EMPLOYMENT AND NONCOMPETITION AGREEMENT
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This agreement is made effective November 12, 1996 (the "Commencement
Date"), between PDHC, Ltd., a Minnesota corporation (the "Company"), and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, D.D.S. (the "Employee").
Background Information
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A. Concurrently with the execution of this agreement, American Dental
Partners, Inc., a Delaware corporation ("ADP"), is acquiring the Company
pursuant to an Acquisition and Exchange Agreement dated November 11, 1996 (the
"Acquisition"). The execution of this agreement is a condition to ADP's
obligations to complete the Acquisition.
B. Prior to the Acquisition, (i) the Company was in the business of
providing professional dental care services to the public, and (ii) the Employee
was employed by the Company as its President, having certain executive and
administrative responsibilities for and general supervisory authority over the
day-to-day operation of the Company.
C. Immediately prior to the Acquisition, the professional dental care
practice of the Company will be assumed by PDG, P.A., a Minnesota professional
association (the "PA"), and, thereafter, the Company will no longer provide
professional dental care services. However, the Company will be providing
certain administrative and other support services to the PA in connection with
its professional dental care practice pursuant to a Services Agreement dated
November 12, 1996.
Statement of Agreement
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The Company and the Employee (the "Parties") hereby acknowledge the
accuracy of the above Background Information and agree as follows:
(S)1. Termination of Prior Employment Agreement. In consideration of
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this agreement, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Employee hereby releases the
Affiliated Companies (defined in (S)8 below) and all of their respective
affiliates, predecessors, successors, and assigns from all obligations and
liabilities under any and all employment agreements or understandings, deferred
compensation arrangements, employee benefit obligations, and all other
employment and compensation arrangements, whether oral or written, between the
Company,or any of its affiliates and the Employee, excepting only the
obligations of the Company under this agreement.
(S)2. Employment. Upon the terms and subject to the conditions
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described in this agreement, the Company hereby employs the Employee and the
Employee hereby accepts employment by the Company.
(S)3. Term. Employee's employment with the Company pursuant to this
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agreement shall be for a five-year term beginning on the Commencement Date and
ending on the fifth
anniversary of the Commencement Date (the "Initial Term"), unless or until
sooner terminated pursuant to (S)9 of this agreement. This agreement may be
extended or renewed after the expiration of the Initial Term, but only by mutual
written agreement of the Parties. When permitted by the context, any reference
in this agreement to the "term of this agreement" shall include the Initial Term
and the period of any such extensions or renewals.
(S)4. Services. The Employee shall serve as the President of the
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Company, devoting such time, attention, energy, loyalty, and skill to the
Company's business as is necessary and appropriate to perform his tasks for and
fulfill his responsibilities to the Company. The Employee shall: (a) be
generally responsible for and have general supervisory authority over the
Company's day-to-day activities and operations, including without limitation
hiring, retaining, and discharging personnel, and preparing budgets, strategic
plans, and management reports, subject in all cases to the business policies and
operating programs, budgets procedures, and directions established from time to
time by the board of directors of the Company (the "Board"); and (b) perform
such related or other executive and administrative tasks as may be reasonably
assigned to him from time to time by the Board or the Chairman of the Board of
the Company (the "Chairman").
The Employee shall not be required to relocate his home from the Twin
Cities Metropolitan Area during the term of this agreement.
The Parties hereby acknowledge that the Employee is being employed
concurrently by the PA. It is the intent of the Parties that the Employee
divide his full business and professional time, energy, attention, and skill
between the Company and the PA such that, collectively, the Employee's tasks,
duties, and responsibilities following the Acquisition are similar to those
which were performed by the Employee for the Company prior to the Acquisition.
The Company agrees that any conflicts of interest may as a result of the
Employee's concurrent employment by the Company and the PA shall not be a basis
for the Company's termination of the Employee's employment under this agreement.
(S)5. Compensation. As compensation for his services under this
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agreement, the Company shall pay the Employee a base salary at the annual rate
of $200,000 (the "Base Salary"), payable in accordance with the Company's
general policies and procedures for payment of salaries to its executive
personnel. The Employee's performance shall be reviewed annually for the purpose
of considering potential increases in the Base Salary. In addition, the Company
shall pay the Employee an annual bonus in an amount of up to 20% of the Base
Salary (as in effect from time to time) for each calendar year during the term
of this agreement, prorated on a daily basis for any partial calendar year,
which bonus shall be based upon and tied to the achievement of various
reasonable objectives established annually by the Board after consultation with
the Employee and shall be paid no later than 100 days following the end of any
such calendar year or partial calendar year, provided that such bonus shall not
be less than $40,000 for any year during the Initial Term (the "Minimum Bonus").
