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Exhibit 10.12
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated April 1,
1995, is entered into by and between Ferrofluidics Corporation
(the "Company"), a Massachusetts corporation with its principal
place of business at 40 Simon Street, Nashua, New Hampshire, and
Paul F. Avery, Jr. ("Avery"), of 178 Drinkwater Road, Kensington,
New Hampshire, and supersedes and replaces the employment
agreement dated October 1, 1993 between Avery and the Company, as
amended on November 15, 1993.
WHEREAS, the operations of the Company are a complex matter
requiring direction and leadership in a variety of areas;
WHEREAS, Avery possesses the experience and expertise to
provide the direction and leadership required by the Company;
and
WHEREAS, subject to the terms and conditions hereinafter set
forth, the Company, therefore, wishes to establish the terms of
employment of Avery as its Chief Executive Officer, and Avery
agrees to so establish such terms of this employment;
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual promises, terms, provisions and conditions set
forth in this Agreement, the parties hereby agree:
1. EMPLOYMENT. Subject to the terms and conditions set
forth in this Agreement, the Company hereby offers and Avery
hereby accepts employment on the terms and conditions set forth
in this Agreement.
2. EFFECTIVE DATE AND TERM. The commencement date (the
"Commencement Date") of this Agreement shall be April 1, 1995.
Subject to the provisions of Section 5, the initial term (the
"Initial Term") of Avery's employment hereunder shall be from the
Commencement Date to the second anniversary of the Commencement
Date (the "Initial Expiration Date"); provided, however, that
this Agreement shall automatically be extended for successive one
(1) year terms commencing on the Initial Expiration Date and
ending on each subsequent anniversary thereof (each subsequent
annual period being referred to as a "Subsequent Term"), unless
either Avery or the Employer provides sixty (60) days' written
notice prior to the Initial Expiration Date (or sixty (60) days'
written notice prior to the last day of any Subsequent Term) of
his or its intention, as the case may be, not to extend the term
of this Agreement.
3. CAPACITY AND PERFORMANCE.
a. Avery shall be employed by the Company as its
Chief Executive Officer, and shall have all powers and duties
consistent with those positions, subject to the direction of the
Company's Board of Directors.
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b. Avery shall devote his best efforts, business
judgment, skill and knowledge to the advancement of the business
and interests of the Company and its affiliates, and to the
discharge of his duties and responsibilities hereunder. In
accordance with the foregoing, Avery shall not engage in any
other business activity, except as may be approved by the Board
of Directors; provided, however, that nothing herein shall be
construed as preventing Avery from:
(1) devoting a portion of his efforts,
from time to time, to certain other business interests
with which he is involved, provided that such
activity does not materially impair Avery's
ability to discharge his obligations and responsibilities
as Chief Executive Officer of the Company hereunder;
(2) investing his assets in a manner
not otherwise prohibited by this Agreement,
and in such form or manner as shall not require
any material services on his part in the operations
or affairs of the companies or other entities
in which such investments are made;
(3) serving on the board
of directors of any company, provided that he
shall not be required to render any material
services with respect to the operations or
affairs of any such company; or
(4) engaging in religious, charitable or
other community or non-profit activities which do
not impair his ability to fulfill his duties and
responsibilities under this Agreement.
c. Except for required travel on the Company's
business and except for attendance at meetings of the Board of
Directors of the Company and/or its affiliates, Avery shall not
be required to work on a regular basis at any location outside of
Hillsborough County in the State of New Hampshire.
4. COMPENSATION AND BENEFITS.
a. BASE SALARY. For the first twelve (12) month
period of the Initial Term, the Company shall pay Avery a base
salary at an annual rate (the "Base Salary") equal to $225,000
per year, payable in accordance with the payroll practices of the
Company for its executives. For the second twelve (12) month
period of the Initial Term and for the twelve (12) month period
of any Subsequent Term, such Base Salary shall equal $200,000.
b. STOCK BONUS PLAN. On the effective date of this
Agreement, Avery will be awarded 15,000 shares of Common Stock of
the Company as a restricted stock award under the Company's 1994
Restricted Stock Plan (the "Plan") to be vested as follows:
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Cumulative
Percentage of Shares Percentage
Vesting Date Becoming Vested Vested
------------ -------------------- --------
January 1, 1996 33 1/3% 33 1/3%
January 1, 1997 33 1/3% 66 2/3%
January 1, 1998 33 1/3% 100%
As provided in Section 10 of the Plan, all of the shares subject
to the Restricted Stock Award above shall vest upon the
occurrence of a "Change of Control" as such term is defined in
the Plan.
c. LIFE INSURANCE. During the period from the
Commencement Date through the Initial Expiration Date and through
the last day of any Subsequent Term, the Company shall maintain a
life insurance policy on the life of Avery in the amount of two
million dollars ($2,000,000) payable as directed by Avery;
provided, however, that the Company shall have no obligation to
maintain such policy at any time following the termination of
Avery's employment pursuant to Section 5d hereunder.
d. VACATIONS. Avery shall be entitled to the number
of paid vacation days to which he would entitled in accordance
with the Company's normal vacation policy, to be taken at such
times and intervals as shall be determined by Avery, subject to
the reasonable business needs of the Company.
e. RETIREMENT PLANS. Avery shall be entitled to
participate in and enjoy the benefit of the Company's retirement,
supplementary retirement, deferred compensation or similar plans,
programs or arrangements as available to the Company's management
from time to time.
f. HEALTH, WELFARE AND FRINGE BENEFIT PLANS, ETC.
