AMENDED EMPLOYMENT AGREEMENT
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AMENDED AGREEMENT, dated as of the lst day of January,
1998, 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 has employed the Executive in the
capacity of Chairman of the Board of Directors, and the Executive
has rendered such services, pursuant to an Employment Agreement,
dated as of February 5, 1997 (the"Original Agreement"); and
WHEREAS, the Company and the Executive desire to amend
their Original Agreement 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.
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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.
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The term of the employment under this Agreement shall be for an
initial period which had commenced on February 5, 1997 and shall
terminate on March 15, 2001 (the "Initial Term"), and 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.
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3.01. Service with the Company.
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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.
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 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.
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The Executive hereby represents to the Company that upon the
commencement of the Initial Term the Executive was not bound by
the terms of any non-competition, confidentiality or similar
agreement or understanding (written or oral) which would have
prevented or restricted 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.
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The Executive will receive an annual base salary
("Base Salary") at an annual rate of $100,000 for the Initial
Term, except for the period beginning March 15, 1998 and ending
July 31, 1998 when the Base Salary will be $52,000 annually, paid
in accordance with the Company's normal payroll practices. In
addition on an annual basis the Board of Directors or a
compensation thereof (the "Compensation Committee") shall review
the Executive's compensation with a view towards increasing the
Base Salary and granting additional options, based on the
Executives performance during the preceding year or pursuant to
guidelines established by the Compensation Committee.
4.02 Bonus.
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(a) In further consideration of the 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 before-tax operating
profits (excluding any extraordinary and/or non-recurring items
of profit or expense) (the "Company Profits") 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 twelve percent (12%) 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. 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.
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 (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 Grant.
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(a) In consideration of the Executive entering into this
Agreement, the Company shall grant to the executive stock options
(the "Options") to purchase up to 400,000 shares of the Company s
common stock, par value $.10 per share (the "Common Stock"),
exercisable at a purchase price of $1.00 per share, vesting as to
212,500 shares upon grant and as to 46,875 shares a month
commencing upon January 1, 1998 and continuing through May 1,
1998, 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. The options shall be in substitution for
the remaining stock options granted to the Executive under the
Original Agreement.
(b) If at any time during the Initial Term hereof
the Company issues any shares of Common Stock, 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 ) nine and three-tenths
(9.3%) 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
Initial Term shall be included in the calculations of beneficial
ownership. Said new options being exercisable at a purchase
price to the Executive equal to the per share price of the shares
issued by the Company which caused the Executive to receive these
additional new stock options. Under no circumstance shall the
per share cost to the Executive be less than one dollar.
(c) 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 $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.
4.04 Monthly Loans.
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(a) The Company shall make available to the Executive a loan in
the amount of $8333.33 (each, a "Monthly Loan") on the first day
of each month (each, a "Loan Date") for so long as the Executive
remains employed hereunder commencing with the month of March
1997 and terminating on February 2, 2001, subject to earlier
termination of fifty per-cent (50%) of the value of the Monthly
Loan upon the Trading Price of the Company's Common Stock
equaling or exceeding $10.00 per share for a period of twenty
(20) consecutive trading days during the Term. 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 February 4, 2002, (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 to
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 (as defined in Rule
13d-2 under the Exchange Act) of more than twenty-five percent
(25%) 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.
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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.
4.06 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 that the cost to the Company does not exceed $700 a
month.
4.07 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.
4.08 Insurance.
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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 $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.
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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, 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, it is necessary that the
Executive agree, and the Executive hereby does agree that he will
not in the United States, at any tune 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) or at
the time the Executive ceases to be employed by the Company.
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 one 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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(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 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.
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 Company for Cause.
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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.
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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 of
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.
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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.
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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 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,
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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 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 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: Xxxxxxx X. Xxxxxxxxx, President
If to Executive:
Xxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
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 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.
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. Heading; 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/ Xxxxxxx X. Xxxxxxxxx
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Xxxxxxx X. Xxxxxxxxx
Chief Financial Officer
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