If the Parties mutually agree to extend or renew the Initial Term pursuant to
(S)3 of this agreement, the Company agrees that the compensation applicable to
such extension or renewal period shall be at a rate not less than the
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Base Salary in effect during the final year of the Initial Term, provided the
Parties agree that the Employee will be performing substantially similar
services for the Company during such extension or renewal period.
(S)6. Fringe Benefits and Perquisites. During the term of this
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agreement, the Employee shall be entitled to the following fringe benefits and
perquisites:
(a) Group health and welfare benefits comparable to those offered
generally to the Company's executive personnel from time to time;
(b) Three weeks paid vacation during each year of the agreement;
(c) Participation in such stock option plans as may be designated from
time to time by the Board (or a duly authorized committee of the Board), in
its discretion, subject to all terms and conditions of such plans;
(d) An annual automobile allowance in an amount equal to $750, payable
in accordance with the Company's general policies and procedures for
payment of such allowances to its executive personnel established or
approved from time to time by the Board;
(e) The Company shall pay to the Employee an annual bonus (which shall
be in addition to the Minimum Bonus) for each calendar year during the term
of this agreement until May 15, 1999, prorated on a daily basis for any
partial calendar year, in an amount equal to $19,866 per calendar year,
which bonus shall be paid periodically at the same time as the Minimum
Bonus is paid;
(f) The Company shall reimburse the Employee for all reasonable
expenses incurred by the Employee in connection with the performance of his
services under this agreement (including without limitation reasonable
gasoline expenditures), subject to such recordkeeping, reporting, and other
reasonable requirements of the Company as may be in effect from time to
time.
(g) Such other benefits and perquisites as may be offered generally to
the Company's executive personnel from time to time pursuant to such terms,
conditions, and policies as may be approved by the Board.
(S)7. Stock Options. As additional consideration for the Employee's
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covenants contained in this agreement, concurrently with the execution of this
agreement, the Company shall grant to the Employee, as of the Commencement Date,
options (the "Options") to purchase up to 1,500 shares of common stock, par
value $.01, of the Company (the "Shares"), consisting of an Option to purchase
up to 1,100 Shares pursuant to the Company's 1996 Stock Option Plan and an
Option to purchase up to 400 Shares pursuant to the Company's 1996 Time
Accelerated Restricted Stock Option Plan. The Options shall be evidenced by
separate agreements containing
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terms consistent with such stock option plans and which the Board deems
necessary or appropriate, in its discretion, including without limitation an
exercise price of $50 per Share and, with respect to the Option granted under
the Company's 1996 Stock Option Plan, a vesting schedule under which, on each of
the first four anniversaries of the Commencement Date, such Option will vest
with respect to 25% of the Shares subject to such option.
(S)8. Confidentiality; Noncompetition. The Employee shall not, directly
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or indirectly, at any time (whether during the term of this agreement or
thereafter), disclose any Confidential Information (defined below) to any
person, association, or other entity (other than the Affiliated Companies, as
defined below), or use, or permit or assist any person, association, or other
entity (other than the Affiliated Companies) to use, any Confidential
Information, excepting only Confidential Information which (i) is then generally
available to or obtainable by the public and which did not become so available
or obtainable through the breach of any provision of this agreement by the
Employee, or (ii) is obtained by the Employee on a non-confidential basis from a
source other than an Affiliated Company or any agent or other representative of
an Affiliated Company and such source had the right to disclose such
Confidential Information to the Employee without violating any legal,
contractual, fiduciary, or other obligation.
Upon termination of his employment by the Company (for any reason), the
Employee shall immediately deliver to the Company all documents and other
materials containing any Confidential Information which are in his possession or
under his control.
During the term of the Employee's employment with the Company or any
Affiliated Company (whether pursuant to this agreement or otherwise) and during
the Restricted Period (defined below), the Employee shall not, other than on
behalf of the Company, directly or indirectly (whether individually or as a
shareholder or other owner, partner, member, director, officer, employee,
consultant, creditor or agent of any person, association, or other entity):
(a) Enter into, engage in, or promote or assist (financially or
otherwise), whether directly or indirectly, any business which competes
with the business of any Affiliated Company (the "Business"); provided that
the foregoing shall not prohibit the Employee from (i) being employed by
the PA during or following the Employee's employment with the Company, (ii)
owning not more than 1% of the outstanding capital stock of any corporation
whose shares are publicly traded on a national securities exchange or
system, or (iii) becoming an employee of, or otherwise performing services
for, after the termination of the Employee's employment with the Company
and any Affiliated Companies, a professional corporation or association or
other person or entity which provides professional dental care services to
the public (a "Dental Care Provider"), so long as such Dental Care Provider
is not an ADP Provider (as defined below) and was not an ADP Provider at
any time during the one-year period immediately preceding such Dental Care
Provider's employment or other engagement of the Employee;
(b) Solicit or attempt to solicit business from any Dental Care
Provider to which any Affiliated Company provides management, consulting,
or other services (an
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"ADP Provider"), or interfere or attempt to interfere with any relationship
of any Affiliated Company with any ADP Provider;
(c) Induce or encourage any employee, officer, director, agent,
supplier, or independent contractor of any Affiliated Company to terminate
its relationship with such Affiliated Company, or otherwise interfere or
attempt to interfere in any way with any Affiliated Company's relationships
with its employees, officers, directors, agents, suppliers, independent
contractors, or others;
(d) Employ or engage any person who, at any time within the one-year
period immediately preceding such employment or engagement, was an
employee, officer, or director of any Affiliated Company; or
(e) Make any statement (oral or written) or take any other action
which would tend to disparage or diminish the reputation of any Affiliated
Company.