Avery shall be entitled to participate in and enjoy the benefit
of all the health, medical, dental, cafeteria, reimbursement,
death (including life insurance), accident, travel insurance,
long-term disability, short-term disability, sick leave, other
leaves of absence, holidays and other similar welfare, fringe-
benefit or employment-related plans, programs, arrangements,
policies or perquisites available to the Company's management
from time to time. Participation shall be subject to the terms
of the applicable plan documents and the discretion of the Board
or any administrative or other committee provided for in or
contemplated by such plan. The Company may alter, modify, add to
or delete its employee benefit plans as they apply to the
Company's management at such times and in such manner as the
Company determines to be appropriate, without recourse by Avery.
g. BUSINESS EXPENSES. The Company shall pay or
reimburse Avery for all reasonable business expenses incurred or
paid by him in the performance of his duties and responsibilities
hereunder, subject to any restrictions on such expenses set by
the Board and
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to such reasonable substantiation and documentation
as may be specified by the Company from time to time.
h. AUTO LEASE. The Company shall furnish Avery,
during the Initial Term and any Subsequent Term, with an
automobile for his use, and the Company shall pay or reimburse
all costs incurred in connection therewith including, without
limitation, any leasing fees, insurance, operating or repairs
costs, tax obligations, etc. In the event that Avery's
employment hereunder is terminated pursuant to Section 5 hereof,
he shall surrender the automobile to the Company not later than
thirty (30) days following the termination of such employment.
5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS.
a. GENERAL SEVERANCE BENEFITS. If terminated for
reasons other than as set forth under Section 5b or 5d hereof,
Avery shall be entitled to receive as a severance payment an
amount equal to the greater of (i) the aggregate Base Salary
which Avery would have received had he been employed by Employer
through the last day of the Initial Term or (ii) twelve (12)
months' Base Salary at the rate then in effect under this
Agreement.
b. CHANGE OF CONTROL BENEFITS.
(1) If the Company undergoes a Change of Control
(as defined below) during the Initial Term or any Subsequent
Term, and a Terminating Event (as defined below) occurs within
twenty-four (24) months after the date on which such Change of
Control occurs, Avery shall be entitled to receive an amount
equal to twenty-four (24) months' Base Salary at the rate then in
effect under this Agreement.
(2) "Change of Control" shall mean the occurrence
of any one of the following events:
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Act")) becomes a "beneficial
owner" (as such term is defined in Rule 13d-3 promulgated
under the Act) (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, or any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company), directly or indirectly, of securities
of the Company representing 15% or more of the combined
voting power of the Company's then outstanding securities;
or
(ii) persons who, as of the Commencement
Date, constituted the Company's Board of Directors (the
"Incumbent Board") cease for any reason, including without
limitation as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a
director of the Company subsequent to the Commencement Date
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whose election was approved by at least a majority of the
directors then comprising the Incumbent Board shall, for
purposes of this Agreement, be considered a member of the
Incumbent Board; or
(iii) the stockholders of the Company
approve a merger or consolidation of the Company with any
other corporation or other entity, other than (a) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation
or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve
a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
(3) A "Terminating Event" shall mean any
voluntary or involuntary termination of Avery's employment
occurring subsequent to a Change in Control, other than the
termination of Avery's employment pursuant to Section 5d
hereunder.
c. DEATH OR DISABILITY. In the event Avery dies or
becomes disabled during the Initial Term or any Subsequent Term
of this Agreement, his employment hereunder shall automatically
terminate. In such case, the Company shall pay to Avery or his
beneficiary, as the case may be, any earned but unpaid salary as
of the date of his death or disability. For the purpose of this
Agreement, "disability" shall refer to a situation in which Avery
is totally disabled from performing his duties for the Company
during a period of thirteen (13) consecutive weeks.
