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Chief Financial Officer Employment Agreement

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Sectors: Transportation
Governing Law: Massachusetts, View Massachusetts State Laws
Effective Date: September 11, 2007
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Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this "Agreement") effective September 11, 2007 (the "Effective Date") by and between ANDOVER MEDICAL, INC, a Delaware corporation, (the "Company") and JIM SHANAHAN (the "Executive") (collectively, the "Parties").

WHEREAS, the Executive is presently employed by the Company in a senior executive capacity;

WHEREAS, the Company desires to continue to employ the Executive and to enter into an agreement embodying the terms of such employment; and

WHEREAS, the Executive desires to continue his employment with the Company on the terms and conditions set forth herein and enter into such agreement.

NOW THEREFORE, in consideration of the premises and mutual covenants herein and for other good and valuable consideration, the Parties agree as follows:

1. Effectiveness; Term of Employment .

a. Effectiveness . This Agreement shall constitute a binding agreement between the Parties as of the date hereof.

b. Term of Employment . The term of this Agreement shall commence on the Effective Date and terminate two (2) years thereafter or for such longer term as the Company and the Executive may agree in writing, but subject to the termination provisions of Paragraph 7 below (the "Term).

2. Position .

a. During the Term, the Executive shall serve as the Company92s Chief Financial Officer. The Executive shall report to the Chief Executive Officer ("CEO") and have and perform such duties and authority generally associated with a Vice President and Chief Financial Officer of a publicly owned corporation. The Executive will have and perform other duties as shall be determined from time to time by the CEO and the Company92s Board of Directors (the "Board") consistent with the Executive92s position.

b. During the Term, the Executive will devote substantially all of his business time and efforts (excluding periods of vacation and sick days) to the performance of the Executive92s duties hereunder, and will not engage in any other business, profession or occupation which would conflict or interfere with the rendition of such services either directly or indirectly, without the prior written consent of the Board, which consent shall not unreasonably be withheld. The Executive may: (i) engage in personal investment activities (including for the Executive92s immediate family); (ii) serve on the boards of nonprofit organizations and business entities; and/or (iii) be involved in other organizations, in each case provided that any of such






activities do not materially interfere with the Executive92s performance of his duties for the Company or create a conflict of interest with that of the Company.

c. Subject to such travel as the performance of the Executive92s duties may reasonably require, the Executive shall perform the duties required of him by this Agreement.

3. Compensation .

a. Base Salary . The Executive92s Gross Base Salary, is hereinafter referred to as " Base Salary ." During the term, the Company shall pay to the Executive a Base Salary of $5,769.23 per biweekly period ($150,000.00 per year), paid in accordance with the Company92s regular payroll practices. Executive92s Base Salary will be subject to all appropriate legally required tax deductions.

b. Equity Based Compensation . In conjunction with the execution of this Agreement, the Executive shall be granted a one-time grant of incentive stock options ("Options") to purchase 300,000 shares of the Company92s common stock at an exercise price per share equal to the closing price of such stock on September 11, 2007. The Options shall vest in 36 equal monthly installments and, upon vesting, be exercisable by the Executive, in whole or in part, at any time through their expiration date. The terms of the Options shall be set forth in a stock option agreement granting such Options and shall be issued to the Executive in accordance with the Andover Medical, Inc. 2006 Employee Stock Incentive Plan (the "2006 Plan").

c. Annual Bonus . The Executive shall receive an annual incentive bonus (the "Bonus") based on certain criteria and corporate objectives similar to the objectives established by the Board for the CEO. The Bonus target shall be twenty-five percent (25%) of the Executive92s Base Salary and be paid to the Executive on an annual basis, subject to all appropriate legally required tax deductions.

d. 2006 Plan . During the Term, the Executive shall be eligible to participate in the Company92s 2006 Plan, or such other individual long term incentive arrangement for the Executive92s benefit approved by the Board, which shall grant to the Executive on an annual basis at the Board92s discretion, cash, stock, options and/or other types of compensatory awards.

4. Benefits and Insurance .

a. Benefits . During the Term, the Executive shall be entitled to participate in the Company92s employee benefit plans (other than any annual bonus or other compensation or severance plans or programs, which benefits are set forth in this Agreement) as in effect from time to time (collectively " Benefits "), on the same basis as those benefits are generally made available to other employees. Such Benefits shall include health, dental, and life insurance benefits. The Company reserves the right to change or cancel any Benefits at its sole discretion, except as specifically set forth in this Agreement.

b. Directors and Officers Liability Insurance . During the Term, and for a reasonable period (not less than two years) thereafter, the Company shall maintain

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Directors and Officers liability insurance coverage for the Executive in a total coverage amount determined by the Board to be reasonable, provided that, if the Executive92s employment is terminated for "Cause" or Executive resigns his employment without "Good Reason," each term as defined herein, the Company may, at its discretion, elect not to maintain Directors and Officers liability insurance coverage for the Executive after the Executive92s termination date.

