Document:

ex10-6

 

EXHIBIT 10.6

OTG SOFTWARE, INC.

Employment Agreement

     THIS EMPLOYMENT AGREEMENT (the “Agreement”) by and between OTG Software,
Inc., a Delaware corporation (the “Company”), and Ronald W. Kaiser (the
“Executive”) is made as of December 20, 2001 (the “Effective Date”).

     WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company; and

     WHEREAS, the Board of Directors of the Company (the “Board”) has
determined that appropriate steps should be taken to reinforce and encourage
the continued employment and dedication of the Company’s key personnel without
distraction from the possibility of a change in control of the Company and
related events and circumstances;

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties to this
Agreement, the parties agree as follows:

     1.     Key Definitions.

     As used herein, the following terms shall have the following respective
meanings:

             1.1      “Change in Control” means an event or occurrence set forth in any one
or more of subsections (a) through (c) below of this Section 1.1 (including an
event or occurrence that constitutes a Change in Control under one of such
subsections but is specifically exempted from another such subsection):

            
            
(a)     the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial ownership of any
capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) 50% or more of either (i) the then-outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”) or (ii) the
combined voting power of the then-outstanding securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change in
Control: (w) any acquisition directly from the Company (excluding an
acquisition pursuant to the exercise, conversion or exchange of any security
exercisable for, convertible into or exchangeable for common stock or voting
securities of the Company, unless the Person exercising, converting or
exchanging such security acquired such security directly from the Company or an
underwriter or agent of the Company); (x) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; (y) any acquisition by any corporation
pursuant to a Business Combination (as defined below) which complies with
clauses (i) and (ii) of subsection (c) of this Section 1.1; or (z) any
acquisition by Richard A. Kay, any member of Mr. Kay’s
family, or any trust controlled by Richard A. Kay or any member of Mr. Kay’s family, of
any shares of the Company’s common stock; or

 

            
            (b)     such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of Directors
of a successor corporation to the Company), where the term “Continuing
Director” means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who was nominated
or elected subsequent to such date by at least a majority of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies or consents,
by or on behalf of a person other than the Board; or

            
            (c)     the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company or a sale or
other disposition of all or substantially all of the assets of the Company in
one or a series of transactions (a “Business Combination”), unless, immediately
following such Business Combination, each of the following two conditions is
satisfied: (i) all or substantially all of the individuals and entities who
were the beneficial owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, respectively; and (ii)
no Person (excluding the Acquiring Corporation or any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 50% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors (except to the extent
that such ownership existed prior to the Business Combination).

             1.2     “Change in Control Date” means the first date during the Employment
Period (as defined in Section 2) on which a Change in Control occurs. Anything
in this Agreement to the contrary notwithstanding, if (a) a Change in Control
occurs, (b) the Executive’s employment with the Company is terminated prior to
the date on which the Change in Control occurs, and (c) it is reasonably
demonstrated by the Executive that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change in Control or (ii) otherwise arose in connection with or in
anticipation of a Change in Control, then for all purposes of this Agreement the Change in
Control Date shall mean the date immediately prior to the date of such
termination of employment.

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             1.3     “Cause” means:

            
            
(a)     the Executive’s willful and actual breach of the restrictions,
obligations, or duties which he is required to satisfy or perform under this
Agreement; or

            
            
(b)     the Executive’s engaging in any of the acts specified in Exhibit A
hereto.

             1.4     “Good Reason” means the occurrence, without the Executive’s written
consent, of any of the events or circumstances set forth in clauses (a) through
(g) below. Notwithstanding the occurrence of any such event or circumstance,
such occurrence shall not be deemed to constitute Good Reason if, prior to the
Date of Termination specified in the Notice of Termination (each as defined in
Section 8.1) given by the Executive in respect thereof, such event or
circumstance has been fully corrected and the Executive has been reasonably
compensated for any losses or damages resulting therefrom (provided that such
right of correction by the Company shall only apply to the first Notice of
Termination for Good Reason given by the Executive).

            
            
(a)     the assignment to the Executive of duties inconsistent in any material
respect with the Executive’s position (including status, offices, titles and
reporting requirements), authority or responsibilities in effect immediately
prior to the Effective Date, or any other action or omission by the Company
which results in a material diminution in such position, authority or
responsibilities;

            
            
(b)     a material reduction, without the Executive’s written consent, in the
Executive’s Target Compensation (as defined below) as in effect on the
Effective Date or as the same was or may be increased thereafter from time to
time; for the purposes hereof, the Executive’s “Target Compensation” shall mean
the sum of the Executive’s Base Salary (as defined below) and the Executive’s
Target Bonus (as defined below);

            
            
(c)     the failure by the Company to continue in effect any material
compensation or benefit plan or program (including without limitation any life
insurance, medical, health and accident or disability plan and any vacation or
automobile program or policy) (a “Benefit Plan”) in which the Executive
participates or which is applicable to the Executive immediately prior to the
Effective Date, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan which is substantially the economic equivalent
or better) has been made with respect to such plan or program;

            
            
(d)     a change by the Company in the location at which the Executive
performs his principal duties for the Company to a new location that (i) is
outside the State of Maryland, or (ii) would require the Executive to travel 10
miles further from the Executive’s principal residence immediately prior to the
Effective Date than the location at which the Executive performed his principal
duties for the Company immediately prior to the Effective Date;

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(e)    the failure of the Company to obtain the agreement from any successor
to the Company to assume and agree to perform this Agreement, as required by
Section 13.1; or

            
            
(f)     any failure of the Company to pay or provide to the Executive any
portion of the Executive’s compensation or benefits due under any Benefit Plan
within seven days of the date such compensation or benefits are due, or any
material breach by the Company of this Agreement or any employment agreement
with the Executive.

     The Executive’s right to terminate his employment for Good Reason shall
not be affected by his incapacity due to physical or mental illness.

     2.     Term of Employment. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts employment with the Company, upon the terms
set forth in this Agreement, for the period commencing as of the Effective Date
and continuing in effect through December 31, 2002 (such period, as it may be
extended, the “Employment Period”); provided, however that, unless sooner
terminated in accordance with the provisions of Section 7, commencing on
January 1, 2003 and each January 1 thereafter, the Employment Period shall be
automatically extended for one additional year unless, not later than 60 days
prior to the scheduled expiration of the Employment Period (or any extension
thereof), the Company or the Executive shall have given the other party written
notice that the Employment Period will not be extended.

     3.     Title; Capacity. The Executive shall serve as Chief Financial Officer
and Treasurer, with all the power and responsibilities normally encompassed by
that position. The Executive shall be based at the Company’s headquarters in
Rockville, Maryland. The Executive shall be subject to the supervision of, and
shall have such authority as is delegated to the Executive by, the Board or
such officer of the Company as may be designated by the Board. The Executive
hereby accepts such employment and agrees to undertake the duties and
responsibilities inherent in such position and such other duties and
responsibilities as the Board or its designee shall from time to time
reasonably assign to the Executive. The Executive agrees to devote his or her
entire business time, attention and energies to the business and interests of
the Company during the Employment Period, except that the Executive may serve
on the boards of directors of charitable and for-profit entities with the
Company’s consent, provided such activities do not interfere with the
Executive’s responsibilities and duties to the Company or violate Section 10
below. The Executive agrees to abide by the rules, regulations, instructions,
personnel practices and policies of the Company and any changes therein which
may be adopted from time to time by the Company.

     4.     Compensation and Benefits.

             4.1     Salary. The Company shall pay the Executive in accordance with the
Company’s customary payroll practices, an annual base salary of $250,000 for
the period commencing on the Effective Date and ending on December 31, 2001
(the “Base Salary”). Such Base Salary shall be subject to adjustment
thereafter as determined by the Board.

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             4.2     Bonus. Subject to the provisions of Exhibit B attached hereto, the
Company shall pay the Executive, on or about each December 31 during the
Employment Period, an annual performance bonus (the “Bonus”).

             4.3     Fringe Benefits. The Executive shall be entitled to participate in
all bonus and benefit programs that the Company establishes and makes available
to its employees, if any, to the extent that Executive’s position, tenure,
salary, age, health and other qualifications make him or her eligible to
participate. The Executive shall be entitled to four (4) weeks paid vacation
per year, to be taken at such times as may be approved by the Board or its
designee.

             4.4     Reimbursement of Expenses. The Company shall reimburse the Executive
for all reasonable travel, entertainment and other expenses incurred or paid by
the Executive in connection with, or related to, the performance of his or her
duties, responsibilities or services under this Agreement, in accordance with
policies and procedures, and subject to limitations, adopted by the Company
from time to time.

             4.5     Withholding. All salary, bonus and other compensation payable to the
Executive shall be paid net of any applicable withholding taxes required under
federal, state or local law.

             4.6     Other Payments and Benefits. The Company will reimburse Executive for
reasonable actual costs to relocate his personal goods closer to the Company’s
headquarters at any time during the twelve month period following the Effective
Date.

     5.     Change in Control. Except as expressly provided in an option agreement
between the Company and the Executive, if the Change in Control Date occurs
during the Employment Period, then, effective upon the Change in Control Date,
one-half of the number of shares subject to each outstanding option to purchase
shares of Common Stock of the Company held by the Executive which were not
already vested shall be exercisable upon the occurrence of such Change in
Control and, the remaining one-half of such number of shares shall continue to
become vested in accordance with the original vesting schedule set forth in
such option, with one-half of the number of shares that would otherwise have
first become vested becoming so vested on each subsequent vesting date in
accordance with the original schedule.

     6.     Survival. Notwithstanding anything else herein to the contrary, the
provisions of Sections 10 and 11 shall survive the termination of this
Agreement.

     7.     Termination of Employment. The employment of the Executive by the
Company pursuant to this Agreement shall terminate upon the occurrence of any
of the following:

             7.1     Expiration of the Employment Period;

             7.2     At the election of the Company, for Cause, upon the Date of
Termination (as defined below) set forth in the Notice of Termination (as
defined below);

             7.3     Upon the death of the Executive;

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             7.4     At the election of the Executive for Good Reason, upon the Date of
Termination set forth in the Notice of Termination; or

             7.5     At the election of either party, upon the Date of Termination set
forth in the Notice of Termination.

     8.     Notice of Termination of Employment.

             8.1     Any termination of the Executive’s employment by the Company or by the
Executive (other than due to the death of the Executive) shall be communicated
by a written notice to the other party hereto (the “Notice of Termination”),
given in accordance with Section 14. Any Notice of Termination shall: (i)
indicate the specific termination provision (if any) of this Agreement relied
upon by the party giving such notice; (ii) to the extent applicable, set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated; and
(iii) specify the Date of Termination (as defined below). The effective date
of an employment termination (the “Date of Termination”) shall be the close of
business on the date specified in the Notice of Termination (which date shall
be 60 days after the date of delivery of such Notice of Termination), in the
case of a termination other than one due to the Executive’s death, or the date
of the Executive’s death, as the case may be. In the event the Company fails
to satisfy the requirements of Section 8 regarding a Notice of Termination, the
purported termination of the Executive’s employment pursuant to such Notice of
Termination shall not be effective for purposes of this Agreement.

