EMPLOYMENT AGREEMENT
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AGREEMENT, dated as of the 30th day of April, 1998' by and
between DYNAMIC DENTAL SYSTEMS INC., a Delaware corporation (the
"Company"), and HENRY J. RHODES (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Executive has been employed by the Company, and
the Company was acquired by and has become a wholly-owned
subsidiary of American Electromedics Corp. ("AEC"); and
WHEREAS, this Agreement is a condition to the closing of the
merger of ESI Acquisition Corporation, a wholly-owned subsidiary
of AEC, with and into the Company; and
WHEREAS, the Company and the Executive desire to assure
continuity of the Executive's services upon the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements hereinafter set forth, the parties
hereto, intending to be legally bound, agree as follows:
1. Retention of Employment. The Company hereby employs
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the Executive as President of the Company, and the Executive
hereby accepts such employment, all upon and subject to the terms
and conditions hereinafter set forth.
2. Term. The term (the "Term") of the employment under
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this Agreement shall be for an initial period which commences on
April 30, 1998, and shall terminate on April 30, 2001, and be
automatically renewed for additional one (1) year periods
thereafter, unless either party gives the other written notice of
termination not less than sixty (60) days prior to the end of the
initial Term or any renewal Term.
3. Position, Duties and representations.
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3.01 Service With the Company. The Executive shall
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serve as President of the Company. The Executive agrees to
perform such executive employment duties for the Company
consistent with such position specified above, and as the
Chairman of The Board or The Executive Committee shall assign to
him from time to time consistent with his position with the
Company.
3.02 Scope of Services. The Executive agrees to serve
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the Company faithfully and to the best of his ability and to
devote his full business time, attention and efforts necessary to
advance the business and affairs of the Company during the Term
of this Agreement. If requested, the Executive shall serve as a
director of the Company and as Officer and/or Director of any
subsidiary of the Company, without any additional compensation
hereunder.
4. Compensation
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4.01 Annual Salary. The Executive shall receive an
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annual base salary ("Base Salary") of $125,000, payable in
accordance with the Company's normal payroll practices. In
addition, commencing within six (6) months after the commencement
of employment hereunder, and on an annual basis thereafter the
Board of Directors or a compensation committee thereof (the
"Compensation Committee") shall review the Executive's
compensation to determine if an increase in the compensation
package is warranted, based on the Executives performance during
the preceding six (6) months or year, as the case may be, or
pursuant to guidelines established by the Compensation Committee
of AEC.
4.02 Stock Options. The Company shall cause AEC to
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grant to the Executive stock options (the "Options") to purchase
up to 100,000 shares of the Company's common stock, par value
$.10 per share (the "Common Stock"), exercisable at a purchase
price of $1.00 per share, vested as of May 1, 1998. In addition,
the Company shall cause AEC to grant to the Executive stock
options to purchase up to 100,000 shares of common stock,
exercisable at a purchase price of $3.00 per share, vested as of
November 1, 2000. All Options not so vested at the termination
of employment of the Executive pursuant to Section 6.02 or 6.04
thereof, shall be cancelled simultaneously to such termination of
employment and have no further force or effect. The Options, to
the maximum extent possible, shall be "incentive" stock options
as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The Options granted herein are upon the
terms and conditions set forth in the Stock Option Agreement
between the Company and the Executive, dated as of the date
hereof (the "Stock Option Agreement"), and attached hereto as
Exhibit A.
4.03 Participation in Benefit Plans. The Executive
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shall also be entitled, to the extent that his position, title,
tenure, salary, age, health and other qualifications make him
eligible, to participate in all employee benefit plans or
programs (including, but not limited to, medical/dental
insurance, disability, stock option, retirement and pension plans
and vacation time, sick leave and holidays) of the Company
currently in existence on the date hereof or as may hereafter be
instituted from time to time. The Executive's participation in
any such plan or program shall be subject to the provisions,
rules and regulations applicable thereto.
4.04 Automobile. The Company shall provide the
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Executive with (1) the use of an automobile or (2) an allowance
or reimbursement for the use by the Executive of his personal
automobile for Company purposes, provided that the cost to the
Company does not exceed $500 a month.
4.05 Expenses. In accordance with the Company's
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policies established from time to time, the Company shall pay or
reimburse the Executive for all reasonable and necessary out-of-
pocket expenses incurred by him in the performance of his duties
under this Agreement, subject to the presentment of appropriate
vouchers and receipts.
4.06 Insurance. The Executive acknowledges and agrees
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that the Company may obtain a life insurance policy on the life
of the Executive in the amount of at least $2,000,000 with the
Company named as the beneficiary. The Executive shall cooperate
fully with the Company's efforts to obtain such insurance policy,
including making himself available for physical examinations.
5. Non-Disclosure of Confidential Information: Non-
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Competition.
