Employment Agreement

EXHIBIT 10.2


EMPLOYMENT AGREEMENT


by and between


AMERICAN TECHNOLOGY CORPORATION


and


STEPHEN M. WILLIAMS


Effective February 15, 2000


TABLE OF CONTENTS


Page


1 Employment......................................... 2


2 Loyal and Conscientious Performance; Noncompetition 3


3 Term of Employment................................. 3


4 Compensation....................................... 3


5 Termination........................................ 5


6 Death or Disability During Term of Employment...... 8


7 Proprietary and Confidential Information........... 9


8 Assignment and Binding Effect...................... 14


9 Notices............................................ 15


10 Choice of Law...................................... 15


11 Integration........................................ 16


12 Waiver............................................. 16


13 Severability....................................... 16


14 Interpretation; Construction....................... 16


15 Attorneys' Fees.................................... 16


16 Counterparts....................................... 17


17 Representations and Warranties..................... 17


18 Arbitration........................................ 17


i


EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into effective as of February 15, 2000 by and between American Technology Corporation, a Delaware corporation (the "Company") and Stephen M. Williams ("EMPLOYEE"). The Company and EMPLOYEE are hereinafter collectively referred to as the "Parties," and individually referred to as each or any "Party."


RECITALS:


A. WHEREAS, the Company is engaged in the design, development and commercialization of sound, acoustics and other technologies, and the sales and marketing of consumer electronic products and related areas (the "Business of the Company"); and


B. WHEREAS, the Company desires assurance of the association and services of EMPLOYEE in order to retain EMPLOYEE's experience, skills, abilities, background and knowledge, and is willing to engage EMPLOYEE's services on the terms and conditions set forth in this Agreement; and


C. WHEREAS, EMPLOYEE desires to be in the employ of the Company, and is willing to accept such employment on the terms and conditions set forth in this Agreement.
AGREEMENT:


In consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the Parties, intending to be legally bound, agree as follows:


1 Employment.
----------


1.1 The Company hereby employs EMPLOYEE, and EMPLOYEE hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in Paragraph 3 hereof (the "Employment Period").


1.2 During the Employment Period, EMPLOYEE shall serve as Division President and shall have the normal duties, responsibilities and authority of such office, unless otherwise determined from time to time by the Company's Chief Executive Officer or Board of Directors. EMPLOYEE shall do and perform all services, acts or things necessary or advisable to carry out the job duties assigned by the Company, provided, however, that at all times during his employment EMPLOYEE shall be subject to the direction and policies from time to time established by the Chief Executive Officer or the Board of Directors of the Company.


1.3 Within thirty (30) days of execution of this Agreement, EMPLOYEE shall submit an annual budget for his division, including a month-to-month breakdown, for review and approval by the Chief Executive Officer of the Company. Upon approval, the budget as amended in accordance with the provisions herein, shall determine the expenditures for and the spending authority of EMPLOYEE for his division for the periods stated. The budget may be revised from time to time as determined by the Chief Executive Officer. Any unbudgeted expense in excess of $500, and any budgeted expense in excess of $2,500, either individually or in the aggregate, in any thirty (30) day period for any single entity or purpose must be pre-approved by the Chief Executive Officer of the Company.


2


2 Loyal and Conscientious Performance; Noncompetition.
---------------------------------------------------


2.1 During his employment by the Company, EMPLOYEE shall devote his full energies, interest, abilities and productive time to the proper and efficient performance of this Agreement and shall not, without the prior written consent of the Chief Executive Officer or the Board of Directors of the Company, directly or indirectly, render services of a business, professional or commercial nature to any other person or entity, whether for compensation or otherwise, or engage in any business activities competitive with or adverse to the Company's business or welfare, whether alone, as a partner, or as a shareholder, officer or director of any other corporation, or as a trustee, fiduciary or in a similar representative capacity.


3 Term of Employment.
------------------


3.1 Subject to earlier termination as provided in this Agreement, EMPLOYEE shall be employed pursuant to the terms of this Agreement for a three (3) year term beginning on February 15, 2000 and expiring at midnight on February 14, 2003.


4 Compensation.
------------


4.1 Beginning with the Effective Date of this Agreement, Company shall pay EMPLOYEE a salary (the "Base Salary") of One Hundred Eighty Thousand Dollars ($180,000.00) per year, payable in accordance with the Company's normal payroll practices for employees. Such salary shall be prorated for any partial employment on the basis of a 30-day calendar month.