If any question shall arise as to whether during any period
Avery has suffered disability, Avery may, and at the request of
the Company will, submit to the Company a certification in
reasonable detail by a physician selected by Avery or his
guardian to whom the Company has no reasonable objection as to
whether Avery was so disabled and such certification shall for
the purposes of this Agreement be conclusive of the issue. If
such question shall arise and Avery shall fail to submit such
certification, the Company's determination of such issue shall be
binding on Avery.
d. BY THE COMPANY FOR CAUSE. The Company may
terminate Avery's employment hereunder for cause at any time upon
notice to Avery setting forth in reasonable detail the nature of
such case. The following, as determined by the Board in its
reasonable judgment, shall constitute "cause" for termination:
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(1) Avery's falsification of the accounts of the
Company, embezzlement of funds of the Company or other
material dishonesty with respect to the Company or any of
its affiliates; or
(2) Conviction of, or plea of nolo contendere to,
a felony or other crime involving moral turpitude (it being
understood that violation of a motor vehicle code does not
constitute such a crime); or
(3) Conduct engaged in or action taken or omitted
to be taken by Avery which is in material breach of this
Agreement; or
(4) Material failure to perform a substantial
portion of Avery's duties and responsibilities hereunder,
which failure continues for more than thirty (30) days after
written notice given to Avery pursuant to a vote of the
Board of Directors, such vote to set forth in reasonable
detail the nature of such failure; or
(5) Gross or willful misconduct of Avery with
respect to the Company or any subsidiary or affiliate
thereof.
Upon the giving of notice of termination of Avery's
employment hereunder for cause, the Company shall have no further
obligation or liability to Avery, other than the payment of
salary earned and unpaid at the date of termination and the
contribution by the Company to the cost of Avery's participation
(subject to any required employee contribution by Avery under the
terms of the applicable plans) in the Company's group medical and
dental insurance plans as the same are in effect from time to
time for so long as Avery is entitled to continue such
participation under applicable law and plan terms.
e. BY THE COMPANY OTHER THAN FOR CAUSE. The Company
may terminate Avery's employment hereunder other than for cause
at any time upon sixty (60) days' written notice to Avery.
f. BY AVERY. Avery may terminate his employment
hereunder at any time upon sixty (60) days' written notice to the
Company.
g. LIMITATION OF BENEFITS. It is the intention of
Avery and of the Company that no payments by the Company to or
for the benefit of Avery under this Agreement or any other
agreement or plan pursuant to which he is entitled to receive
payments or benefits shall be non-deductible to the Company by
reason of the operation of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") relating to parachute
payments. Accordingly, and notwithstanding any other provision
of this Agreement or any such agreement or plan, if by reason of
the operation of said Section 280G, any such payments exceed the
amount which can be deducted by the Company, the payments which
Avery is entitled to receive under this Agreement shall be
reduced by that amount which exceeds the maximum amount
deductible by the Company under Section 280G. To the extent that
payments exceeding such maximum deductible amount have been made
to or for the benefit
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of Avery, such excess payments shall be refunded to the Company with
interest thereon at the applicable federal rate determined under Section
1274(d) of the Code, compounded annually, or at such other rate as may be
required in order that no such payments shall be non-deductible to the Company
by reason of the operation of said Section 280G.
6. WITHHOLDING. All payments made by the Company under
this Agreement shall be reduced by any tax or other amounts
required to be withheld by the Company under applicable law.
7. ASSIGNMENT. Neither the Company nor Avery may make any
assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the
other; provided, however, that the Company may assign its rights
and obligations under this Agreement without the consent of Avery
in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other person
or entity or transfer all of its properties or assets to any
other person or entity. This Agreement shall insure to the
benefit of and be binding upon the Company and Avery, their
respective successors, executors, administrators, heirs and
permitted assigns.
8. SEVERABILITY. If any portion or provision of this
Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion
or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.
9. WAIVER. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party.
The failure of either party to require the performance of any
term or obligation of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.
10. NOTICES. Any and all notices, requests, demands and
other communications provided for by this Agreement shall be in
writing and shall be deemed given when delivered by hand, telex
or facsimile, or if mailed, five days after mailing (two business
days in the case of courier service), to the parties as follows:
to Avery at his last known address on the books of the Company
and, in the case of the Company, to its principal place of
business, attention of Clerk or to such other address as either
party may specify by notice to the other.
11. ENTIRE AGREEMENT. This Agreement and the
Non-Disclosure/Non-Compete Agreement executed by Avery constitute
the entire agreement between the parties and supersede all prior
communications, agreements and understandings, written or oral,
with respect to the terms and conditions of Avery's employment.
12. AMENDMENT. This Agreement may be amended or modified
only by a written instrument signed by Avery and by an expressly
authorized representative of the Company.
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13. HEADINGS. The headings and captions in this Agreement
are for convenience only and in no way define or describe the
scope of or content of any provision of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be an original and all of
which together shall constitute one and the same instrument.
15. GOVERNING LAW. This is a New Hampshire contract and
shall be construed and enforced under and be governed in all
respects by the laws of The State of New Hampshire, without
regard to the conflict of laws principles thereof.
[END OF TEXT]
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IN WITNESS WHEREOF, this Agreement has been executed as a
sealed instrument by the Company, by its duly authorized
representative, and by Avery, as of the date first above
written.
FERROFLUIDICS CORPORATION
/s/ Paul F. Avery, Jr. By: /s/ Robert P. Rittereiser
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Paul F. Avery, Jr. Robert P. Rittereiser
Chairman, Compensation Committee
of the Board of Directors