EMPLOYMENT
AGREEMENT
THIS AGREEMENT is entered into
effective as of the 28th day of February, 2000, between AMERICAN
TECHNOLOGY CORPORATION, a Delaware publicly traded corporation (the
"Company"), and James J. Croft III ("Employee").
Employee, in consideration of the
covenants and agreements hereinafter contained, agrees as follows
with respect, to the employment of the Company of Employee and
Employees future business activities.
1. Employment: Term of Employment.
The Company hereby employs Employee
and Employee hereby accepts such employment upon the terms and
conditions hereinafter set forth. Subject to the provisions for
termination as hereinafter provided, Employee's term of employment
by the Company shall be from the date of this agreement until
September 30, 2004, and said employment shall continue after such
date until either party shall deliver written notice to the other
party hereto to the effect that the employment hereunder shall
terminate thirty (30) days from the giving of such notice. This
Agreement will supersede all prior written and oral employment
agreements entered into by and between Company and
Employee.
2. Services to be Rendered by Employee.
Employee shall be subject to the
direction of the Board of Directors, a duly authorized committee
thereof, or the Company's Chief Executive Officer and his duties
shall be those generally vested in the office of Vice President of
Research for the corporation and he shall have such other powers
and duties as may be reasonably prescribed by the Board of
Directors, a duty authorized committee thereof, or the Company's
Chief Executive Officer and shall perform such duties as from time
to time may be decided upon by the Board of Directors, a duly
authorized committee thereof, or the Company's Chief Executive
Officer, including but not limited to, speaking for and promoting
the sale of the Company's product lines as public spokesman both in
print and television ads.
The Employee agrees that he will
serve the Company faithfully and to the best of his abilities,
devoting substantially all his time, energy and skill to the
activities of the Company and the promotion of its interests.
Employee shall not serve as an officer or director or similar
capacity with any other entity except with the consent of the
Company. The Company has agreed to accommodate Employee's position
with Definitive Audio to the extent of an average of one day per
month so long as the prime focus of Employee's time and activities
are in support of the Company's objectives.
(a) For the services to be rendered by Employee
during his employment by the Company, the Company shall pay
Employee a Base Salary of One Hundred Ten Thousand Dollars
($110,000) per annum during the term of this agreement, prorated
for any partial period and paid in conformity with the Company's
normal payroll period. Employee's salary shall be reviewed by the
Board of Directors from time to time in its discretion, and
Employee will receive such salary increases, if any, as the Board
of Directors in its sole discretion determines.
(b) Employee shall be entitled to participate in any
bonus pool or similar program established by the Board of
Directors.
(c) The Employee's place of employment shall be
considered San Diego County, California (or other mutually agreed
upon location).
(d) Employee shall be entitled to participate in and
receive benefits under the Company's executive benefits plans as in
effect from time to time, including, medical insurance, sick leave,
and vacation time, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and
Company policies.
(e) The Company shall pay or reimburse Employee for
all expenses normal reimbursed by the Company and reasonably
incurred by him in furtherance of his duties hereunder and
authorized by the Company, including without limitation, expenses
for entertainment, traveling, meals, hotel accommodations and the
like upon submission by him of vouchers or an itemized list thereof
as the Board of Directors; may from time to time adopt and
authorize, and as may be required in order to permit such payments
as proper deductions to the Company under the Internal Revenue Code
of 1986 and the rules and regulations adopted pursuant thereto now
or hereafter in effect.
(f) All amounts payable or which become payable
under any provision of this Agreement will be subject to any
deductions authorized in writing by Employee and any deductions and
withholdings required by law.
(g) As compensation for consideration of extending
Employee's Employment Agreement and granting an exclusive license
to ATC for the Croft Invention known as "Three chamber, series
tuned band-pass subwoofer" as defused, in the document "Croft
Pre-October 1997 Proprietary Technologies" dated 10/1/97, and as of
this date commonly referred to as the Xtended Range Subwoofer in
ATC, the Company agrees to pay a Premium Royalty in addition to
that in the Royalty Agreement Addendum Plumber Three with Employee.
Royalty Agreement for this Agreement shall mean the Addendum agreed
to and signed by Employee for royalty payments for granting an
exclusive license to ATC for the Croft Invention known as "Three
chamber, series tuned band-pass subwoofer" within the terms of the
Employee Intellectual Property Submissions for American Technology
Corporation Policy ( Hereinafter referred to as the "Policy"). The
Premium Royalty for this Agreement shall mean the amounts listed
herein for incremental compensation. The schedule of these
incremental amounts is: 3% incremental to the royalties in the
Policy for the first two million dollars of income from the
invention to ATC, 2% incremental to the royalties in the Policy for
the second two million dollars of income from the invention to ATC,
and 1% incremental to the royalties in the Policy for the third two
million dollars of income from the invention ATC. These Premium
Royalties shall vest as one incremental amount per complete year of
service from the signing date of this Agreement. These royalties
shall continue indefinitely and survive this Agreement if Employee
fulfills the term and conditions of this Agreement and is not
terminated for good cause. Should Employee voluntarily terminate
employment or be terminated without cause, one fourth of the
incremental potential earnings from the Premium Royalties shall be
vested for each year of successfully completed service.
