an amount equal to ten percent (10%) of the Company's
consolidated net after-tax operating profits (excluding any
extraordinary and/or non-recurring items) in excess of $500,000
(the "Threshold") for each fiscal year during the Term (the
"Profits"), provided the Company has earned in such Fiscal Year a
fifteen percent (15%) return on its equity on its Common Stock.
(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, provided that for the period from the commencement
of this Agreement through the end of the 1997 Fiscal Year, the
Threshold for the Profits shall be $250,000 and the calculation
shall be based upon the Company's unaudited financial information
for the last two quarters of such Fiscal Year. Promptly after
the 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. The Executive may object to the
calculation, within thirty (30) days after receipt thereof, 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's Profits for such Fiscal Year, as determined by such
Committee.
4.03 Stock Options; Conditional Stock Grant. (a)
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In consideration of the Executive entering into this Agreement,
the Company shall grant to the Executive stock options to
purchase up to 300,000 shares of the Company's common stock, par
value $.10 per share (the "Common Stock"), exercisable at a
purchase price of $3.00 per share, all upon the terms and
conditions set forth in the Stock Option Agreement between the
Company and the Executive, dated as of the date hereof (the
"Stock Option Agreement"), and attached hereto as Exhibit A.
(b) 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
NASDAQ OTC Bulletin Board or other national market quotation
system or exchange where the Common Stock is then traded (the
"Trading Price") equals or exceeds $60.00 per share for a period
of twenty (20) consecutive trading days during the Term. In the
event of any 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, as determined by
the Board of Directors of the Company. The Company shall use its
best efforts to register the Bonus Shares under the Securities
Act of 1933, as amended, after the issuance thereof, subject to
availability of audited financial information and regulatory
review.
4.04 Monthly Loans. (a) The Company shall make
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available to the Executive a loan in the amount of $8,333.33
(each, a "Monthly Loan") on the first day of each month of each
Fiscal Year (each, a "Loan Date") for so long as the Executive
remains employed hereunder during the initial Term, commencing
with the month of March 1997. In order to obtain a Monthly Loan
on a Loan Date, the Executive shall notify the Company in writing
at least ten (10) days prior to each Loan Date, whereupon the
Company shall disburse the amount of such Monthly Loan on the
next succeeding Loan Date against delivery by the Executive of a
promissory note (the "Note"), as described below, to the Company.
(b) Each Monthly Loan shall be evidenced by a
Note executed by the Executive in favor of the Company and shall
bear interest commencing on the Loan Date at a rate of seven
percent (7%) per annum, compounded annually. The principal of
each Monthly Loan, plus all accrued and unpaid interest thereon,
shall mature and be payable to the Company in full on the
earliest of (i) the fifth anniversary of this Agreement, (ii) two
(2) years from the date on which the Executive ceases to be
employed by the Company hereunder, other than pursuant to
Section 6.03 hereof, or (iii) upon the date of termination of
this Agreement pursuant Section 6.03 hereof (the "Maturity
Date"), and (I) shall be repaid on the Maturity Date by payment,
in whole or part at the discretion of the Executive: (v) in cash,
(w) delivery of shares of the Company's Common Stock or fully
vested stock options exercisable therefor, which in the case of
the Common Stock shall be valued at the Trading Price as of the
Maturity Date, and in the case of the stock options shall be
valued at the difference between the Trading Price as of the
Maturity Date and the respective exercise prices of such Stock
Option or (x) by crediting against the amount due any amount then
outstanding and owed to the Executive as a Profits Bonus pursuant
to Section 4.02 hereof, or (II) shall be forgiven by the Company
(y) in the event the Executive continues in the employ of the
Company for the entire initial Term hereof or the Company
terminates this Agreement during the initial Term other than for
cause pursuant to Section 6.03 hereof, or (z) in the event of a
merger or consolidation of the Company whereby it is not the
surviving entity or the stockholders of the Company are not the
controlling stockholders of the surviving entity, the sale of all
or substantially all of the Company's assets, liquidation,
dissolution or entry by the Company (voluntarily or
involuntarily) into insolvency or bankruptcy proceedings, or any
person or group becomes the beneficial owner of more than twenty-
five (25%) percent of the Company's outstanding voting securities
other than in a transaction approved by the Board of Directors of
the Company as presently constituted or by their chosen
successors as directors. The Executive agrees that should there
be any income tax withholding obligation by reason of the Monthly
Loans or their repayment or forgiveness, he will bear his portion
of such withholding obligation.
4.05 Participation in Benefit Plans. The
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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.
4.06 Automobile. The Company shall provide the
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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 that the cost to the
Company does not exceed $500 a month.
4.07 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.
4.08 Insurance. The Executive acknowledges and
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agrees that the Company may obtain a life insurance policy on the
life of the Executive in the amount of at least $2,000,000 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;
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Non-Competition.
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5.01 Confidentiality. Except as may be in
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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, 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
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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
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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, at any time during and for a period of
two (2) years after he ceases to be employed by the Company, hold
any equity interest or act as a sole proprietor, partner,
coventurer, 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 the
business of the research, development, manufacture and sale of
audiometers and other devices designed to test hearing, or
engaged in any other business competitive to any business that
the Company is engaged (or has formulated plans to engage) in at
the time the Executive ceases to be employed by the Company.
5.04 Remedies. The Executive agrees that any
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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 5.04
shall be deemed a waiver of any future breach.
6. Termination.
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6.01 Disability. (a) The Executive shall be
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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 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.
(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, except that the
Company shall pay to the Executive the accrued amount of the
compensation (including any Profits Bonus), benefits,
reimbursements and other sums payable pursuant to this Agreement,
prorated through the date of termination (other than expense
reimbursements which shall be paid in full), if, as and when such
amounts would be paid but for the termination of this Agreement.
After the date of termination by reason of disability, the
Company shall pay to the Executive an amount equal to fifty
percent (50%) of his then Base Salary, payable in six (6) equal
monthly installments commencing on the first day of the month
immediately following the month in which the employment
terminated pursuant to this Section 6.01.
6.02 Death. If the Executive shall die during
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the Term of this Agreement, this Agreement and the Executive's
employment hereunder shall terminate immediately upon the
Executive's death. Upon such death, the Company shall pay to the
Executive's estate the accrued amount of the compensation
(including any Profits Bonus calculated pursuant to Section
4.02(b) hereof), benefits, reimbursements or other sums payable
pursuant to this Agreement, plus an amount equal to fifty percent
(50%) of his then Base Salary, payable in six (6) equal monthly
installments commencing with the month immediately following the
month in which the Executive died.
6.03 By the Company for Cause. The Company may
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terminate this Agreement for cause at any time. For purposes of
this Agreement, the term "cause" shall be limited to (i) the
engaging by the Executive in conduct which is materially
injurious to the Company, with written notice of the specific
misconduct given to the Executive and which conduct is not cured
within ten (10) days after the Executive receives such notice,
(ii) the conviction of the Executive of a crime involving any
financial impropriety or which would materially interfere with
the Executive's ability to perform his services required under
this Agreement or otherwise be materially injurious to the
Company, or (iii) 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 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.
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: Xxxx Xxxx, President
If to Executive:
Xxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
8. Entire Agreement. This Agreement contains the
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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
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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.
10. Waiver and Severability. The waiver by either
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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
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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
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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:
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Xxxxxxx X. Xxxxxxxxx,
Chief Financial Officer
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Xxxxxx X. Xxxxxxxx