4.2 EMPLOYEE's compensation may be changed from time to time by mutual agreement of EMPLOYEE and the Board of Directors of the Company. Any such agreement shall be evidenced by a written amendment of this Agreement, which, among other things, shall


3


specify with particularity any change in EMPLOYEE's compensation and the date or dates when each such change shall become effective.


4.3 Immediately upon the execution of this Agreement by the parties, EMPLOYEE shall be awarded an additional equity compensation package regarding common voting shares of the Company according to the terms and conditions described in Exhibit A to this Agreement.


4.4 In addition to the Base Salary payable to EMPLOYEE hereunder, the EMPLOYEE shall be entitled to the following benefits during the Employment Period:


4.4.1 All benefits to which the senior management of the Company are entitled, as determined by the Company's Board of Directors, on terms comparable thereto, including but not limited to, participation in any and all pension and profit sharing plans, bonus and incentive payment programs, group life insurance policies and plans, medical and health policies and plans, and the like, which may be maintained by the Company for the benefit of its executives.


4.4.2 Three (3) weeks vacation per year, which shall accrue annually beginning with the effective date of this Agreement. If the EMPLOYEE does not utilize the entire three weeks of annual vacation in a given year, he may carry over such weeks into the following calendar year, provided that such accrual shall not exceed the maximum accrual permitted under current Company policy.


4.4.3 EMPLOYEE shall be based in Seattle, Washington until the Board of Directors and EMPLOYEE mutually agree that the relocation of EMPLOYEE to San Diego, California is necessary. At such time as EMPLOYEE does relocate to San Diego, the Company shall reimburse to EMPLOYEE for his moving expenses to San Diego in an amount up to Twenty Thousand Dollars ($20,000.00) of such moving expenses, provided EMPLOYEE provides to the Company appropriate documentation supporting such expenses.


4


4.5 The Company shall reimburse EMPLOYEE for all reasonable out-of-pocket expenses incurred by him in the course of performing his duties under this Agreement, which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documentation of such expenses.


4.6 All of EMPLOYEE's compensation shall be subject to customary federal and state withholding taxes and any other employment taxes as are commonly required to be collected or withheld by the Company.


5 Termination.
-----------


5.1 The Company may terminate this Agreement for Cause (as defined herein) by delivery of written notice to EMPLOYEE specifying the cause or causes relied upon for such termination. If EMPLOYEE's employment under this Agreement is terminated by the Company for Cause before the last day of any calendar month, EMPLOYEE shall be entitled to receive as compensation for such calendar month, only the Base Salary set forth in Section 4.1 prorated to the date of termination on the basis of a 30-day calendar month and all accrued and unreimbursed business expenses incurred by Williams on or before such date. Grounds for the Company to terminate this Agreement for "Cause" shall include the occurrence of any of the following events:


5.1.1 EMPLOYEE's willful misconduct or gross negligence in the performance of his duties hereunder;


5.1.2 EMPLOYEE's willful failure or refusal to perform in the usual manner at the usual time those duties which he regularly and routinely performs in connection with the business of the Company or such other duties reasonably related to the capacity in which he is


5


employed hereunder which may be assigned to him by the Board of Directors of the Company, if such failure or refusal has not been substantially cured to the satisfaction of the Board of Directors within thirty (30) days after written notice of such failure or refusal has been given by the Company to EMPLOYEE.


5.1.3 EMPLOYEE's performance of any action when specifically instructed not to do so by the Chief Executive Officer of the Company unless specifically requested by the Board of Directors;


5.1.4 EMPLOYEE's engaging or in any manner participating in any activity which is directly competitive with or intentionally injurious to the Company or which violates any provision of Section 7;


5.1.5 EMPLOYEE's commission of any fraud against the Company or use or appropriation for his personal use or benefit of any funds or properties of the Company not authorized by the Board of Directors to be so used or appropriated; or


5.1.6 EMPLOYEE's conviction of any crime involving moral turpitude. Any notice of termination given pursuant to this Section 5.1 shall effect termination as of the date specified in such notice or, in the event no such date is specified, on the last day of the month in which such notice is delivered.


5.2 The Company may voluntarily terminate this Agreement without Cause by giving not less than thirty (30) days written notice to EMPLOYEE, provided, h ...