Document:

EMPLOYMENT
AGREEMENT

 

This EMPLOYMENT AGREEMENT is
made this 17th day of December, 2001, (the “Agreement”) between HealthTronics
Surgical Services Inc., a Georgia corporation (the “Company”), and Roy Brown
(the “Executive”).

 

PRELIMINARY
STATEMENTS

 

A.            The Company desires to secure the services of the
Executive and the Executive desires to be employed by the Company, on the terms
and subject to the conditions set forth in this Agreement.

 

B.            The Executive is a key employee of the Company and his
services and knowledge with respect to the Company and its business strategies
and operations are critical to maintaining the Company’s position in its
industry against its competitors.

 

C.            The Compensation Committee (“Compensation Committee”) of
the Board of Directors of the Company (the “Board”) has approved the execution
and delivery by the Company of this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the premises and mutual covenants set forth herein, the
parties agree as follows:

 

1.             Employment.  The
Company hereby agrees to continue to employ the Executive and the Executive
hereby agrees to continue to serve the Company, on the terms and conditions set
forth in this Agreement.

 

2.             Term of Agreement. 
This Agreement shall be deemed to commence on January 1, 2002, and
unless it is terminated earlier in the manner provided in this Agreement, shall
continue for a term of three (3) years and upon each anniversary date of this
Agreement shall be deemed to automatically renew for a new three year term from
such anniversary date (the “Term”).  Not
later than sixty (60) days prior to each anniversary date of this Agreement,
either party shall have the right to provide written notice of his or its
intention to have the Agreement expire at the end of the the then pending
three-year term period without automatic renewal.

 

3.             Position and Duties. 
The Executive shall serve as the President of the Company, shall perform
substantially the same duties as he currently performs and shall have
substantially the same authority as he currently exercises.  The Executive shall report to the Chief
Executive Officer, and shall have such other powers and duties as may from time
to time be delegated to him by the Chief Executive Officer or, following a
Change in Control (as defined below), the senior executive, board or committee
established pursuant to the terms of the Change of Control that is responsible
for the unit, division or subsidiary of which the Company has become a part;
provided that such duties are 

 

 

generally consistent with his present duties
and with the Executive’s position.  The
Executive shall devote substantially all of his working time and efforts during
normal business hours to the business and affairs of the Company in
substantially the same manner (both as to working time and effort) as the
Executive has devoted to the Company in the past; provided, that it shall not
be a violation of this Agreement for the Executive to (i) serve on corporate,
civic or charitable boards or committees, and (ii) deliver lectures or fulfill
speaking engagements, so long as such activities are approved by the executive
or body to which the Executive reports and do not interfere with the
performance of the Executive’s responsibilities as an employee of the Company
in accordance with this Agreement.

 

4.             Place of Performance. 
In connection with his employment by the Company, the Executive shall be
based at the Company’s principal executive offices except for required travel
on the Company’s business.

 

5.             Compensation and Related Matters.

 

(a)           Base Salary.  The
Executive shall receive a base salary, payable in substantially equal bi-weekly
installments, at the annual rate of at least $200,000 during each fiscal year
during the Term, or such greater amount as shall be determined by the
Compensation Committee or the entire Board, in its sole discretion (the “Base
Salary”).  The Base Salary shall be
reviewed at least annually for merit increases and may, by action and in the
discretion of the Compensation Committee or the Board, be increased at any time
or from time to time.  Any increase in
the Base Salary or other compensation granted by the Compensation Committee or
the Board shall in no way limit or reduce any other obligation of the Company
under this Agreement and, unless otherwise specified by the Compensation
Committee or the Board, once established at an increased specified rate, the
Base Salary shall not thereafter be reduced.