             8.2     The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting any such fact or circumstance in enforcing the Executive’s or
the Company’s rights hereunder.

             8.3     Any Notice of Termination for Cause given by the Company must be given
within 90 days of the occurrence of the event(s) or circumstance(s) which
constitute(s) Cause.

     9.     Effects of Termination.

             9.1     Stock Acceleration. In addition to any accelerated vesting or any
other benefit as expressly provided in an option agreement between the Company
and the Executive, if (i) the Change in Control Date occurs during the
Employment Period, and (ii) within 12 months following the Change in Control
Date, the Executive’s employment with the Company is terminated by the Company
(other than for Cause) or by the Executive for Good Reason, then, effective
upon the Date of Termination, each outstanding option to purchase shares of
Common Stock of the Company held by the Executive shall become immediately
exercisable in full and will no longer be subject to a right of repurchase by
the Company.

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             9.2     Compensation.

            
            
(a)     Termination Without Cause or for Good Reason. If the Executive’s
employment with the Company is terminated by the Company (other than for Cause)
or by the Executive for Good Reason, then the Executive shall be entitled to
the following benefits:

                 
                  
(i)     the Company shall pay to the Executive in a lump sum in cash on or
prior to the next regular pay-day after the Date of Termination the aggregate
of the following amounts: the sum of (A) the Executive’s then-current Base
Salary through the Date of Termination and (B) the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
previously paid (the sum of the amounts described in clauses (A) and (B) shall
be hereinafter referred to as the “Accrued Obligations”);

                 
                  (ii)     in exchange for a severance agreement and release substantially in
the form attached hereto as Exhibit C, for 12 months after the Date of
Termination, the Company shall pay the Executive, the Executive’s then-current
Base Salary bi-weekly;

                 
                  (iii)     in exchange for a severance agreement and release substantially in
the form attached hereto as Exhibit C, for 12 months after the Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue to
provide benefits to the Executive and the Executive’s family at least equal to
those which would have been provided to them if the Executive’s employment had
not been terminated, in accordance with the applicable Benefit Plans in effect
on the Effective Date or, if more favorable to the Executive and his family, in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies; provided, however, that if the
Executive becomes reemployed with another employer, then the Company shall no
longer be required to provide such benefits to the Executive and his family;

                 
                  (iv)     to the extent not previously paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive following
the Executive’s termination of employment under any plan, program, policy,
practice, contract or agreement of the Company and its affiliated companies
(such other amounts and benefits described in this clause (iv) shall be
hereinafter referred to as the “Other Benefits”); and

                 
                  (v)     for purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits to which the
Executive is entitled, the Executive shall be considered to have remained
employed by the Company until 12 months after the Date of Termination.

            
            
(b)     Resignation without Good Reason. If the Executive voluntarily
terminates his employment with the Company, excluding a termination for Good
Reason, then the Company shall (i) pay the Executive (or his estate, if
applicable), in a lump sum in cash on or prior to the next regular pay-day after the Date of Termination, the
Accrued Obligations and (ii) timely pay or provide to the Executive the Other
Benefits.

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(c)     Termination for Cause. If the Company terminates the Executive’s
employment with the Company for Cause, then the Company shall (i) on or prior
to the next regular pay-day after the Date of Termination pay the Executive (or
his estate, if applicable), in a lump sum in cash, the Accrued Obligations, to
the extent not previously paid, and (ii) timely pay or provide to the Executive
the Other Benefits. Any termination for Cause must be made by the Board of
Directors of the Company.

             9.3     Taxes.

            
            
(a)     In the event that the Company undergoes a “Change in Ownership or
Control” (as defined below, and different from the defined Term “Change in
Control”), the Company shall, within 30 days after each date on which the
Executive becomes entitled to receive (whether or not then due) a Contingent
Compensation Payment (as defined below) relating to such Change in Ownership or
Control, determine and notify the Executive (with reasonable detail regarding
the basis for its determinations) (i) which of the payments or benefits due to
the Executive (under this Agreement or otherwise) following such Change in
Ownership or Control constitute Contingent Compensation Payments, (ii) the
amount, if any, of the excise tax (the “Excise Tax”) payable pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), by
the Executive with respect to such Contingent Compensation Payment and (iii)
the amount of the Gross-Up Payment (as defined below) due to the Executive with
respect to such Contingent Compensation Payment. Within 30 days after
delivery of such notice to the Executive, the Executive shall deliver a
response to the Company (the “Executive Response”) stating either (A) that he
agrees with the Company’s determination pursuant to the preceding sentence or
(B) that he disagrees with such determination, in which case he shall indicate
which payment and/or benefits should be characterized as a Contingent
Compensation Payment, the amount of the Excise Tax with respect to such
Contingent Compensation Payment and the amount of the Gross-Up Payment due to
the Executive with respect to such Contingent Compensation Payment. The amount
and characterization of any item in the Executive Response shall be final;
provided, however, that in the event that the Executive fails to deliver an
Executive Response on or before the required date, the Company’s initial
determination shall be final. Within 90 days after the due date of each
Contingent Compensation Payment to the Executive, the Company shall pay to the
Executive, in cash, the Gross-Up Payment with respect to such Contingent
Compensation Payment, in the amount determined pursuant to this Section 9.3(a).

            
            
(b)     For purposes of this Section 9.3, the following terms shall have the
following respective meanings:

                 
                  (i)     “Change in Ownership or Control” shall mean a change in the ownership
or effective control of the Company or in the ownership of a substantial
portion of the assets of the Company determined in accordance with Section
280G(b)(2) of the Code.

                 
                  (ii)     “Contingent Compensation Payment” shall mean any payment (or benefit)
in the nature of compensation that is made or made available (under this Agreement or otherwise) to a “disqualified individual” (as defined in
Section 280G(c) of the Code) and that is contingent (within the meaning of
Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of
the Company.

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                  (iii)     “Gross-Up Payment” shall mean an amount equal to the sum of (i) the
amount of the Excise Tax payable with respect to a Contingent Compensation
Payment and (ii) the amount necessary to pay all additional taxes imposed on
(or economically borne by) the Executive (including the Excise Taxes, state and
federal income taxes and all applicable withholding taxes) attributable to the
receipt of such Gross-Up Payment. For purposes of the preceding sentence, all
taxes attributable to the receipt of the Gross-Up Payment shall be computed
assuming the application of the maximum tax rates provided by law.

            
            
(f)     The provisions of this Section 9.3 are intended to apply to any and
all payments or benefits available to the Executive under this Agreement or any
other agreement or plan of the Company under which the Executive receives
Contingent Compensation Payments.

     10.     Non-Competition and Non-Solicitation.

             10.1     Restricted Activities. While the Executive is employed by the
Company and for a period of two years after the termination or cessation of
such employment for any reason, the Executive will not, directly or indirectly,
in the geographical areas that the Company or any of its subsidiaries does
business or has done business at the time of the Executive’s departure:

            
            
a.    Engage in any business or enterprise (whether as owner, partner,
officer, director, employee, consultant, investor, lender or otherwise, except
as the holder of not more than 1% of the outstanding stock of a publicly-held
company) that is competitive with the Company’s business, including but not
limited to any business or enterprise that develops, manufactures, markets, or
sells any product or service that competes with any product or service
developed, manufactured, marketed, sold or provided, or planned to be
developed, manufactured, marketed, sold or provided, by the Company or any of
its subsidiaries while the Executive was employed by the Company; or

            
            
b.    Either alone or in association with others (i) solicit, or permit any
organization directly or indirectly controlled by the Executive to solicit, any
employee of the Company to leave the employ of the Company, or (ii) solicit for
employment or permit any organization directly or indirectly controlled by the
Executive to solicit for employment any person who was employed by the Company
at any time during the term of the Executive’s employment with the Company;
provided, that this clause (ii) shall not apply to any individual whose
employment with the Company has been terminated for a period of six months or
longer.

             10.2     Extension. If the Executive violates the provisions of Section 10.1,
the Executive shall continue to be bound by the restrictions set forth in
Section 10.1 until a period of two years has expired without any violation of
such provisions.

             10.3     Interpretation. If any restriction set forth in Section 10.1 is
found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or in too broad a geographic
area, it shall be interpreted to extend only over the maximum period of time,
range of activities or geographic area as to which it may be enforceable.

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             10.4     Equitable Remedies. The restrictions contained in this Section 10
are necessary for the protection of the business and goodwill of the Company
and are considered by the Executive to be reasonable for such purpose. The
Executive agrees that any breach of this Section 10 is likely to cause the
Company substantial and irrevocable damage which is difficult to measure.
Therefore, in the event of any such breach or threatened breach, the Executive
agrees that the Company, in addition to such other remedies which may be
available, shall have the right to obtain an injunction from a court
restraining such a breach or threatened breach and the right to specific
performance of the provisions of this Section 10 and the Executive hereby
waives the adequacy of a remedy at law as a defense to such relief.

     11.     Proprietary Information and Developments.

             11.1     Proprietary Information.

            
            
a.    The Executive agrees that all information, whether or not in writing,
of a private, secret or confidential nature concerning the Company’s business,
business relationships or financial affairs (collectively, “Proprietary
Information”) is and shall be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information may include
inventions, products, processes, methods, techniques, formulas, compositions,
compounds, projects, developments, plans, research data, clinical data,
financial data, personnel data, computer programs, customer and supplier lists,
and contacts at or knowledge of customers or prospective customers of the
Company. The Executive will not disclose any Proprietary Information to any
person or entity other than employees of the Company or use the same for any
purposes (other than in the performance of his or her duties as an employee of
the Company) without written approval by an officer of the Company, either
during or after his or her employment with the Company, unless and until such
Proprietary Information has become public knowledge without fault by the
Executive.

            
            
b.    The Executive agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Executive or others, which shall come into
his or her custody or possession, shall be and are the exclusive property of
the Company to be used by the Executive only in the performance of his or her
duties for the Company. All such materials or copies thereof and all tangible
property of the Company in the custody or possession of the Executive shall be
delivered to the Company, upon the earlier of (i) a request by the Company or
(ii) termination of his or her employment. After such delivery, the Executive
shall not retain any such materials or copies thereof or any such tangible
property.

            
            
c.    The Executive agrees that his or her obligation not to disclose or to
use information and materials of the types set forth in paragraphs (a) and (b)
above, and his or her obligation to return materials and tangible property, set
forth in paragraph (b) above, also extends to such types of information,
materials and tangible property of customers of the Company or suppliers to the Company or other third parties who may have
disclosed or entrusted the same to the Company or to the Executive.

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             11.2     Developments.

            
            
a.    The Executive will make full and prompt disclosure to the Company of
all inventions, improvements, discoveries, methods, developments, software, and
works of authorship, whether patentable or not, which are created, made,
conceived or reduced to practice by him or her or under his or her direction or
jointly with others during his or her employment by the Company, whether or not
during normal working hours or on the premises of the Company (all of which are
collectively referred to in this Agreement as “Developments”).

