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EXHIBIT 5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated June 3, 1998 (the
"Effective Date"), 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.
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
President, Chief Executive Officer and Chairman of the Board of Directors, 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 date first set forth above. 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 first
anniversary of the Commencement Date (the "Initial Expiration Date"); provided,
however, that this Agreement may, by written consent of the Company and Mr.
Avery, be extended for a subsequent term not to exceed one (1) year commencing
on the Initial Expiration Date (such subsequent period being referred to as the
"Subsequent Term").
3. Capacity and Performance.
a. Avery shall be employed by the Company as its President,
Chief Executive Officer and Chairman of the Board of Directors, 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 President, Chief
Executive Officer and Chairman of the Board
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) subject to subparagraph (1) above, 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 Initial Term and any Subsequent Term,
the Company shall pay Avery a base salary at an annual rate (the "Base Salary")
equal to $250,000 per year, payable in accordance with the payroll practices of
the Company for its executives.
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b. Matters Concerning Equity Compensation.
(1) The Company acknowledges that Avery holds certain
options to purchase shares of Common Stock of the Company and holds shares of
Common Stock of the Company, in each case previously granted or awarded to him
by the Company in connection with his prior service to the Company. The Company
and Avery each acknowledge and agree that the Company's and Avery's rights and
obligations, if any, in respect of such options and shares of Common Stock shall
not be affected, altered or changed in any way as a result of the execution or
terms and conditions of this Agreement.
(2) On the Effective Date, Avery shall be awarded an
option to purchase 75,000 shares of Common Stock of the Company under the
Company's 1995 Stock Option and Incentive Plan (the "1995 Plan") to be
immediately vested and exercisable in its entirety as of the date hereof. As
provided in Section 15 of the 1995 Plan, all of the shares subject to the option
described above shall vest upon the occurrence of a "Change of Control" as such
term is defined in the 1995 Plan.
(3) Notwithstanding any provision to the contrary
contained in any other agreement, the restricted stock and the options described
in this Section 4b shall be subject to the following termination provisions:
(i) Termination Due to Death. If Avery's employment
terminates by reason of death, the option granted to Avery pursuant to Section
4b(2) above may thereafter be exercised by Avery's legal representative or
legatee until the expiration date of such option.
(ii) Termination for Cause. If Avery's employment
terminates for Cause (as defined in the 1995 Plan), the option granted to Avery
pursuant to Section 4b(2) above shall immediately terminate and be of no further
force and effect.
(iii) Other Termination. If Avery's employment
terminates for any reason other than death or for Cause but including without
limitation by reason of Disability, Retirement or without Cause (as such terms
are defined in the 1995 Plan), the option granted to Avery pursuant to Section
4b(2) above may thereafter be exercised by Avery until the expiration date of
such option.
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 one million dollars ($1,000,000) 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.
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d. Vacations. Avery shall be entitled to four (4) weeks of
paid vacation, 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 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, 5d or 5f hereof, Avery shall be entitled to
receive as a severance payment an amount equal to (i) the aggregate Base Salary
which Avery would have received had he been employed by the Company through the
last day of the Initial Term if such termination occurs during the Initial Term,
or (ii) the aggregate Base Salary which Avery
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would have received had he been employed by the Company through the last day of
the Subsequent Term if such termination occurs during the Subsequent Term.
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, then, notwithstanding any other provision of
this Agreement, Avery shall be entitled to receive the amount set forth in
Section 5a hereof.
(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
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
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(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:
(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
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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 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.
h. Consulting Services. The Company and Avery agree that
following the termination of this Agreement pursuant to Section 5e hereof or the
expiration of the Initial Term (or Subsequent Term, if any), the Company and
Avery shall immediately thereafter enter into an agreement pursuant to which
Avery shall be engaged as a consultant to the Company. The terms and conditions
of such consultancy shall be identical to those set forth in the Consulting
Agreement dated May 1, 1997 between the Company and Avery (the "Consulting
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Agreement"). Notwithstanding the foregoing, upon the engagement of Avery as a
consultant as provided by the foregoing, the Company may also request that Avery
continue to serve as the Chairman of the Board of Directors. If the Company so
requests, and if Avery agrees to so serve, the Company shall pay Avery an annual
retainer of $50,000 for such service for so long as Avery serves in such
position. Such retainer shall be in addition to any and all payments to be made
to Avery under the consulting arrangement discussed above.