 

(b)           Incentive Compensation. 
In addition to the Base Salary, during the Term the Executive shall be entitled
to receive an annual bonus (the “Annual Bonus”) payable in the form of either
cash or Company stock at the sole discretion of the Company.  The Annual Bonus will be determined based
upon the Company achieving its budgeted earnings per share (“EPS”) target (the
“Target”) for each fiscal year.  The
Target for each fiscal year shall be approved by the Compensation Committee not
later than 90 days after the beginning of each fiscal year.  For purposes of this Section, the term “EPS”
means the Company’s earnings after interest, taxes, depreciation and
amortization divided by the number of outstanding registered shares of the
Company’s stock, as determined in accordance with generally accepted accounting
principles, consistently applied with the Company’s past practices, and as
reflected in the Company’s audited financial statements for the relevant fiscal
year.  If the Company does not achieve
the Target for any fiscal year, any bonus will be made at the sole discretion
of the Compensation Committee.  The
Annual Bonus payable with respect to any fiscal year (net of any tax or other
amount properly withheld therefrom) shall be paid by the Company to the
Executive within sixty (60) days after the end of the fiscal year; provided,
that (i) the amount of Annual Bonus payable for any fiscal year during which
the Term expires or this Agreement is

 

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terminated shall be prorated and payable only
with respect to the portion of the fiscal year during which the Executive was
employed by the Company and (ii) no Annual Bonus shall be payable with respect
to any fiscal year during which the Executive’s employment is terminated by the
Company for Cause, or by the Executive for other than Good Reason.  In addition to the Annual Bonus, the
Executive shall be entitled to receive such other bonuses or incentive
compensation as the Compensation Committee may determine in its sole
discretion, taking into consideration such criteria as it shall deem relevant.

 

(c)           Stock Options. 
During the Term, the Executive shall be entitled to receive stock option
grants at the sole discretion of the Compensation Committee.  The number of stock options and the terms
and conditions of stock options granted to the Executive shall be determined by
the Compensation Committee in its sole discretion.

 

(d)           Corporate Automobile. 
The Company shall furnish either (i) an automobile of the make and model
suitable to the Executive, or (ii) provide the Executive with six hundred
dollars ($600) per month that can be applied toward a payment for an automobile
of the Executive’s choice.  The
automobile furnished for the executive shall remain the property of the Company
and will be insured under the insurance policy of the Company at all times
during the Term of this Agreement.

 

(e)           Expenses.  During
the Term, the Company, in accordance with its expense reimbursement policies
and procedures in effect for senior management employees from time to time,
shall reimburse the Executive for all reasonable expenses actually paid or
incurred by the Executive in the course of and pursuant to the business of the
Company.

 

(f)            Other Benefits. 
The Executive shall be entitled to participate in or receive benefits
under any employee benefit plan or arrangement made available generally by the
Company to its executives, subject to and on a basis consistent with the terms,
conditions and overall administration of such plan or arrangement.  The Company shall also provide the Executive
such coverage under any directors and officers liability policies it maintains
as is provided to its other senior management employees.  Nothing paid or provided to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or any other obligation
payable to the Executive pursuant to this Agreement.

 

(g)           Vacation.  The
Executive shall be entitled to the greater of (i) four (4) weeks of paid
vacation per year, or (ii) the number of paid vacation days in each calendar year
determined by the Company from time to time for its senior executive
officers.  The Executive shall also be
entitled to all paid holidays given by the Company to its senior executive
officers.

 

(h)           Perquisites and Fringe Benefits.  The Executive shall be entitled to continue to receive all
perquisites and fringe benefits provided or available to senior executive
officers of the Company in accordance with present practice and as may be
changed from time to time with respect to all senior executive officers of the
Company.

 

3

 

(i)            Working Facilities. 
The Company shall furnish the Executive with an office, a secretary and
such other facilities and services suitable to his position and adequate for
the performance of his duties hereunder.

 

6              Other Offices. 
The Executive agrees to serve without additional compensation as an
officer and/or director of any of the Company’s present or future subsidiaries;
provided, that the Executive shall be indemnified for serving in any and all
such capacities on a basis no less favorable than may be from time to time
provided to other senior executives of the Company.