            
            
b.    The Executive agrees to assign and does hereby assign to the Company
(or any person or entity designated by the Company) all his or her right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. The Executive also hereby
waives all claims to moral rights in any Developments. However, this paragraph
(b) shall not apply to Developments which do not relate to the present or
planned business or research and development of the Company and which are made
and conceived by the Executive not during normal working hours, not on the
Company’s premises and not using the Company’s tools, devices, equipment or
Proprietary Information. The Executive understands that, to the extent this
Agreement shall be construed in accordance with the laws of any state which
precludes a requirement in an employee agreement to assign certain classes of
inventions made by an employee, this paragraph (b) shall be interpreted not to
apply to any invention which a court rules and/or the Company agrees falls
within such classes.

            
            c.    The Executive agrees to cooperate fully with the Company, both during
and after his or her employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and foreign countries)
relating to Developments. The Executive shall sign all papers, including,
without limitation, copyright applications, patent applications, declarations,
oaths, formal assignments, assignments of priority rights, and powers of
attorney, which the Company may deem necessary or desirable in order to protect
its rights and interests in any Development. The Executive further agrees that
if the Company is unable, after reasonable effort, to secure the signature of
the Executive on any such papers, any executive officer of the Company shall be
entitled to execute any such papers as the agent and the attorney-in-fact of
the Executive, and the Executive hereby irrevocably designates and appoints
each executive officer of the Company as his or her agent and attorney-in-fact
to execute any such papers on his or her behalf, and to take any and all
actions as the Company may deem necessary or desirable in order to protect its
rights and interests in any Development, under the conditions described in this
sentence.

             11.3     United States Government Obligations. The Executive acknowledges
that the Company from time to time may have agreements with other parties or
with the United States Government, or agencies thereof, which impose
obligations or restrictions on the Company regarding inventions made during the
course of work under such agreements or regarding the confidential nature of
such work. The Executive agrees to be bound by all such obligations and restrictions which are made known to the Executive and to take all
appropriate action necessary to discharge the obligations of the Company under
such agreements.

11

 

             11.4     Equitable Remedies. The restrictions contained in this Section 11
are necessary for the protection of the business and goodwill of the Company
and are considered by the Executive to be reasonable for such purpose. The
Executive agrees that any breach of this Section 11 is likely to cause the
Company substantial and irrevocable damage which is difficult to measure.
Therefore, in the event of any such breach or threatened breach, the Executive
agrees that the Company, in addition to such other remedies which may be
available, shall have the right to obtain an injunction from a court
restraining such a breach or threatened breach and the right to specific
performance of the provisions of this Section 11 and the Executive hereby
waives the adequacy of a remedy at law as a defense to such relief.

     12.     Other Agreements. The Executive represents that his performance of
all the terms of this Agreement and the performance of his duties as an
employee of the Company do not and will not breach any agreement with any prior
employer or other party to which the Executive is a party (including without
limitation any nondisclosure or non-competition agreement). Any agreement to
which the Executive is a party relating to nondisclosure, non-competition or
non-solicitation of employees or customers is listed on Exhibit D attached
hereto.

     13.     Successors.

             13.1     Successor to Company. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business or assets of the Company expressly
to assume and agree to perform this Agreement to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain an assumption of this Agreement at or prior to
the effectiveness of any succession shall be a breach of this Agreement and
shall constitute Good Reason if the Executive elects to terminate employment,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, “Company” shall mean the Company as defined above and
any successor to its business or assets as aforesaid which assumes and agrees
to perform this Agreement, by operation of law or otherwise.

             13.2     Successor to Executive. This Agreement shall inure to the benefit of
and be enforceable by the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable
to the Executive or his family hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.

12

 

     14.     Notice. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or
certified mail, return receipt requested, postage prepaid, or (ii) prepaid via
a reputable nationwide overnight courier service, in each case addressed to the
Company, at 2600 Tower Oaks Boulevard, Rockville, MD 20852, and to the
Executive at 306 Danmark Ct., Millersville, MD 21108-1459 (or to such other address as
either the Company or the Executive may have furnished to the other in writing
in accordance herewith). Any such notice, instruction or communication shall
be deemed to have been delivered five business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or one
business day after it is sent via a reputable nationwide overnight courier
service. Either party may give any notice, instruction or other communication
hereunder using any other means, but no such notice, instruction or other
communication shall be deemed to have been duly delivered unless and until it
actually is received by the party for whom it is intended.

     15.     Miscellaneous.

             15.1     Employment by Subsidiary. For purposes of this Agreement, the
Executive’s employment with the Company shall not be deemed to have terminated
solely as a result of the Executive continuing to be employed by a wholly-owned
subsidiary of the Company.

             15.2     Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

             15.3     Injunctive Relief. The Company and the Executive agree that any
breach of Sections 5 and 9 this Agreement by the Company is likely to cause the
Executive substantial and irrevocable damage and therefore, in the event of any
such breach, in addition to such other remedies which may be available, the
Executive shall have the right to specific performance and injunctive relief.

             15.4     Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal laws of the
State of Maryland, without regard to conflicts of law principles.

             15.5     Waivers. No waiver by the Executive at any time of any breach of, or
compliance with, any provision of this Agreement to be performed by the Company
shall be deemed a waiver of that or any other provision at any subsequent time.

             15.6     Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.

13

 

             15.7     Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of the
subject matter contained herein, including, without limitation, that certain
Employment Agreement, dated May 28 ,1998, as amended to date between the
Executive and the Company (the “Prior Employment Agreement”); provided however,
notwithstanding anything herein to the contrary, for the purposes of the Option
Agreement, dated October 21, 1998, between the Company and the Executive (the
“Initial Option Agreement”), the definition of “Cause” as set forth in the
Prior Employment Agreement shall continue to be the definition of “Cause” under the Initial Option Agreement. Subject to the foregoing, any prior
agreement of the parties hereto in respect of the subject matter contained
herein, including the Prior Employment Agreement, is hereby terminated and
cancelled in all respects. This Agreement does not supersede any option
agreement, indemnification agreement, stock purchase agreement, or any written
incentive compensation, deferred compensation or benefit plan or program which
currently benefits the Executive, excluding the Prior Employment Agreement.

             15.8     Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.

14

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.

	 	OTG SOFTWARE, INC.

	 	By:____________________________

	 	Name:__________________________

	 	Title:___________________________

	 	EXECUTIVE

	 	______________________________

	 	Ronald W. Kaiser

15

 

EXHIBIT A

	1.	 	Misappropriation of Company funds.
	2.	 	Embezzlement of Company funds.
	3.	 	Soliciting a Company customer’s business for personal or competitive gain.
	4.	 	Use or sale of illegal drugs in the work place.
	5.	 	Physical/mental/sexual abuse of any employee of the Company.
	6.	 	Criminal activity in the work place.
	7.	 	Theft or destruction of Company property.
	8.	 	Flagrant violation of Company policy/procedure.
	9.	 	Providing professional services to a competitor while in the employ of the Company
        without the Company’s knowledge and prior express written consent.
	10.	 	Use of Company information for material personal gain.
	11.	 	Breach of any covenant or obligation contained in Section 11 of the
Agreement.

16

 

EXHIBIT B

     In January of each year during the Employment Period, the Compensation
Committee of the Board will set a target annual performance bonus (the “Target
Bonus”) for the Executive. The Executive’s Target Bonus for the year 2001 is
$80,000. The Executive shall be eligible to receive some or all of this Target
Bonus based upon his achievement of the Performance Goals as described below.
Determining whether the Executive has earned the Target Bonus shall be based on
the following three equally weighted components: (i) achieving the Company’s
budgeted revenue target for the year, (ii) achieving the Company’s budgeted
earnings per share target for the year, and (iii) achieving specified
management objectives for the year (each a “Performance Goal” and collectively
the “Performance Goals”). Each Performance Goal will correspond to, and govern
the payment of, one third (1/3) of the Executive’s Target Bonus (the
“Performance Goal Target Bonus”) and will be measured as described below.

     If the Executive does not achieve at least 91% of a Performance Goal, then
the Executive will not earn any portion of the related Performance Goal Target
Bonus for that year. If the Executive achieves 110% of a Performance Goal, the
Company shall pay the Executive 200% of the related Performance Goal Target
Bonus for that year, provided that in no event and notwithstanding anything to
the contrary shall the Company be obligated to pay the Executive in the
aggregate a bonus equal to more than 200% of his Target Bonus for any given
year. If the Executive achieves 91% or greater of a Performance Goal, but less
than 110% of a Performance Goal for any given year, the Company shall pay his
related Performance Goal Target Bonus as set forth below:

	Percentage of Performance Goal
Achieved	Percentage of related Performance Goal
Target
Bonus to be Paid

        
	
           91%
        	
           10%
        
	
           92%
        	
           20%
        
	
           93%
        	
           30%
        
	
           94%
        	
           40%
        
	
           95%
        	
           50%
        
	
           96%
        	
           60%
        
	
           97%
        	
           70%
        
	
           98%
        	
           80%
        
	
           99%
        	
           90%
        
	
           100%
        	
           100%
        
	
           101%
        	
           101%
        
	
           102%
        	
           104%
        
	
           103%
        	
           109%
        
	
           104%
        	
           116%
        
	
           105%
        	
           125%
        
	
           106%
        	
           136%
        
	
           107%
        	
           149%
        
	
           108%
        	
           164%
        
	
           109%
        	
           181%
        

17

 

EXHIBIT C

SEVERANCE AGREEMENT AND GENERAL RELEASE

[Date]

Ronald W. Kaiser

306 Danmark Ct.

Millersville, MD 21108-1459

Dear Ron:

In connection with the termination of your employment with OTG Software, Inc.
(the “Company”) on [TERMINATION DATE] , you are eligible to receive the
severance benefits described in the “Description of Severance Benefits”
attached to this letter agreement as Attachment A if you sign and return this
letter agreement to Richard A. Kay in the enclosed envelope by [RETURN DATE (21
days after Termination Date)] . By signing and returning this letter
agreement, you will be entering into a binding agreement with the Company and
will be agreeing to the terms and conditions set forth in the numbered
paragraphs below, including the release of claims set forth in paragraph 3.
Therefore, you are advised to consult with your attorney before signing this
letter agreement and you may take up to twenty-one (21) days to do so. If you
sign this letter agreement, you may change your mind and revoke your agreement
during the seven (7) day period after you have signed it. If you do not so
revoke, this letter agreement will become a binding agreement between you and
the Company upon the expiration of the seven (7) day revocation period.

If you choose not to sign and return this letter agreement by [RETURN DATE], you shall not receive any severance benefits from the Company. You will,
however, receive payment on your next regular payday for any wages and unused
vacation time accrued through the termination date. Also, regardless of
signing this letter agreement, you may elect to continue receiving group
medical insurance pursuant to the federal “COBRA” law, 29 U.S.C. § 1161 et seq.
All premium costs shall be paid by you on a monthly basis for as long as, and
to the extent that, you remain eligible for COBRA continuation. However, if you
sign this letter agreement and elect “COBRA,” 29 U.S.C. §1161 et seq., the
Company will pay for 12 months of COBRA continuation coverage. You should
consult the COBRA materials to be provided by the Company for details regarding
these benefits. Except as provided on Attachment A hereto, all other benefits
will cease upon your Termination Date. All unvested stock rights will be
cancelled on the termination date.