(h) Employee also agrees to
restructure his Addendum of January 12, 1999 and Addendum Number
Two dated January 14,1999 for the exclusive license to ATC for the
"Acoustic Transformer Based Woofer Systems" intellectual property
and subsequent patent(s). Those Addenda are amended by this
Agreement to the following terms:
1) From the date of this agreement until March
25,2004, ATC maintains its exclusive license with no minimum
payments.
2) On March 25,2004, the existing terms and
minimums from the above mentioned 1999 Addenda will be
reinstated.
(i) Employee agrees to use
Employee's best efforts to prepare and have filed patent
documentation, in a timely and accurate manner, for "an
electrostatic loudspeaker that uses higher resistance stators with
contacts in the middle of stator or in a line source strip (two
examples of many) such that areas further from the contact point
are attenuated with fiequency; the impedance becomes more resistive
in nature, frequency response is flattened, directivity is
manipulated, and areas of highest resistive paths are delayed,
further curving the wavefront" (currently commonly referred to
within ATC as " variable resistive stator") including
all embodiments known to Employee as well as any and all future
improvements which likewise will be prepared and filed for
patent(s) in a timely and accurate manner. Employee also agrees to
assign the patent(s) exclusively to ATC. ATC agrees that should the
Company at some future time determine not to use the technology in
its licensed technologies or to generate revenues through licensing
of this specific technology with or without combination with other
ATC technologies, ATC will great an exclusive license to Employee
for Employee's use in commerce for a royalty fee to ATC of 2% of
Employee's Royalty earnings from sublicensing or Employee's
revenues for products sold directly to market from the technology
and or patent(s) related to said technology. Company agrees to use
reasonable efforts to obtain additional stock options from the
shareholders for the 1997 Stock Option Plan at the 2000 Annual
Meeting and upon successfully obtaining same to grant to Employee
25,000 Stock Options as consideration for work performed on this
technology. Said Stock Options are to vest 50% after one year of
voluntary service and 50% after the second year of voluntary
service. Said options would not continue to vest if Employee is
terminated for cause.
(a) If, after the date of the commencement of the
Employment Period, the Employee is made a parry or is threatened to
be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was an officer of the Company or
is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation or
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether or not the
basis of such Proceeding is an alleged act or failure to act in an
official capacity as a director, officer, member, employee or
agent, he shall be indemnified and held harmless by the Company to
the fullest extent authorized by Delaware law, as the same exists
or may hereafter be amended, against all expense, liability and
loss (including, without limitation, attorneys' fees, judgments,
fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by the Employee in connection therewith,
including, without limitation, payment of expenses incurred in
defending a Proceeding prior to the final disposition of such
Proceeding (subject to receipt of an undertaking by the Employee to
repay such amount if it shall ultimately be determined that the
Employee is not entitled to be indemnified by the Company under
Delaware taw), and such indemnification shall continue as to the
Employee even if he has ceased to be an officer, member, employee
or agent of the Company or other enterprise and shall inure to the
benefit of his heirs, executors and administrators.
(b) The right of indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 4 shall not be exclusive of
any other right that the Employee may have or hereafter may acquire
under any statute, provision of the Certificate of incorporation or
Bylaws of the Company, agreement, vote of shareholders or
disinterested directors or otherwise.
5. Termination of Employment.
(a) The Company shall have the right
at its option to terminate the employment of Employee hereunder by
giving written notice thereto to the Employee in the event of any
of the following:
(1) The Company may terminate this Agreement at any
time with good cause, as determined by the Board of Directors of
the Company, or a duly authorized committee thereof, acting in good
faith and upon reasonable grounds, whereupon all compensation to
Executive shall cease as of the effective date of termination. As
used in this paragraph or elsewhere in this Agreement, the term
"good cause" shall mean (i) dishonesty by Executive detrimental to
the best interests of the Company, (ii) continuing inattention to
or neglect of the duties to be performed by Employee, (iii) willful
disloyalty of Employee to Company, (iv) the death or disability of
Employee, (v) conviction by a court of competent jurisdiction of
Employee in any fraud, or (vi) the imparting of any material
confidential information by Employee in violation of this
Agreement.
(2) if the Company gives Employee thirty days
advance written notice of termination of employment.
(3) If this agreement is terminated
by the Company pursuant to Paragraph 5(a)(2) hereof, then Employee
shall be entitled to severance payments equal to six (6) months of
his then monthly Base Salary and any bonus on an as if perfected
basis payable in one lump sum within thirty (30) days after such
effective termination of Employee's employment by the Company
irrespective of the remaining term of this agreement.
(b) The Employee shall have the
right at his sole option to terminate employment hereunder at any
time upon thirty (30) days written notice.
6. Soliciting Customers or vendors.
The Employee agree