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 the address set forth herein or 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
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supersede all prior communications, agreements and understandings, written or
oral, with respect to the terms and conditions of Avery's employment, including
without limitation, the Consulting Agreement.
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.
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 Massachusetts contract and shall be
construed and enforced under and be governed in all respects by the laws of The
Commonwealth of Massachusetts, 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
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This AGREEMENT, dated as of June 3, 1999, 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").
WHEREAS, the Company and Avery entered into that certain Employment
Agreement, dated as of June 3, 1998 (the "Employment Agreement"); and
WHEREAS, the parties hereto desire to set forth certain additional
matters relating to Avery's employment with the Company as President, Chief
Executive Officer and Chairman of the Board as governed by the Employment
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth herein, the parties
hereby agree:
1. The parties hereby consent, pursuant to Section 2 of the Employment
Agreement and effective as of June 3, 1999, to extend the term of the Employment
Agreement for a subsequent period of one (1) year, commencing June 3, 1999.
2. The parties hereby agree and acknowledge that, notwithstanding
anything contained in the Employment Agreement to the contrary, following any
termination of the Employment Agreement pursuant to Section 5 thereof
(termination by Avery of his employment at any time upon sixty (60) days'
written notice to the Company), the Company and Avery shall immediately
thereafter enter into an agreement pursuant to which Avery shall be engaged as a
consultant to the Company. The terms and conditions of such consultancy shall be
identical to those set forth in the Consulting Agreement, dated May 1, 1997,
between the Company and Avery. Notwithstanding the foregoing, upon the
engagement of Avery as a consultant as provided by the foregoing, the Company
may also request that Avery continue to serve as the Chairman of the Board of
Directors. If the Company so requests, and if Avery agrees to so serve, the
Company shall pay Avery an annual retainer of $50,000 for such service for so
long as Avery serves in such position. Such retainer shall be in addition to any
and all payments to be made to Avery under the consulting arrangement discussed
above.
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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
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AGREEMENT
This AGREEMENT, dated as of September 9, 1999, 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").
WHEREAS, the Company and Avery entered into that certain Employment
Agreement, dated as of June 3, 1998, as amended on June 3, 1999 (the "Employment
Agreement"); and
WHEREAS, the parties hereto desire to set forth certain additional
matters relating to Avery's employment with the Company as President, Chief
Executive Officer and Chairman of the Board as governed by the Employment
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth herein, the parties
hereby agree:
1. For clarification purposes, the parties hereby agree and acknowledge
that, notwithstanding anything contained in the Employment Agreement to the
contrary, in the event that a Terminating Event (as defined in the Employment
Agreement) shall occur following a Change in Control (as defined in the
Employment Agreement), in addition to any payments to which Mr. Avery may be
entitled pursuant to Section 5b of the Employment Agreement, the Company and
Avery shall immediately thereafter enter into an agreement pursuant to which
Avery shall be engaged as a consultant to the Company. The terms and conditions
of such consultancy shall be identical to those set forth in the Consulting
Agreement, dated May 1, 1997, between the Company and Avery, and shall provide,
among other things, that Mr. Avery shall be engaged as a consultant to the
Company for a period of three (3) years and shall receive consulting fees at a
rate of $10,000 per month. Notwithstanding the foregoing, upon the engagement of
Avery as a consultant as provided by the foregoing, the Company may also request
that Avery continue to serve as the Chairman of the Board of Directors. If the
Company so requests, and if Avery agrees to so serve, the Company shall pay
Avery an annual retainer of $50,000 for such service for so long as Avery serves
in such position. Such retainer shall be in addition to any and all payments to
be made to Avery under the consulting arrangement discussed above.
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IN WITNESS WHEREOF, this Arrangement 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/ Dennis R. Stone
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Paul F. Avery, Jr. Dennis R. Stone
Chairman, Compensation
Committee of the Board of
Directors