If, after reviewing this letter agreement with your attorney, you find the
terms and conditions are satisfactory to you, you should sign and return this
letter agreement to ______________ in the enclosed envelope by [RETURN
DATE] .

The following numbered paragraphs set forth the terms and conditions that will
apply if you timely sign and return this letter agreement and do not revoke it
within the seven (7) day period:

	1.	 	Termination Date - Your effective date of termination from the Company is
______________ (the “termination date”).

18

 

	2.	 	Description of Severance Benefits - The severance benefits paid to you if
you timely sign and return this letter agreement and do not revoke it
within the seven (7) day revocation period are described in the
“Description of Severance Benefits” attached as Attachment A (the
“severance benefits”).
	 
	3.	 	Release - In consideration of the payment of the severance benefits,
which you acknowledge you would not otherwise be entitled to receive, you
hereby fully, forever, irrevocably and unconditionally release, remise and
discharge the Company, its officers, directors, stockholders, corporate
affiliates, subsidiaries, parent companies, agents and employees (each in
their individual and corporate capacities) (hereinafter, the “Released
Parties”) from any and all claims, charges, complaints, demands, actions,
causes of action, suits, rights, debts, sums of money, costs, accounts,
reckonings, covenants, contracts, agreements, promises, doings, omissions,
damages, executions, obligations, liabilities, and expenses (including
attorneys’ fees and costs), of every kind and nature which you ever had or
now have against the Released Parties arising out of your employment with
and/or separation from the Company, including, but not limited to, all
employment discrimination claims under Title VII of the Civil Rights Act
of 1964, 42 U.S.C. §2000e et seq., the Age Discrimination in Employment
Act, 29 U.S.C. § 621 et seq., the Americans With Disabilities Act of 1990,
42 U.S.C., §12101 et seq., the Family and Medical Leave Act, 29 U.S.C. §
2601 et seq., the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., the
Fair Employment Practices Act, Md. Ann. Code art. 49B, § 1 et seq., the
Maryland Anti-Discrimination Act (96 DLR A-2, 5/17/01), the Handicapped
Anti-Discrimination Regulations, Code of Maryland Regulations (COMAR),
14.03.02.01 et seq., and the Equal Pay Law, Md. Ann. Code, Subtitle 3, §
301 et seq., all as amended, all claims arising out of the Fair Credit
Reporting Act, 15 U.S.C. §1681 et seq., and the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. §1001 et seq., all as amended,
all common law claims including, but not limited to, actions in tort,
defamation and breach of contract, all claims to any non-vested ownership
interest in the Company, contractual or otherwise, including, but not
limited to, claims to stock or stock options, and any claim or damage
arising out of your employment with and/or separation from the Company
(including a claim for retaliation) under any common law theory or any
federal, state or local statute or ordinance not expressly referenced
above; provided, however, that nothing in this letter agreement prevents
you from filing, cooperating with, or participating in any proceeding
before the EEOC or a state fair employment practices agency (except that
you acknowledge that you may not be able to recover any monetary benefits
in connection with any such claim, charge or proceeding).
	 
	 	 	Nothing in this Section 3 shall limit (1) your rights to indemnification
by the Company under the Indemnification Agreement, dated March 8, 2000,
between you and the Company, (2) your right to the severance as set forth
herein, or (3) your rights to exercise your vested stock incentive
options.
	 
	4.	 	Non-Disclosure and Non-Competition and Non-Solicitation- You acknowledge
and reaffirm your obligation to keep confidential all non-public
information concerning the Company that you acquired during the course of
your employment with the Company, as stated more fully in the Employment
Agreement, dated December __, 2001, between you and the Company (the
“Employment Agreement”), which obligation remains in full force
and effect. You further acknowledge and reaffirm your obligations under
the Employment Agreement’s non-competition and non-solicitation
provisions, which obligations also remain in full force and effect.

19

 

	5.	 	Return of Company Property - You confirm that you have returned to the
Company in good working order all keys, files, records (and copies
thereof), equipment (including, but not limited to, computer hardware,
software and printers, wireless handheld devices, cellular phones, pagers,
etc.), Company identification, Company vehicles and any other
Company-owned property in your possession or control and have left intact
all electronic Company documents, including, but not limited to, those
which you developed or helped develop during your employment. You further
confirm that you have cancelled all accounts for your benefit, if any, in
the Company’s name, including, but not limited to, credit cards, telephone
charge cards, cellular phone and/or pager accounts and computer accounts.
	 
	6.	 	Business Expenses and Compensation - You acknowledge that you have been
reimbursed by the Company for all relocation costs and business expenses
incurred in conjunction with the performance of your employment and that
no other reimbursements are owed to you. You further acknowledge that you
have received payment in full for all services rendered in conjunction
with your employment by the Company and that no other compensation is owed
to you other than as provided herein.
	 
	7.	 	Non-Disparagement - You understand and agree that as a condition for
payment to you of the consideration herein described, you shall not make
any false, disparaging or derogatory statements to any media outlet,
industry group, financial institution or current or former employee,
consultant, client or customer of the Company regarding the Company or any
of its directors, officers, employees, agents or representatives or about
the Company’s business affairs and financial condition.
	 
	8.	 	Amendment - This letter agreement shall be binding upon the parties and
may not be modified in any manner, except by an instrument in writing of
concurrent or subsequent date signed by duly authorized representatives of
the parties hereto. This letter agreement is binding upon and shall inure
to the benefit of the parties and their respective agents, assigns, heirs,
executors, successors and administrators.
	 
	9.	 	Waiver of Rights - No delay or omission by the Company in exercising any
right under this letter agreement shall operate as a waiver of that or any
other right. A waiver or consent given by the Company on any one occasion
shall be effective only in that instance and shall not be construed as a
bar to or waiver of any right on any other occasion.
	 
	10.	 	Validity - Should any provision of this letter agreement be declared or
be determined by any court of competent jurisdiction to be illegal or
invalid, the validity of the remaining parts, terms or provisions shall
not be affected thereby and said illegal or invalid part, term or
provision shall be deemed not to be a part of this letter agreement.

20

 

	11.	 	Confidentiality - You understand and agree that as a condition for
payment to you of the severance benefits herein described, the terms and
contents of this letter agreement, and the contents of the negotiations
and discussions resulting in this letter agreement, shall be maintained as
confidential by you and your agents and representatives and shall not be
disclosed except to the extent required by federal or state law or as
otherwise agreed to in writing by the Company.
	 
	12.	 	Nature of Agreement - You understand and agree that this letter agreement
is a severance agreement and does not constitute an admission of liability
or wrongdoing on the part of the Company.
	 
	13.	 	Acknowledgments - You acknowledge that you have been given at least
twenty-one (21) days to consider this letter agreement, including
Attachment A, and that the Company advised you to consult with an attorney
of your own choosing prior to signing this letter agreement. You
understand that you may revoke this letter agreement for a period of seven
(7) days after you sign this letter agreement, and that the letter
agreement shall not be effective or enforceable until the expiration of
this seven (7) day revocation period.
	 
	14.	 	Voluntary Assent - You affirm that no other promises or agreements of any
kind have been made to or with you by any person or entity whatsoever to
cause you to sign this letter agreement, and that you fully understand the
meaning and intent of this letter agreement. You state and represent that
you have had an opportunity to fully discuss and review the terms of this
letter agreement with an attorney. You further state and represent that
you have carefully read this letter agreement, including Attachment A,
understand the contents herein, freely and voluntarily assent to all of
the terms and conditions hereof, and sign your name of your own free act.
	 
	15.	 	Applicable Law - This letter agreement shall be interpreted and
construed by the laws of the State of Maryland, without regard to conflict
of laws provisions. You hereby irrevocably submit to and acknowledge and
recognize the jurisdiction of the courts of the State of Maryland, or if
appropriate, a federal court located in Maryland (which courts, for
purposes of this letter agreement, are the only courts of competent
jurisdiction), over any suit, action or other proceeding arising out of,
under or in connection with this letter agreement or the subject matter
hereof.
	 
	16.	 	Entire Agreement - This letter agreement, including Attachment A,
contains and constitutes the entire understanding and agreement between
the parties hereto with respect to your severance benefits and the
settlement of claims against the Company and cancels all previous oral and
written negotiations, agreements, commitments, writings in connection
therewith. Nothing in this paragraph, however, shall modify, cancel or
supersede your obligations set forth in paragraph 4 herein.

If you have any questions about the matters covered in this letter agreement,
please call ______________.

	 	 
		Very truly yours,
	 
		OTG Software, Inc.
	 
		By:                                              

       Name:

       Title:
	 
		

21

 

I hereby agree to the terms and conditions set forth above and in the attached
Description of Severance Benefits. I have been given at least twenty-one (21)
days to consider this letter agreement and I have chosen to execute this on the
date below. I intend that this letter agreement become a binding agreement
between me and the Company if I do not revoke my acceptance in seven (7) days.

	 	 
	                                                                      	Date                                                                       

	Ronald W. Kaiser	

To be returned in the enclosed envelope by [Date, 21 days out]

22

 

ATTACHMENT A

DESCRIPTION OF SEVERANCE BENEFITS

In exchange for your execution of this letter agreement, including, but not
limited to your release of claims in paragraph 3, you will receive the
following:

[To mirror the severance provisions of the Employment Agreement, dated December
     , 2001, between you and the Company.]

23

 

EXHIBIT D

None

24ex10-3

 

CERTAIN INFORMATION (INDICATED BY ASTERISKS) IN THIS EXHIBIT HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTION.

SUPPLY AGREEMENT

     This Agreement, is made as of the 7th day of December, 2001 (“Execution
Date”), among Siemens Hearing Instruments, Inc., a Delaware corporation, with
an address at 10 Constitution Avenue, Piscataway, New Jersey 08855 (“SHI” or
“Seller”), certain subsidiaries and affiliates of Siemens Aktiengesellschaft
(collectively, the “Siemens Affiliates”) and HEARx, Ltd., a Delaware
corporation, with an address at 1250 Northpoint Parkway, West Palm Beach, FL
33407 (“HEARx” or “Buyer”).

     WHEREAS, Buyer is a retail seller of hearing aids in the United States and
also services hearing healthcare programs sponsored by HMOs and insurance
companies; and

     WHEREAS, Seller is a manufacturer of hearing aids and sells such hearing
aids to retail resellers, including Buyer, for resale to consumers; and

     WHEREAS, Buyer and Seller have determined that it would be in their
respective best interests to assure a steady supply of hearing aids of various
styles and capacities (the “Products”) from Seller in order that Buyer may
efficiently and economically distribute such Products through its current and
future retail outlets (“Facilities”); and

     WHEREAS, Seller has offered to sell and Buyer has agreed to purchase the
Products, all in accordance with the terms and conditions contained herein.