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5.01 Confidentiality. Except as may be in furtherance
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of the Executive's performance of his functions as a senior
executive officer of the Company, the Executive shall not,
throughout the Term of this Agreement and thereafter, disclose to
any third party or use or authorize any third party to use, any
information relating to the business, business plans, trade
secrets or other interests of the Company (including customers
and clients of the Company) which is confidential and valuable to
the Company or AEC or any of their subsidiaries or any third
party (including customers and clients of the Company) and which
is not known to the public (the "Confidential Information"). The
Confidential Information is and will remain the sole and
exclusive property of the Company, and during the Term of this
Agreement, the Confidential Information, when entrusted to the
Executive's custody, shall be deemed to remain at all times in
the Company's sole possession and control. Notwithstanding the
foregoing, the Executive may, after prior written notice to the
Company (to the extent such notice is possible under the
circumstances) disclose such Confidential Information pursuant to
subpoena or other legal process, and promptly thereafter shall
advise the Company in writing as to the Confidential Information
which was disclosed and the circumstances of such disclosure.
5.02 Return of Documents. The Executive agrees that,
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upon the expiration of his employment with the Company for any
reason, he shall forthwith deliver up to the Company any and all
documents and other material, recorded or stored in any medium or
by any method, and all copies thereof, in his possession or under
his control relating to any Confidential Information which is
otherwise the property of the Company.
5.03 Non-Competition. The Executive recognizes that
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the services to be performed by him for the Company are special
and unique. The Executive further recognizes that the nature of
the Company's business is such that the Executive will have full
knowledge of the Company's business plans and practices. The
parties therefore confirm that, in order to protect the Company's
goodwill, and in consideration of the Company entering into this
Agreement, providing for a fixed term of employment of the
Executive, the Executive does hereby agree that he will not in
the United States of America and/or the Federal Republic of
Germany for a period of two (2) years after he ceases to be
employed by the Company, become employed by, a consultant or a
Director of or hold any equity interest as a partner, member or
shareholder (to the extent of 5% or more of the equity interest
thereof), of any sole proprietorship, partnership, joint venture,
corporation, or other business entity which engages in a business
directly competitive to any business that the Company is engaged
(or has formulated plans to engage) in at the time of termination
of this Agreement. This Section shall not be applicable if the
Executive terminates this Agreement pursuant to Section 6.04
hereof or if the Company terminates this Agreement pursuant to
Section 6.03 hereof.
5.04 Remedies. The Executive agrees that any breach
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or threatened breach by him of any provision of this Section 5
shall entitle the Company, in addition to any other legal
remedies available to it, to apply to any court of competent
jurisdiction to enjoin such breach or threatened breach. The
parties understand and intend that each restriction agreed to by
the Executive hereinabove shall be construed as separable and
divisible from every other restriction, and that the
unenforceability, in whole or in part, of any restriction, will
not affect the enforceability of remaining restrictions, and that
one or more or all of such restrictions my be enforced in whole
or in part as the circumstances warrant. No waiver of any one
breach of the restrictions contained in this Section 5 shall be
deemed a waiver of any future breach.
6. Termination.
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6.01 Disability. (a) The Executive shall be
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considered disabled if, due to illness or injury, either physical
or mental, he is unable to perform his customary duties and
responsibilities as required by this Agreement for more than (2)
months in the aggregate out of six (6) months. The determination
that the Executive is disabled shall be made by the Board of
Directors of the Company (with the Executive abstaining from the
decision if he is then a member the Board), based upon an
examination and certification by a physician selected by the
Company subject to the Executive's approval, which approval shall
not be unreasonably withheld. The Executive agrees to submit
timely to any required medical or other examination, provided
that such examination shall be conducted at a location convenient
to the Executive and that if the examining physician is other
than the Executive's personal physician, the Executive shall have
the right to have such personal physician present at such
examination.
(b) If the Executive is determined to be disabled
pursuant to this Section 6.01, the Company shall have the option
to terminate this Agreement by written notice to Executive
stating the date of termination, which date may be any time
subsequent to the date of such determination.
6.02 Death. If the Executive shall die during the
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Term of this Agreement, this Agreement and the Executive's
employment hereunder shall terminate immediately upon the
Executive's death.
6.03 By the Company for Cause. The Company may
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terminate this Agreement for "cause" at any time. For the
purposes of this Section 6.03, the term "cause" shall be limited
to (1) conviction of a felony or equivalent crime under the laws
of the United States or any state, (2) conviction of a felony or
equivalent crime under the laws of any other country or political
subdivision thereof involving moral turpitude (3) action
involving gross negligence having a material adverse effect on
the Company, including willfully aiding the competition, (4)
willful misrepresentation at any time during the Term hereof by
the Executive to the Board of Directors of the Company of any
material information, (5) the Executive's failure or refusal to
perform specific directives of the Company and the Board of
Directors or the Chairman of the Board, which directives are
consistent with the scope and nature of the Executive's duties
and responsibilities, and which are not remedied by the Executive
within ten (10) days after receipt of written notice thereof.
Upon termination of employment by the Company pursuant to this
Section, the executive shall receive any accrued Base Salary
through the termination date, less any amounts by reason of
claims the Company may have against the Executive.