For purposes of this agreement: (i) "Affiliated Companies" shall include
the Company and all subsidiaries or affiliates of the Company other than Summit
Ventures IV, L.P., Noro-▇▇▇▇▇▇▇ Partners, and any of their respective affiliates
which are not engaged in a business similar to the Company or its subsidiaries,
(ii) "Confidential Information" shall mean all trade secrets, proprietary data,
and other confidential information of any Affiliated Company, including without
limitation financial information, information relating to business operations,
services, promotional practices, and relationships with ADP Providers,
suppliers, employees, independent contractors, or other parties, and any
information which any Affiliated Company is obligated to treat as confidential
pursuant to any course of dealing or any agreement to which it is a party or
otherwise bound; and (iii) the "Restricted Period" shall mean the two-year
period following the date of termination (for any reason) of Employee's
employment with the Company and any Affiliated Companies (whether pursuant to
this agreement or otherwise).
The Employee acknowledges that (A) the provisions of this section are
fundamental and essential for the protection of the Company's legitimate
business and proprietary interests, (B) such provisions are reasonable and
appropriate in all respects, and (C) in the event of any violation by the
Employee of any of such provisions, the Company would suffer irreparable harm
and its remedies at law would be inadequate. In the event of any violation or
attempted violation of such provisions by the Employee, the Company shall be
entitled to a temporary restraining order, temporary and permanent injunctions,
specific performance, and other equitable relief, without any showing of
irreparable harm or damage or the posting of any bond, in addition to any other
rights or remedies which may then be available to the Company.
(S)9. Termination. The Employee's employment with the Company shall
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terminate automatically upon the death of the Employee and may be terminated by
the Company, without any further obligation on the part of the Company (except
as provided in clause (c), below), immediately upon notice to the Employee under
any of the following circumstances:
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(a) At any time for Cause (defined below);
(b) At any time if the Employee is under a Long-Term Disability (defined
below); or
(c) At any time without Cause; provided that if the Company terminates the
Employee's employment effective prior to the end of the Initial Term pursuant to
this clause (c), and no other basis for termination exists under this agreement,
then the Employee shall be entitled to: (i) severance payments in an aggregate
amount equal to (A) the Base Salary for the remainder of the Initial Term, plus
(B) any amounts which remain unpaid with respect to the Minimum Bonus payable
for the Initial Term; and (ii) substantially the same health benefits for the
remainder of the Initial Term as were being provided by the Company to the
Employee at the time of such termination, which benefits shall, at the option of
the Company, be provided either under the Company's existing plans or under
comparable coverage obtained by the Employee with reimbursement to the Employee
for the expenses of obtaining and maintaining such coverage. Any such severance
payments shall be payable periodically in the same manner as the Base Salary
and, if applicable, the Minimum Bonus are payable under (S)5 of this agreement,
and, notwithstanding any other provisions of this agreement to the contrary,
such severance payments and shall be payable and provided only so long as the
Employee is in full compliance with the provisions of (S)8 of this agreement.