     NOW, THEREFORE, the parties hereto agree as follows:

     1.     Purchase and Sale. Subject to the provisions contained in this
Agreement, Seller has agreed to sell and Buyer has agreed to buy those Products
listed on Exhibit A to this Agreement during the term of this Agreement. The
Siemens Affiliates manufacture or may manufacture certain of the Products
offered hereunder, and those Products manufactured and supplied by the Siemens
Affiliates and purchased by Buyer will be included within the definition of
Products under this Agreement and included in the calculations set forth in
Section 4 hereof. If any Siemens Affiliate shall sell any of the Products to
the Buyer, such Siemens Affiliate shall execute and deliver a counterpart,
substantially in the form of Exhibit B, to SHI and the Buyer. Upon the
execution of such counterpart, such Siemens Affiliate shall become a party
hereto and be bound by all the terms and conditions hereof as a “Seller” to the
same extent as though such Siemens Affiliate had originally executed this
Agreement. The parties understand and agree that Exhibit A may be amended from
time to time, upon mutual agreement of the Seller and Buyer, to add or delete
Products. In addition, it is specifically understood that Buyer is purchasing
the Products for the purpose of resale in all of Buyer’s Facilities, including,
without limitation, any new Facilities which may be or are owned, operated,
affiliated with or managed by Buyer.

 

 

     2.     Term. The initial term of this Agreement is five (5) years, commencing
on the Execution Date (the “Initial Term”). The Initial Term will be extended
for one additional five (5) year term (the “Renewal Term”) on the same terms
and conditions as those set forth as of the Execution Date of this Agreement;
provided, however, that during the Renewal Term the “minimum purchasing levels”
set forth in Section 4 hereof shall be at least the lesser of (a) **** percent
(****%) of Buyer’s quarterly purchases of hearing aid products and (b) ****
hearing aids per quarter.

     3.     Terms and Conditions of Sale. The Buyer will submit its orders for
Products either on the forms provided therefor or via a website provided by
Seller and payment shall be made by Buyer for products delivered and accepted
within sixty (60) days from the date of statement by Seller.

     4.     Ordering Process and Pricing. Buyer understands that Seller has
offered special terms and pricing to Buyer as consideration for the purchase
compliance levels committed to by Buyer, and that Seller is willing to continue
to provide Products to Buyer in a manner consistent with the relationship
enjoyed to date by Seller and Buyer. Subject to Section 3 hereof, Buyer agrees
to purchase, in each Fiscal Quarter during the term of this Agreement (which,
for the purposes of this calculation, shall be each of the three month periods
ending on the last Saturday of the months of March, June, September and
December, at least the lesser of (a) **** percent (****%) of Buyer’s quarterly
purchases of hearing aid products and (b) **** hearing aids per quarter
(“minimum purchasing levels”) from Seller; provided however, that:

               (i)  for purposes of this Section 4, (A) the Fiscal Quarter in which the
Execution Date or the first day of the Renewal Term occurs (unless the
Execution Date or such first day of the Renewal Term is the first day of a
Fiscal Quarter), shall mean the period commencing on the Execution Date or such
first day of the Renewal Term and ending on the last day of the applicable
Fiscal Quarter (such period, the “Initial Contract Fiscal Quarter”), (B) the
“quarterly purchases” described in clause (a) above shall refer to such
purchases made during the applicable Initial Contract Fiscal Quarter, and (C)
for purposes of clause (b) above and Section 2(b), the numbers **** and ****
shall be reduced to a number equal to the product of **** or ****, as the case
may be, multiplied by a fraction, the numerator of which is the number of days
in the applicable Initial Contract Fiscal Quarter and the denominator of which
is the actual number of days in the Fiscal Quarter in which the Execution Date
occurs or the Renewal Term commences; and

               (ii)  for purposes of this Section 4, (A) the Fiscal Quarter in which the
last day of the Initial Term or the Renewal Term occurs (unless such day is the
last day of a Fiscal Quarter), shall mean the period commencing on the first
day of such Fiscal Quarter and ending on the last day of the Initial Term or
the Renewal Term, as the case may be (such period, the “Final Contract Fiscal
Quarter”), (B) the “quarterly purchases” described in clause (a) above shall
refer to such purchases made during the applicable Final Contract Fiscal
Quarter, and (C) for purposes of clause (b) above and Section 2(b), the numbers
**** and **** shall be reduced to a number equal to the product of **** or
****, as the case may be, multiplied by a fraction, the numerator of which is
the number

-2-

 

 of days in the applicable Final Contract Fiscal Quarter and the
denominator of which is the actual number of days in the Fiscal Quarter in
which the last day of the Initial Term or the Renewal Term occurs.

               In exchange for this purchase commitment, Seller has offered to sell the
Products to Buyer at the prices set forth on Exhibit A. During the term of
this Agreement, upon written notice to Buyer not later than sixty (60) days
prior to the effective date thereof, Seller may adjust the list prices for the
Products, such adjustment to take effect on the date set forth on such notice.
Seller may not change the list prices for the Products more often than ***** in
any contract year and the prices shall not be increased more than ******* above
the then-current prices at the time of such change, unless Buyer fails to meet
its purchase requirements set forth in Section 4, at which time the parties
shall meet to discuss the adjustments which need to be made should Buyer
continue not to meet such purchase requirements. In the event Buyer defaults in
its obligation to meet the agreed purchase requirements, Seller, in its sole
discretion, shall have the right to take any or all of the following actions
hereunder: (i) adjust prices or terms and conditions of sale with respect to
the provision of Products for the remaining contract years of the Agreement,
(ii) seek reimbursement from Buyer for the difference between the special
pricing offered in connection with this Agreement and the then-current list
prices for the Products, (iii) obtain injunctive relief compelling Buyer to
refrain from purchasing hearing aids from any vendor other than Seller until
the end of the term of this Agreement, (iv) obtain injunctive relief compelling
Buyer to purchase all its requirements for hearing aids from Seller until the
end of the term of this Agreement, or (v) terminate this Agreement in
accordance with Section 11 hereof.

     5.     Product Representations. Seller makes the following representations
and warranties with respect to the Products sold hereunder:

     (a)  Each Product shall be manufactured (i) in conformity with all
applicable requirements of the Food and Drug Administration (“FDA”) and (ii) in
accordance with all applicable United States federal, state and local statutes,
ordinances and regulations, including but not limited to the Food, Drug and
Cosmetic Act (21 USC 301 et seq.) (the “Act”), as amended from time to time,
and the regulations thereunder, including Good Manufacturing Practice
Regulations, which are currently in force or which are hereafter adopted. At
the time of shipment of any Product, it will not be adulterated or misbranded
within the meaning of the Act and will not be a product which would violate any
section of the Act if introduced into interstate commerce in the United States.

     (b)  Seller has good and marketable title to, and the right to sell, the
Products.

     (c)  The manufacture and sale of the Product, and its use in accordance
with all applicable approvals theretofore obtained and Seller’s directions for
use, shall not, to the knowledge of Seller, infringe any intellectual property
rights of any third parties.

     6.     Covenants of Seller. Seller covenants and agrees as follows with
respect to the Products:

-3-

 

      (a) Seller shall conduct its manufacturing operations in a safe and
prudent manner, in compliance with all applicable laws and regulations,
including, but not limited to, those dealing with occupational safety and
health, those dealing with public safety and health, those dealing with
protection of the environment, and those dealing with disposal of wastes and in
compliance with the applicable provisions of this Agreement.

     (b)  Seller shall use commercially reasonable efforts to have the Products
listed on the “pick lists” maintained by each of the Canadian provinces.

     (c)  Seller shall use commercially reasonable efforts to (i) fill Buyer’s
orders for Products on time and (ii) deliver Products that function as per
specifications and that meet the requirements of the orders submitted by Buyer,
in each case consistent with past practices of Buyer and Seller.

     (d)  Seller shall use commercially reasonable efforts to remain one of the
technology leaders in the field of hearing healthcare; provided that nothing
contained herein shall limit or prohibit Seller from conducting its business in
accordance with the policies and procedures established from time to time by
Seller’s Board of Directors or with the overall policies and procedures of
Siemens Aktiengesellschaft.

     7.     Indemnification by Seller.

     (a)  Subject to the provisions of subsection 7(b) below, Seller agrees to
indemnify, defend and hold harmless Buyer, its affiliates and their respective
employees, agents and representatives, against any and all claims, losses,
damages and liabilities, including reasonable attorneys’ fees, incurred by any
of them arising out of any breach of any representation by Seller, resulting
from the actual adulteration or misbranding of Product, or any defect in
materials or workmanship.

     (b)  The foregoing indemnify shall not be effective to the extent any such
claim, loss, damage or liability is based upon (i) any act of Buyer or any of
its affiliates, agents or representatives, (ii) any act of Buyer or any of its
affiliates, agents or representatives done jointly with any party other than
Seller, or (iii) any claim arising as a result of any unauthorized alteration,
modification or change to the Product by any party other than Seller.

     8.     Indemnification by Buyer.

     (a)  Subject to the provisions of subsection 8(b) below, Buyer agrees to
indemnify, defend and hold harmless Seller, its affiliates and their respective
employees, agents and representatives, against any and all claims, losses,
damages and liabilities, including reasonable attorneys’ fees, incurred by any
of them arising out of any act of Buyer relative to the marketing, distribution
and sale of Products.

     (b)  The foregoing indemnity shall not be effective nor shall it be
enforceable in the event any such claim, loss, damage or liability is based
upon (i) any act of Seller or any of its affiliates, agents or representatives,
(ii) any act of Seller or

-4-

 

any of its affiliates,
agents or representatives done jointly with any party other than Buyer, or
(iii) any claim arising as a result of any unauthorized alteration,
modification or change to the Product by any party other than Buyer, or any
defect in materials or workmanship.

     9.     Procedures Related to Indemnification.

     (a)  A party seeking indemnification under the terms of this Agreement
shall be referred to as the “indemnified party” and the person who is to
provide such indemnification shall be referred to as the “indemnifying party.”
The indemnified party shall notify in writing the indemnifying party with
reasonable promptness of its discovery of any matter giving rise to a claim of
indemnity. The failure or delay in so notifying the indemnifying party shall
not relieve indemnifying party of its obligations to indemnify unless, and only
to the extent that, the indemnifying party’s defense of such claim is
materially prejudiced as a result of such delay. The indemnified party shall
provide the indemnifying party as soon as practicable all information and
documentation related to the matter for which the indemnified party seeks
indemnification. The indemnifying party shall be given access to all books and
records in the possession or under the control of the indemnified party that
the indemnifying party reasonably determines to be related to such claim.