5. Business Expenses . During the Term, the Company shall reimburse the Executive for, or pay on behalf of the Executive, all reasonable and customary business expenses, including but not limited to travel expenses incurred by the Executive in the performance of the Executive92s duties hereunder.

6. Vacations and Sick Time . During the Term, the Executive shall be entitled to 15 days of vacation annually, prorated on a monthly basis from the Effective Date. Up to one week of vacation time may be carried over until March 31 of the next calendar year, at which time it shall be forfeited if unused.

7. Termination . The Term of the Executive92s employment hereunder shall commence on the Effective Date and terminate two (2) years thereafter, unless terminated earlier by the Company or by the Executive pursuant to this Paragraph 7.

a. Termination By the Company For Cause; Resignation By Executive Without Good Reason .

(i) The Term and the Executive92s employment hereunder may be terminated by the Company for Cause (defined below). Additionally, the Executive92s employment shall terminate automatically upon Executive92s resignation without Good Reason (as hereinafter defined).

(ii) For purposes of this Agreement, "Cause" shall mean: (A) the Executive92s material breach of this Agreement; (B) the Executive92s willful misconduct in the performance of Executive92s duties hereunder that has an adverse effect on the Company; (C) the Executive92s indictment for, or plea of nolo contendere to a felony under the laws of the United States or any state thereof or a misdemeanor involving moral turpitude; or (D) the Executive92s willful malfeasance or willful misconduct in connection with the Executive92s duties hereunder which is materially injurious to the financial condition or business reputation of the Company; provided, that no such termination shall be effective as a termination for "Cause" unless the Executive has been given written notice by the Board of its intention to terminate the Executive92s employment for Cause, stating the grounds for such purported termination.

(iii) If the Executive92s employment is terminated by the Company for Cause or if the Executive resigns without Good Reason, the Executive shall be entitled only to receive:

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(A) the Executive92s Base Salary through the date of the Executive92s termination, paid in one lump sum within the payroll period immediately following the Executive92s date of termination;

(B) reimbursement for any business expenses properly incurred by the Executive in accordance with Company policy prior to the date of the Executive92s termination; and

(C) such Benefits, if any, pursuant to Paragraph 4 herein as to which the Executive may be entitled as of the effective date of termination under the employee benefit plans of the Company, as required by applicable law.

The amounts described in clauses (A) through (C) are referred to herein as the "Accrued Rights."

b. Termination by the Company Without Cause; Resignation by Executive for Good Reason .

(i) The Term and the Executive92s employment hereunder may be terminated by the Company without Cause or by the Executive92s resignation for Good Reason.

(ii) For purposes of this Agreement, "Good Reason" shall mean only: (A) the failure of the Company to pay or cause to be paid, or to provide or cause to be provided, any part of the Executive92s compensation, benefits or perquisites within ten business days from the date due hereunder; (B) any change in the Executive92s office location that would require him to commute more than fifty (50) miles from his current personal residence, as specified herein; (C) any material breach by the Company of this Agreement; or (D) a Change of Control (as hereinafter defined); provided that the events described in clauses (A) through (C) of this Paragraph 7(b)(ii) shall constitute Good Reason only if the Company fails to cure such event to the Executive92s reasonable satisfaction within 30 days after receipt from the Executive of written notice of the event which constitutes Good Reason. The Executive92s determination that Good Reason exists shall be subject to review, at the Company92s election, through arbitration in accordance with Paragraph 15 herein.

(iii) For purposes of this Agreement, "Change of Control" shall mean any one of the following transactions: (i) the acquisition in a transaction or a series of transactions (including a merger) by any person or organization, other than the Company or any of its subsidiaries, of beneficial ownership of fifty percent (50%) or more (on a fully diluted basis) of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors or persons holding similar positions with the Company; (ii) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Company, or successors appointed with the approval of such

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individuals, cease for any reason to constitute at least a majority of the Board of Directors (or similar body) as constituted from time to time; or (iii) the sale or other disposition of all or substantially all of the assets of the Company in one transaction or series of related transactions.

(iv) If the Term and the Executive92s employment is terminated by the Company without Cause or if the Executive resigns for Good Reason, the Executive shall be entitled only to receive:

(A) the amount equal to six months of the Executive92s Base Salary, payable in monthly installments equal to Executive92s monthly Base Salary for the first six (6) months beginning with the Company92s payroll date following the Executive92s date of termination;

(B) all restrictions on any shares of Company stock, options, or other equity grants to the Executive shall lapse on the date of termination;

(C) reimbursement for any business expenses properly incurred by the Executive in accordance with Company policy prior to the date of the Executive92s termination on or before the Company92s payroll period immediately following the Executive92s date of termination;

(D) payment of any accrued but unused vacation days on or before the Company payroll period immediately following the Executive92s date of termination; and

(E) Directors and Officers liability insurance coverage in a total coverage amount determined by the Board to b
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