6.04 By the Executive for Cause. The Executive may
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terminate this Agreement for "cause" at any time. For purposes
of this Section 6.04, the term "cause" shall be the failure of
the Company to perform in a material respect of its material
obligation under this Agreement without proper justification
after notice thereof from the Executive and, if curable, the
opportunity to cure, within ten (10) days after receipt of
written notice thereof to the Company.
6.05 Termination Benefit. Upon termination of
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employment (1) by the Company other than pursuant to Section 6.03
hereof, (2) upon the disability of the Executive pursuant to
Section 6.01 hereof, (3) by the Executive's death pursuant to
Section 6.02 hereof, or (4) by the Executive pursuant to Section
6.04 hereof, the Executive (or his estate or representative)
shall receive a severance payment equal to 50% of the amount of
the then current annual Base Salary for the remaining portion of
the current Term.
6.06 Change of Control of the Company. (a) If, at
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anytime during the Term hereof, a change in control of the
Company (as defined in Subsection (b) below) occurs, then within
sixty (60) days after receipt of written notice of such change in
control of the Company, the Executive may, by written notice to
the Company (or its successor), terminate this Agreement. In the
event of said termination. (1) the Executive shall receive a lump
sum payment equal two(2) times his then Base Salary, payable
within thirty (30) days after termination of this Agreement, (2)
the Company (or its successor) shall maintain, at its expense,
the health plan coverage of the Executive for a period of twelve
(12) months after such termination, subject to termination of
such health plan benefits upon the Executive becoming covered by
a comparable plan offered by a subsequent employer and also
subject to any changes in such plan as applicable to other
executive officers and (3) all stock options and other equity
based awards granted to the Executive by the Company shall become
fully vested and exercisable subject to their respective terms;
provided, however, if the amount to be paid or distributed to the
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Executive pursuant to this Section 6.06 (taken together with any
amounts otherwise to be paid or distributed to the Executive by
the Company) (such amounts collectively the "Section 6.06
Payment") would result in the application of an excise tax under
Section 4999 of the Code, or any successor or similar provision
thereto, the Section 6.06 Payment shall not be paid or
distributed in the amounts or at the times otherwise required by
this Agreement, but shall instead be paid or distributed
annually, beginning within thirty (30) days after the termination
date and thereafter on each anniversary thereof, in the maximum
substantially equal amounts and over the minimum number of years
that are determined to be required to reduce the aggregate
present value of Section 6.06 Payment to an amount that will not
cause any Section 6.06 Payment to be non-deductible under Section
280G of the Code. For purposes of this Section 6.06, present
value shall be determined in accordance with Section 280G(d)(4)
of the Code.
(b) "Change of control of the Company" shall be deemed
to have occurred if:
(i) any "person" or "group" (as "person" and "group" are
defined in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), other than (A) the
Executive or a person controlled by him, (B) a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, (C) a person or group by reason of a transaction
with the Company approved by the Company Board of Directors as
constituted in accordance with Paragraph (ii) below, or (D) a
corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of
the Company's then outstanding securities; or
(ii) individuals who on the commencement date of this
Agreement constitute members of the Board of Directors, or
successors chosen by such individuals, shall cease for any reason
to constitute a majority of the whole Board of Directors.
7. Notices. All notices, requests, demands or other
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communications hereunder shall be deemed to have been given if
delivered in writing personally or by registered mail to each
party at the address set forth below, or at such other address as
each party may designate in writing to the other:
If to the Company:
American Electromedics Corp.
13 Columbia Drive
Amherst, New Hampshire 03031
Attn: Michael T. Pieniazek, President
If to Executive:
Henry J. Rhodes
427 Green Street NW
Gainesville, Georgia 30501
Fax: (770) 534-0883
8. Entire Agreement. This Agreement contains the entire
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understanding of the parties with respect to the subject matter
hereof, supersedes any prior written or oral agreement between
the parties. No change, termination or attempted waiver of any
of the provisions hereof shall be binding unless in writing and
signed by the party against whom the same is sought to be
enforced.
9. Successors and Assigns; Binding Effect. This Agreement
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will be binding upon and inure to the benefit of the Company and
its successors and assigns, and the Executive, and his heirs and
administrators. The Company may assign this Agreement to any
corporation which is in a consolidated group with the Company.
10. Waiver and Severability. The waiver by either party of
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a breach of any terms or conditions of this Agreement shall not
operate or be construed as a waiver of any subsequent breach by
such party. In the event that any one or more of the provisions
of this Agreement shall be declared to be illegal or
unenforceable under any law, rule or regulation of any government
having jurisdiction over the parties hereto, such illegality or
unenforceability shall not affect the validity and enforceability
of the other provisions of this Agreement.
11. Heading, Interpretations. The headings and captions
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used in this Agreement are for convenience only and shall not be
construed in interpreting this Agreement.
12. Governing Law. All matters concerning the validity and
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interpretation of and performance under this Agreement shall be
governed by the laws of the State of Delaware without regard to
the conflicts of law principles thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
DYNAMIC DENTAL SYSTEMS, INC.
By: AMERICAN ELECTROMEDICS CORP.
By: /s/ Thomas A. Slamecka
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Thomas A. Slamecka
Chairman
/s/ Henry J. Rhodes
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Henry J. Rhodes