     (b)  Promptly upon receipt of notice from the indemnified party, the
indemnifying party shall take over control of the defense of any action, claim
or litigation arising out of the indemnification provisions of this Agreement.
The indemnified party shall support and assist the indemnifying party in the
defense, but all costs, expenses and related charges, including but not limited
to attorneys’ fees, shall be for the account of the indemnifying party, except
to the extent such independent counsel is representing the indemnified party
for defenses available to it but not available to the indemnifying party. If
the indemnified party wishes to retain its own counsel to advise and assist in
the defense of such claim, it may do so, but the expense of retaining such
independent counsel shall be for the account of the indemnified party and the
indemnifying party shall retain complete control over the defense. If, after
receipt of notice, the indemnifying party does not defend the interests of the
indemnified party or does not take appropriate action to defend and hold
harmless the indemnified party, then, and in that case only, the indemnified
party shall be entitled to retain counsel, defend the action, claim or
litigation, and seek compensation for all of its costs of defense from the
indemnifying party. The indemnified party shall not, without the prior consent
of the indemnifying party, enter into any settlement the result of which would
materially limit or modify the rights of the indemnifying party under this
Agreement.

     10.     Recall. In the event of any recall of any Product, whether voluntary
or involuntary, Seller shall replace the recalled Product without charge to
Buyer. In addition, Seller shall pay all of Buyer’s reasonable out of pocket
expenses incurred in connection with such recall. In no event shall Seller be
liable for any loss of use, revenue or anticipated profits, loss of stored,
transmitted or recorded data, or for any incidental,

-5-

 

unforeseen, special,
punitive or consequential damages arising out of or in connection with this
Agreement, or the sale or use of the Products, or arising out of the actions
taken by Seller in response to a recall or other action required by law,
regulation or agency with oversight over the operations and business of Seller;
provided, however, that nothing in this Section 10 shall limit Seller’s
indemnification obligations under Section 7 for losses incurred by Buyer for
which Buyer is entitled to indemnification arising out of a claim by any third
party.

     11.     Termination.

     (a)  Either party may terminate this Agreement in the event of a material
breach by the other which remains uncured (or where significant steps toward
effecting the cure shall not have been taken) within sixty (60) days after
written notice is given to the breaching party specifying the nature of the
breach. The parties agree that Buyer’s failure to meet the purchase
requirements set forth in Section 4 or to make payments as required under this
Agreement shall be material breaches, giving Seller the right subject to the
cure period, but not the obligation, to terminate this Agreement. The remedy
of termination shall be without prejudice to any other rights or remedies
available to the non-breaching party under this Agreement or at law.

     (b)  Notwithstanding subsection (a) hereinabove, Seller may terminate this
Agreement effective immediately if any proceeding shall be instituted by or
against the Buyer seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a custodian, receiver, trustee or other
similar official for it or for any substantial part of its property and, in the
case of any such proceedings instituted against Buyer (but not instituted by
it) either such proceedings shall remain undismissed or unstayed for a period
of sixty (60) days or any of the actions sought in such proceedings shall
occur; or the Buyer shall take any corporate action to authorize any of the
actions set forth above in this subsection (b). Buyer may terminate this
Agreement if Seller voluntarily or involuntarily becomes bankrupt or is unable
to fulfill its obligations hereunder.

     (c)  Buyer may terminate this Agreement if (i) the US Food and Drug
Administration takes any final action the result of which is to ban the
manufacture, sale or introduction into interstate commerce of any Product or to
impose significant restrictions on its use in the hearing field or generally or
(ii) Seller purchases or operates any entity which sells hearing aids through
retail outlets.

     (d) Termination or expiration of this Agreement for any reason shall not
(i) release either party from any liability or obligation which has already
accrued as of the effective date of such termination or (ii) constitute a
waiver or release of, or otherwise be deemed to prejudice or adversely affect,
any rights, remedies or claims, whether for damages or otherwise, which a Party
may have hereunder, at law, equity or otherwise.

-6-

 

     12.     Change of Control. If, during the two-year period following the
Execution Date, there is a Change of Control (as defined in the Credit
Agreement, dated as of December 7, 2001, by and between the Seller and the Buyer), and the
surviving entity of such Change of Control does not assume the obligations
hereunder, Buyer will remit to Seller a break-up fee in the amount of fifty
million ($50,000,000.00) dollars not later than five (5) days from the date of
the Change in Control. After this two year period, if there is a Change of
Control and the surviving entity of such Change of Control is a manufacturer of
hearing aids or related products or owns, directly or indirectly, a
manufacturer of hearing aids or related products, Buyer will remit to Seller a
break-up fee in the amount of fifty million ($50,000,000.00) dollars not later
than five (5) days from the date of the Change in Control.

     13.     Representations and Warranties.

     (a)  Seller represents and warrants that:

		
	               (i)      Seller is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and has
requisite power and authority to own, lease and operate its properties
and to carry on its business as currently conducted, and is qualified to
do business in all jurisdictions where it currently conducts business.	

		
	               (ii)      Seller has the power and authority to enter into this Agreement
and to perform its obligations hereunder, and the execution of this
Agreement has been duly authorized by all necessary corporate or other
action.	 

		
	               (iii)      This Agreement constitutes a legal, valid and binding
obligation of Seller, and is enforceable against it in accordance with
its terms, except to the extent such enforceability may be subject to (a)
the laws of bankruptcy, insolvency, fraudulent conveyance or other laws
relating to creditors’ rights or (b) general equitable principles.	 

		
	               (iv)      The execution and delivery of this Agreement and the
performance by Seller of its obligations hereunder will not violate any
laws or regulations applicable to Seller, conflict with or cause a breach
of any obligations to a third party, or violate, breach or conflict with
any of the terms of Seller’s Certificate of Incorporation or By-Laws.	 

     (b)  Buyer represents and warrants that:

		
	               (i)      Buyer is a corporation duly organized, validly existing and in
good standing under the laws of its state of organization and has
requisite power and authority to own, lease and operate its properties
and to carry on its business as currently conducted, and is qualified or
will be qualified to do business in all jurisdictions where it does or
will conduct business.	 

-7-

 

		
	               (ii)      Buyer has the power and authority to enter into this Agreement,
including the power and authority to make payments in respect of
purchases and other transactions arising herefrom, and to perform its
obligations hereunder. The execution of this Agreement has been duly authorized by all
necessary corporate, governmental or other action.	 

		
	               (iii)      This Agreement constitutes a legal, valid and binding
obligation of Buyer, and is enforceable against it in accordance with its
terms, except to the extent such enforceability may be subject to (a) the
laws of bankruptcy, insolvency, fraudulent conveyance or other laws
relating to creditors’ rights or (b) general equitable principles.	 

		
	               (iv)      To the best of Buyer’s knowledge, Buyer does not have any
liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise, that would be material to its or their financial
condition or business operations that have not been disclosed to Seller.	 

		
	               (v)      The execution and delivery of this Agreement and the performance
by Buyer of its obligations hereunder will not violate any laws or
regulations applicable to Buyer, conflict with or cause a breach of any
obligations of Buyer to a third party, or violate, conflict with or cause
a breach of any of the terms of Buyer’s Certificate of Incorporation or
By-Laws.	 

     (c)  Product Complaint Procedures. Buyer agrees to provide all complaints
with respect to the Products to Seller, in writing and in the English language,
in a timely manner. Submitted complaints shall contain sufficient detail to
enable Seller to adequately investigate the reported problem. Complaints
pertaining to injury or death shall be reported to Seller in five (5) working
days or less from the date of Buyer’s receipt of such complaint in order that
Seller may comply with the requisite FDA Medical Device Reporting requirements.
Seller will take appropriate steps to make all necessary filings and reports
to regulatory agencies in accordance with its obligations. When requested so
to do, Buyer will use its best commercial efforts to provide evaluation and
investigation support to Seller. Seller, as service provider for the Products,
is responsible for analysis of service reports, service repair data, service
trends and telephone support for potential complaints or corrective action
requirements, all as set forth in the Quality Systems Regulation and other FDA
instructions. Buyer agrees to return parts involved in a complaint to Seller
promptly, and in any event within thirty (30) days after notification by Buyer
to Seller of the complaint.

     14.     Dispute Resolution.

     (a)  In an effort to effectively and economically manage the resolution of
any disagreement which might arise during the term of this Agreement with
respect to the obligations of the parties, or with respect to actions to be
taken or not taken under the terms of the Agreement, the parties agree to
appoint a representative (at the line manager level or its equivalent) to meet
and discuss the disagreement. If such representatives,

-8-

 

after a good faith
effort, are not able to resolve the disagreement to the mutual satisfaction of
the parties, the disagreement then shall be submitted to the respective Vice
Presidents of the parties for their attention. If the Vice Presidents are not
able to negotiate a
mutually acceptable resolution of the dispute, then the parties agree to
submit the disagreement to arbitration and the provisions of clause (b) of this
Section shall apply.

     (b)  Subject to the provisions of subsection (a) hereinabove, any
disagreement, dispute, controversy or claim arising out of this Agreement,
including without limitation, interpretation thereof, or any alleged breach or
invalidity, which cannot be resolved through the good faith negotiations of the
parties shall be resolved through arbitration. The arbitration shall be
conducted in accordance with the commercial arbitration rules of the American
Arbitration Association (except to the extent such rules conflict with the
provisions of this Agreement, in which event, this Agreement shall control).
The tribunal shall be composed of three arbitrators (one selected by each party
and the third selected by the arbitrators selected by the parties) and shall be
conducted in New York, New York (“Site”). Any arbitration proceedings shall be
conducted in confidence and the award or decision of the tribunal shall be
final and binding upon the parties. The award of the arbitrators shall be
enforceable by any court having jurisdiction thereof.

     (c)  Nothing contained herein shall prohibit or limit in any way any party
from seeking or obtaining preliminary or interim injunctive or other equitable
relief from a court for a breach or alleged breach of any of the covenants and
agreements of the other party to this Agreement.

     15.     Notices. When any notice is required or permitted to be given under
any provision of this Agreement, such notice shall be made in writing and
signed by or on behalf of the party giving such notice, mailed certified mail,
postage prepaid, return receipt requested, or sent by nationally recognized
overnight courier, and addressed to the party to whom such notice is to be
given at the addresses set forth below. Notices are considered delivered on
the postmarked date or the date delivered to a courier for next workday
delivery. Either party may change its address for the receipt of any notice in
the manner set forth above.

	 	 	 
	To Seller:	 	
To Buyer:
	 
	Siemens Hearing Instruments, Inc..

10 Constitution Avenue

Piscataway, New Jersey  08855

Attention:  Chief Financial Officer

Telecopy No.  (732) 562-6688	 	
HEARx Ltd.

1250 Northpoint Parkway

West Palm Beach, FL 33407

Attention:  President

Telecopy No. (561) 688-8893
	 
	Copy to:	 	
Copy to:
	 
	Associate General Counsel

Siemens Corporation

186 Wood Avenue South

Iselin, NJ 08830	 	
The Buyer’s General Counsel (at the

address specified above).

-9-

 

     16.     New Products. The parties understand and agree that the development
of new hearing aids is both anticipated and encouraged. Buyer wishes to be
able to sell new and improved Products. As new Products become commercially
available from Seller, Seller will provide notice to Buyer of such
availability, and such Products will be added to this Agreement as soon as they
are commercially available upon the mutual agreement of the parties. Seller
shall determine the prices for such new Products, such prices to be
commercially reasonable and consistent with the quantity discounts provided
under this Agreement. Such Products shall be subject to the same adjustments
in price as described above for the current Products. As a result of the
development of new technology, certain of the current Products may become less
valuable in the marketplace. To the extent practicable, Seller will continue
to offer the older Products, but Buyer agrees to channel its marketing efforts
and those of the Facilities towards the introduction and sale of the new
Products added to this Agreement. As the scope of the Products changes,
certain older Products may be deleted from the Products offered under this
Agreement, upon the mutual agreement of the parties.