For purposes of this agreement:
(i) "Cause" shall mean:
(A) any act constituting (1) a felony under the federal laws of
the United States, the laws of any state, or any other applicable law, (2)
fraud, embezzlement, misappropriation of assets, willful misfeasance, or
dishonesty, or (3) other criminal conduct which in any way materially and
adversely affects the reputation, goodwill, or business position of the Company;
(B) the failure of the Employee to perform and observe all
obligations and conditions to be performed and observed by the Employee under
this agreement, or to perform his duties in accordance with the policies,
programs, budgets, procedures, and directions established from time to time by
the Board (any such failure, a "Performance Failure"), and to correct such
Performance Failure promptly following notice from the Company to do so; or
(C) having corrected (or the Company having waived the correction
of two Performance Failures, the occurrence of any subsequent Performance
Failure; and
(ii) "Long-Term Disability" shall mean that, because of physical or
mental incapacity, it is more likely than not that the Employee will be unable,
within, 180 days after such incapacity commenced, to perform the essential
functions of his position with the Company,
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with or without reasonable accommodation. In the event of any disagreement about
whether or when the Employee is under a Long-Term Disability, the question shall
be determined: (A) by a physician selected by agreement between the Employee
and the Company if such a physician is selected within 10 days after either of
them requests the other so to agree; or, if not, (B) by two physicians, the
first of whom shall be selected by the Employee and the second of whom shall be
selected by the Company or, if the Employee fails to make a selection within 10
days after being requested to do so by the Company, the second physician shall
be selected by the first physician; or, if the two physicians fail to agree, (C)
by a third physician selected by the first two physicians. The Employee shall
submit to all reasonable examinations requested by any such physicians.
(S)10. Capacity. The Employee represents and warrants to the Company that
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he has the capacity and right to enter into this agreement and perform all of
his obligations under this agreement without any restriction.
(S)11. Remedies. All rights and remedies of either Party under this
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agreement are cumulative and in addition to all other rights and remedies which
may be available to that Party from time to time, whether under any other
agreement, at law, or in equity.
(S)12. Survival. The termination of the Employee's employment with the
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Company (for any reason) shall not relieve either Party of any of that Party's
obligations under this agreement existing at, arising as a result of, or
relating to acts or omissions occurring prior to, such termination. Without
limiting the generality of the preceding sentence, in no event shall the
termination of such employment modify or affect any obligations of the Employee
or rights of the Company under (S)8 of this agreement or the Company's
obligations, if any, under (S)9(c) of this agreement, all of which shall survive
the termination of such employment.
(S)13. Notices. All notices and other communications under this agreement
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to any Party shall be in writing and shall be deemed given when delivered
personally, telecopied (which is confirmed) to that Party at the telecopy number
for that Party set forth below, mailed by certified mail (return receipt
requested) to that Party at the address for that Party (or at such other address
for such Party as such Party shall have specified in notice to the other Party)
or delivered to Federal Express, UPS, or any similar express delivery service
for delivery to that Party at that address:
(a) If to the Company:
PDHC, Inc.
c/o American Dental Partners, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Employee:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(S)14. Severability. The intention of the Parties is to comply fully with
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all rules, laws, and public policies to the extent possible. If and to the
extent that any court of competent jurisdiction is unable so to construe any
provision of this agreement and holds that provision to be invalid, such
invalidity shall not affect the remaining provisions of this agreement, which
shall remain in full force and effect. With respect to any provision in this
agreement finally determined by such a court to be invalid or unenforceable,
such court shall have jurisdiction to reform this agreement to the extent
necessary to make such provision valid and enforceable, and, as reformed, such
provision shall be binding on the Parties.
(S)15. Non-Waiver. No failure by either Party to insist upon strict
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compliance with any term of this agreement, to exercise any option, to enforce
any right, or to seek any remedy upon any default of the other Party shall
affect, or constitute a waiver of, the other Party's right to insist upon such
strict compliance, exercise that option, enforce that right, or seek that remedy
with respect to that default or any prior, contemporaneous, or subsequent
default. No custom or practice of the Parties at variance with any provision of
this agreement shall affect, or constitute a waiver of, either Party's right to
demand strict compliance with all provisions of this agreement.
(S)16. Complete Agreement. This agreement and all documents referred to
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in this agreement, all of which are hereby incorporated herein by reference,
contain the entire agreement between the Parties and supersede all other
agreements and understandings between the Parties with respect to the subject
matter of this agreement. No alterations, additions, or other changes to this
agreement shall be made or be binding unless made in writing and signed by both
Parties.
(S)17. Governing Law; Venue. This agreement shall be governed by and
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construed in accordance with the laws of the State of Minnesota without regard
to principles of conflicts of law.
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(S)18. Captions. The captions of the various sections of this agreement
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are not part of the context of this agreement, are only guides to assist in
locating those sections, and shall be ignored in construing this agreement.
(S)19. Genders and Numbers. Where permitted by the context, each pronoun
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used in this agreement includes the same pronoun in other genders and numbers,
and each noun used in this agreement includes the same noun in other numbers.
(S)20. Successors. This agreement shall be personal to the Employee and
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no rights or obligations of the Employee under this agreement may be assigned by
the Employee to any third party. Any assignment or attempted assignment by the
Employee in violation of the preceding sentence shall be null and void. Subject
to the foregoing, this agreement shall be binding upon, inure to the benefit of,
and be enforceable by and against the successors and assigns of each Party.
PDHC, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
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