     17.     Miscellaneous Provisions.

     (a)  No Assignment. Neither this Agreement, nor the rights or duties of
any party thereunder, may be assigned without the written consent of the other
party, which consent shall not be unreasonably withheld or delayed, provided,
however, that Seller shall be permitted to assign this Agreement to a
subsidiary, parent or affiliated entity of Seller. In the event of a Change of
Control (as defined in Section 12 hereof) during the term of this Agreement,
Seller shall have the right to determine whether or not, in its discretion,
this Agreement should be assigned to the third party or the entity which
results from the Change of Control, and, should Seller so request, Buyer will
provide or arrange to have provided to Seller, additional assurance of the
abilities and willingness of the third party or new entity to assume the
obligations and provide the services of Buyer hereunder. If Seller does not
consent to an assignment of this Agreement, Buyer shall have the right to
terminate the Agreement on sixty (60) days prior written notice without any
further obligation or liability hereunder. Seller shall retain all rights
which it has or may have up to the effective date of such termination. This
Agreement shall be binding on Seller and Buyer and their respective successor
and permitted assigns.

     (b)  No Waiver. No waiver of a breach of any provision of this Agreement
shall constitute a waiver of any other breach of such provision, nor shall any
such waiver be construed as a continuing waiver.

     (c) Governing Law. This Agreement is governed by and construed in
accordance with the laws of the State of New York, without giving effect to
such State’s conflict of laws provisions (other than Sections 5-1401 and 5-1402
of the New York General Obligations Law).

-10-

 

     (d)  Force Majeure. No party shall be liable for failure to perform or
delay in performing its obligations under this Agreement, and shall not be
deemed to be in breach of its obligations hereunder, if and to the extent and
for so long as such failure or delay in performance or breach is due to natural disaster, war, strikes or other
labor disputes, any loss or disruption of facilities, or any other cause beyond
the reasonable control of such party. The affected party shall promptly
provide the other party with notice of such occurrence, shall diligently
attempt to restore or continue its performance, and shall advise when such
event of force majeure shall have ended.

     (e)  Housemark Usage. In connection with the transactions contemplated
under this Agreement, Seller has authorized Buyer to use Seller’s housemark
‘SIEMENS’ in accordance with Seller’s regulations and guidelines for the use of
such housemark. In order to assure proper usage of its housemark, Seller
reserves the right to review all proposed usages of the housemark by Buyer.

     (f)  Complete Agreement. This Agreement, and the Exhibits hereto,
represents the complete and exclusive statement of the arrangement between the
parties with respect to the matters contained herein and supersedes all prior
agreements and representations, oral or written, on the same subject matter.
Amendments to this Agreement shall not be effective unless made in writing and
signed by the parties hereto. In the event of a conflict between the terms
contained in any of the Exhibits relating to this Agreement and the terms of
this Agreement, the text of this Agreement shall govern. If there are terms in
the Exhibits which govern activities related thereto and which are not
addressed in this Agreement, the terms of the Exhibit shall govern. If the
nature of the activities to be conducted pursuant to this Agreement anticipate
the preparation, execution and use of other agreements (“ancillary documents”)
in respect of specific activities, such ancillary documents will be subject to
the terms of this Agreement to the extent the terms therein are not in conflict
with this Agreement, and in an event of conflict, the terms of the ancillary
documents shall control the activities described therein.

     (g)  No Agency. The relationship established hereby is in all respects a
commercial relationship. Nothing herein shall be construed as imposing any
fiduciary obligations on either party, or as establishing any partnership or
joint venture between the parties, or as rendering one part an agent of the
other. No agent or employee of one party shall be deemed to be an employee or
agent of the other. The parties acknowledge that their relationship is one of
independent buyer and seller and that, as separate entities, they have entered
into this Agreement for their respective business interests.

     (h)  Confidentiality. Buyer and Seller agree that this Agreement,
including any Exhibits, appendices or ancillary agreements, as well as the
nature of the services to be provided one to the other hereunder, are
confidential. The parties agree to keep this Agreement and the information
disclosed in, in connection with and with respect to this Agreement as
confidential and not reveal such information to any other entity now, during or
after the termination or expiration of this Agreement. The parties may,
however, admit to the existence of a supply agreement between them. This
restriction

-11-

 

does not apply to any information that (i) is or becomes public
through the process of law, or through no fault of either party, or (ii) that
was revealed to either party by a third party not owing an obligation of
confidentiality to the party who owns the information disclosed, (iii)
information that is rightfully in the recipient’s possession or part of
recipient’s general knowledge prior to the receipt of such confidential
information, or (iv) information that is required to be disclosed by law, the
order of a court or regulation of a governmental agency having jurisdiction
over the parties; provided, however, in the event this Agreement is a “Material
Agreement” or Buyer is otherwise required by the SEC to file this Agreement,
Buyer shall provide to Seller for Seller’s prior review: (i) a copy of Buyer’s
proposed redacted version of the Agreement, and (ii) Buyer’s explanatory cover
letter to the SEC. Buyer shall incorporate all redactions reasonably requested
by Seller, provided all redactions are requested upon the advice of Seller’s
counsel.

     (i)  Taxes. Each party shall remain responsible for any taxes assessed
against such party which are to be paid by such party as a result of the
transactions hereunder.

     (j)  Headings; Counterparts. The headings contained in this Agreement are
for convenience of reference only and shall not constitute a part hereof, or
define, limit or in any was affect the meaning of any of the terms or
provisions hereof. This Agreement may be executed in two or more counterparts
and any party hereto may execute any such counterpart. Each counterpart, when
executed and delivered, shall be deemed to be an original and all of such
counterparts taken together shall be deemed to be one and the same instrument.

     (k)  Public Announcements. Except as the other party shall authorize in
writing, or as required by law, the parties shall not disclose, and shall cause
their respective officers, directors, employees, affiliates and advisors not to
disclose, any matter or matters relating to this transaction to any person not
an officer, director, employee, affiliate or advisor of such party. In the
event a party is required by law to make a public announcement or disclosure,
such party shall, if practicable, consult with the other as to the timing and
content of such announcement before such announcement is made. The parties
shall agree about the content of any statement or communication to the public
or the media prior to the release thereof.

     (l)  Survival of Certain Provisions. Notwithstanding the termination or
expiration of this Agreement, the following provisions shall survive, along
with either party’s obligations to pay any payments or fees accrued prior to
termination or expiration: Sections 7, 8, 9, 10, 11(d), 12, 13, 14 and 17.

[SIGNATURE PAGE FOLLOWS.]

-12-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the Execution Date.

	 	 	 
		 	
HEARX LTD.
	 
	 	 	
/s/ Stephen J. Hansbrough                         

Name: Stephen J. Hansbrough

Title: President and Chief Operating
Officer
	 
	 	 	
SIEMENS HEARING INSTRUMENTS, INC.
	 
	 	 	
By: /s/ John R. Krauter                         

Name:  John R. Krauter

Title:  President and Chief Financial

Officer

-13-

 

EXHIBIT A

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	Type	 	Description 1	 	Description 2	 	List Price	 	Buyer's Price
	
	 	
	 	
	 	
	 	

	

	Custom
	 	AGC/RPC	 	1 ITE	 	$	352	 	 	$	              ***	 
	

	Custom
	 	AGC/RPC	 	3 Canal	 	$	524	 	 	$	              ***	 
	

	Custom
	 	AGC/RPC	 	4 Mini Canal	 	$	560	 	 	$	              ***	 
	

	Custom
	 	AGC-I	 	1 ITE	 	$	325	 	 	$	              ***	 
	

	Custom
	 	AGC-I	 	3 Canal	 	$	497	 	 	$	              ***	 
	

	Custom
	 	CL D AGC-O	 	1 ITE	 	$	325	 	 	$	              ***	 
	

	Custom
	 	CL D AGC-O	 	2 Half Shell	 	$	426	 	 	$	              ***	 
	

	Custom
	 	Class D	 	1 ITE	 	$	319	 	 	$	              ***	 
	

	Custom
	 	Class D	 	2 Half Shell	 	$	420	 	 	$	              ***	 
	

	Custom
	 	Class D	 	3 Canal	 	$	491	 	 	$	              ***	 
	

	Custom
	 	Class D	 	4 Mini Canal	 	$	527	 	 	$	              ***	 
	

	Custom
	 	Class D	 	6 Low Profile	 	$	373	 	 	$	              ***	 
	

	Custom
	 	Class D w/AGC	 	1 ITE	 	$	363	 	 	$	              ***	 
	

	Custom
	 	Class D w/AGC	 	2 Half Shell	 	$	464	 	 	$	              ***	 
	

	Custom
	 	Class D w/AGC	 	3 Canal	 	$	535	 	 	$	              ***	 
	

	Custom
	 	Class D w/AGC	 	4 Mini Canal	 	$	571	 	 	$	              ***	 
	

	Custom
	 	Class D w/AGC	 	6 Low Profile	 	$	417	 	 	$	              ***	 
	

	Custom
	 	Frontier	 	1 ITE	 	$	491	 	 	$	              ***	 
	

	Custom
	 	Illusion Linear-D	 	5 CIC	 	$	780	 	 	$	              ***	 
	

	Custom
	 	Infiniti 3	 	1 ITE	 	$	361	 	 	$	              ***	 
	

	Custom
	 	Infiniti 3	 	2 Half Shell	 	$	462	 	 	$	              ***	 
	

	Custom
	 	Infiniti 3	 	3 Canal	 	$	533	 	 	$	              ***	 
	

	Custom
	 	Infiniti 3	 	4 Mini Canal	 	$	569	 	 	$	              ***	 
	

	Custom
	 	Infiniti 3	 	5 CIC	 	$	797	 	 	$	              ***	 
	

	Custom
	 	Infiniti 3	 	6 Low Profile	 	$	415	 	 	$	              ***	 
	

	Custom
	 	InteliVenience	 	1 ITE	 	$	476	 	 	$	              ***	 
	

	Custom
	 	InteliVenience	 	2 Half Shell	 	$	577	 	 	$	              ***	 
	

	Custom
	 	InteliVenience	 	3 Canal	 	$	648	 	 	$	              ***	 
	

	Custom
	 	InteliVenience	 	5 CIC	 	$	912	 	 	$	              ***	 
	

	Custom
	 	K-AMP (28D)	 	5 CIC	 	$	825	 	 	$	              ***	 
	

	Custom
	 	K-AMP Plus	 	2 Half Shell	 	$	490	 	 	$	              ***	 
	

	Custom
	 	K-AMP Plus	 	3 Canal	 	$	561	 	 	$	              ***	 
	

	Custom
	 	Music	 	1 ITE	 	$	683	 	 	$	              ***	 
	

	Custom
	 	Music	 	2 Half Shell	 	$	784	 	 	$	              ***	 
	

	Custom
	 	Music	 	3 Canal	 	$	855	 	 	$	              ***	 
	

	Custom
	 	Music	 	4 Mini Canal	 	$	891	 	 	$	              ***	 
	

	Custom
	 	Music	 	5 CIC	 	$	1,119	 	 	$	              ***	 
	

	Custom
	 	Music	 	6 Low Profile	 	$	737	 	 	$	              ***	 
	

	Custom
	 	Music Digital	 	1 ITE	 	$	841	 	 	$	              ***	 
	

	Custom
	 	Music Digital	 	2 Half Shell	 	$	942	 	 	$	              ***	 
	

	Custom
	 	Music Digital	 	3 Canal	 	$	1,013	 	 	$	              ***	 
	

	Custom
	 	Music Digital	 	4 Mini Canal	 	$	1,049	 	 	$	              ***	 
	

	Custom
	 	Music Digital	 	5 CIC	 	$	1,277	 	 	$	              ***	 
	

	Custom
	 	Music Digital	 	6 Low Profile	 	$	895	 	 	$	              ***	 
	

A-1

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	Type	 	Description 1	 	Description 2	 	List Price	 	Buyer's Price
	
	 	
	 	
	 	
	 	

	

	Custom
	 	Music Digital	 	7 Helix	 	$	943	 	 	$	              ***	 
	

	Custom
	 	POWER D	 	1 ITE	 	$	346	 	 	$	              ***	 
	

	Custom
	 	POWER D/AGC-I	 	1 ITE	 	$	384	 	 	$	              ***	 
	

	Custom
	 	Prisma	 	1 ITE	 	$	961	 	 	$	              ***	 
	

	Custom
	 	Prisma	 	2 Half Shell	 	$	1,062	 	 	$	              ***	 
	

	Custom
	 	Prisma	 	3 Canal	 	$	1,133	 	 	$	              ***	 
	

	Custom
	 	Prisma	 	4 Mini Canal	 	$	1,169	 	 	$	              ***	 
	

	Custom
	 	Prisma	 	5 CIC	 	$	1,397	 	 	$	              ***	 
	

	Custom
	 	PushPull	 	1 ITE	 	$	344	 	 	$	              ***	 
	

	Custom
	 	PushPull	 	2 Half Shell	 	$	445	 	 	$	              ***	 
	

	Custom
	 	PushPull AGC-I	 	1 ITE	 	$	381	 	 	$	              ***	 
	

	Custom
	 	PushPull AGC-I	 	2 Half Shell	 	$	482	 	 	$	              ***	 
	

	Custom
	 	RPC	 	1 ITE	 	$	313	 	 	$	              ***	 
	

	Custom
	 	RPC	 	2 Half Shell	 	$	414	 	 	$	              ***	 
	

	Custom
	 	RPC	 	3 Canal	 	$	485	 	 	$	              ***	 
	

	Custom
	 	RPC	 	6 Low Profile	 	$	367	 	 	$	              ***	 
	

	Custom
	 	Signia	 	1 ITE	 	$	1,251	 	 	$	              ***	 
	

	Custom
	 	Signia	 	2 Half Shell	 	$	1,352	 	 	$	              ***	 
	

	Custom
	 	Signia	 	3 Canal	 	$	1,423	 	 	$	              ***	 
	

	Custom
	 	Signia	 	4 Mini Canal	 	$	1,459	 	 	$	              ***	 
	

	Custom
	 	Signia	 	5 CIC	 	$	1,687	 	 	$	              ***	 
	

	Custom
	 	Signia	 	6 Low Profile	 	$	1,305	 	 	$	              ***	 
	

	Custom
	 	Standard	 	1 ITE	 	$	262	 	 	$	              ***	 
	

	Custom
	 	Standard	 	2 Half Shell	 	$	363	 	 	$	              ***	 
	

	Custom
	 	Standard	 	3 Canal	 	$	434	 	 	$	              ***	 
	

	Custom
	 	Standard	 	4 Mini Canal	 	$	470	 	 	$	              ***	 
	

	Custom
	 	Standard	 	6 Low Profile	 	$	316	 	 	$	              ***	 
	

	 	BTE
	 	BTE AID,BN,284 PP	 	2738474	 	 	 	$	353	 	 	$	              ***	 
	

	 	BTE
	 	BTE, INF3 S2P+, BLUE	 	7082360	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE, INFINITI3-
S2+P,TB,13 BAT	 	7204238	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE, INFINITI3-
S2+D,BG,13BAT	 	7208635	 	 	 	$	409	 	 	$	              ***	 
	

	 	BTE
	 	BTE, INFINITI3-
S2+D,GRY,13BAT	 	7208650	 	 	 	$	409	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI3-
S2+D,TB,13BAT	 	7208643	 	 	 	$	409	 	 	$	              ***	 
	

	 	BTE
	 	BTE, PHOENIX 104 
BEIGE	 	5635490	 	 	 	$	522	 	 	$	              ***	 
	

	 	BTE
	 	BTE, PHOENIX 204 
BEIGE	 	5628008	 	 	 	$	542	 	 	$	              ***	 
	

	 	BTE
	 	BTE, SIGNIA S MINI, BG	 	7210466	 	 	 	$	1,434	 	 	$	              ***	 
	

	 	BTE
	 	BTE,284PP,BG,M.A.E	 	2746022	 	 	 	$	353	 	 	$	              ***	 
	

	 	BTE
	 	BTE,284PPAGCI,BG,AE	 	2746048	 	 	 	$	368	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INF3 S3+,BLUE,675
 BAT	 	7082410	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3
S1+,BG,13 BAT	 	2942667	 	 	 	$	384	 	 	$	              ***	 
	

A-2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	Type	 	Description 1	 	Description 2	 	List Price	 	Buyer's Price
	
	 	
	 	
	 	
	 	

	

	 	BTE
	 	BTE,INFINITI 3
S1+,GY,13 BAT	 	2942675	 	 	 	$	384	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3S1+,TB,13
 BAT	 	2942683	 	 	 	$	384	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3 S1,
BLUE,13 BAT	 	7086460	 	 	 	$	363	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3S1,BG,13 
BAT	 	2942634	 	 	 	$	363	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3S1,GY,13 
BAT	 	2942642	 	 	 	$	363	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3S1,TB,13 
BAT	 	2942659	 	 	 	$	363	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3 S2+,BG	 	2944218	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3 S2+,GY	 	2943095	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3 S2+,TB	 	2943152	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3
S3+,BG,675 BAT	 	2942725	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI 3 S3+,TB	 	2942741	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI3-
S2+P,BG,13 BAT	 	7204212	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,INFINITI3-
S2+P,GRY,13 BAT	 	7204220	 	 	 	$	421	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC
DIGITAL,BEIGE	 	5619197	 	 	 	$	769	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC 
DIGITAL,GRAY	 	7059087	 	 	 	$	769	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC 
DIGITAL,TOBACCO	 	5619213	 	 	 	$	769	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC
POWER,BEIGE,13 BAT	 	5620351	 	 	 	$	729	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC
POWER,TOBACCO,13 
BAT	 	5620880	 	 	 	$	729	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC,BG,13 BAT	 	2933575	 	 	 	$	689	 	 	$	              ***	 
	

	 	BTE
	 	BTE,MUSIC,GRY,13 BAT	 	2933591	 	 	 	$	689	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA 2-SP+ 
BEIGE	 	7202877	 	 	 	$	1,202	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA 2-SP+
TOBACCO	 	7153377	 	 	 	$	1,202	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA 2-SP+, 
BLUE	 	7080612	 	 	 	$	1,202	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA BEIGE	 	2922172	 	 	 	$	1,087	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA GRANITE	 	2922271	 	 	 	$	1,087	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA 
POWER,BEIGE	 	5620955	 	 	 	$	1,171	 	 	$	              ***	 
	

	 	BTE
	 	BTE,PRISMA
POWER,TOBACCO	 	5620963	 	 	 	$	1,171	 	 	$	              ***	 
	

	 	BTE
	 	BTE,SIGNIA BEIGE	 	5627000	 	 	 	$	1,403	 	 	$	              ***	 
	

	 	BTE
	 	BTE,SIGNIA GRANITE	 	5627422	 	 	 	$	1,403	 	 	$	              ***	 
	

	 	BTE
	 	BTE,SIGNIA GREY	 	5627430	 	 	 	$	1,403	 	 	$	              ***	 
	

A-3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	Type	 	Description 1	 	Description 2	 	List Price	 	Buyer's Price
	
	 	
	 	
	 	
	 	

	

	 	BTE
	 	BTE,SIGNIA S MINI GR	 	7210490	 	 	 	$	1,434	 	 	$	              ***	 
	

	 	BTE
	 	BTE,SIGNIA, TB	 	5627414	 	 	 	$	1,403	 	 	$	              ***	 
	

	Options
	 	Clear Coat	 	0113LC	 	$	28	 	 	$	              ***	 
	

	Options
	 	Filament VC	 	0506FT	 	$	59	 	 	$	              ***	 
	

	Options
	 	Gain Control	 	0512GC	 	$	24	 	 	$	              ***	 
	

	Options
	 	Gain Control	 	0513GC	 	$	24	 	 	$	              ***	 
	

	Options
	 	Gain Control	 	0514GC	 	$	24	 	 	$	              ***	 
	

	Options
	 	MPO Control	 	0512PC	 	$	24	 	 	$	              ***	 
	

	Options
	 	MPO Control	 	0513PC	 	$	24	 	 	$	              ***	 
	

	Options
	 	MPO Control	 	0514PC	 	$	24	 	 	$	              ***	 
	

	Options
	 	Screw Set VC	 	0506SS	 	$	24	 	 	$	              ***	 
	

	Options
	 	Soft Canal	 	0105SC	 	$	26	 	 	$	              ***	 
	

	Options
	 	T-Coil	 	0503TC	 	$	53	 	 	$	              ***	 
	

	Options
	 	Tone (N-H) Control	 	0512NH	 	$	24	 	 	$	              ***	 
	

	Options
	 	Tone (N-H) Control	 	0513NH	 	$	24	 	 	$	              ***	 
	

	Options
	 	Tone (N-H) Switch	 	0512HT	 	$	24	 	 	$	              ***	 
	

	Options
	 	Tone (N-H) Switch	 	0513HT	 	$	24	 	 	$	              ***	 
	

	Options
	 	Tone (N-L) Control	 	0514NL	 	$	24	 	 	$	              ***	 
	

	Options
	 	Tone (N-L) Control	 	0512NL	 	$	24	 	 	$	              ***	 
	

	Options
	 	Tone (N-L) Control	 	0513NL	 	$	24	 	 	$	              ***	 
	

	Options
	 	TwinMic System	 	0211D	 	 	 	$	120	 	 	$	              ***	 
	

	Options
	 	VoiceMic	 	0211E	 	 	 	$	120	 	 	$	              ***	 
	

		 	  *The parties agree that the “ship to” addresses determine the level of
pricing charged to the purchasers under the terms of this Agreement.

A-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}]]