 

7.             Restrictive Covenants.

 

(a)           Noncompetition. 
The Executive agrees that he will not, either during the Term and for a
period of one (1) year following any termination of this Agreement, directly or
indirectly, engage in, operate, have any investment or interest or otherwise
participate in any manner (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) in any sole
proprietorship, partnership, corporation or business or any other person or
entity that engages, directly or indirectly, in a Competing Business; provided,
that the Executive may continue to hold Company securities and/or acquire,
solely as an investment, shares of capital stock or other equity securities of
any company which are publicly traded, so long as the Executive does not
control, acquire a controlling interest in, or become a member of a group which
exercises direct or indirect control of, more than five percent (5%) of any
class of capital stock of such corporation. For purposes of this Agreement, the
term “Competing Business” means any business providing any of the following
services within a 50 mile radius of any office or treatment location of the
Company or any subsidiary of the Company: (a) Lithotripsy services, (b) any
business providing treatment of orthopedic or podiatric conditions using
extracorporeal shock wave treatments or shock wave treatments, or (c) any
business involving the service, maintenance or upkeep of machines providing
such services.

 

(b)           Unauthorized Disclosure. 
During the Term and for a period of one year following any termination
of this Agreement, the Executive shall not, without the written consent of the
Board or a person authorized thereby, disclose to any person, other than an
employee of the Company (or its subsidiaries) or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of his duties as an executive of the Company, any confidential
information obtained by him while in the employ of the Company with respect to
any of the Company’s customers, suppliers, creditors, lenders, investment bankers,
methods of distribution or methods of marketing; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the
Executive).  Notwithstanding the
foregoing, nothing herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent required by law.

 

(c)           Nonsolicitation of Employees.  During the Term and for a period of six (6) months following any
termination of this Agreement, the Executive shall not directly or

 

4

 

indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity, attempt to
employ or enter into any contractual arrangement with any employee or former
employee of the Company, unless such employee or former employee has not been
employed by the Company for a period in excess of three months.

 

8.             Termination.  The
Executive’s employment under this Agreement may be terminated without any
breach of this Agreement only on the following circumstances:

 

(a)           Death.  The
Executive’s employment under this Agreement shall terminate automatically upon
his death.

 

(b)           Disability.  If, as
a result of the Executive’s incapacity due to physical or mental illness, the
Executive is absent from the performance of his duties under this Agreement for
a period of four (4) months during any twelve-month period, and within 10 days
after written notice of termination is given, the Executive does not return to
the performance of his duties under this Agreement, the Company may terminate
the Executive’s employment under this Agreement for “Disability.”

 

(c)           Cause.  The Company
may at any time terminate the Executive’s employment under this Agreement for
Cause.  For purposes of this Agreement,
“Cause” means: (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive’s incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the Company
believes the Executive has not substantially performed his duties, and the
Executive shall have failed to resume substantial performance of such duties
within thirty (30) days of receiving such demand, (ii) the willful engaging by
the Executive in criminal conduct (including embezzlement and criminal fraud)
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (iii) the conviction of the Executive of a felony (other than a
traffic violation).  For purposes of
this paragraph, no act, or failure to act, on the Executive’s part shall be
considered “willful” unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the best
interest of the Company.  Notwithstanding
anything herein to the contrary, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the affirmative vote of not
less than a majority of the members of the Board then in office (other than the
Executive) at a meeting of the Board called and held for such purpose (after
reasonable notice to the Executive and an opportunity for him, together with
his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board the Executive was guilty of conduct set forth in clause
(i), (ii) or (iii), above, and specifying the particulars thereon in detail.

 

(d)           Termination by the Executive.  The Executive may terminate his employment under this Agreement
(i) for Good Reason, or (ii) if his health should become impaired to any extent
that makes the continued performance of his duties under 

 

5

 

this Agreement hazardous to his physical or
mental health or his life, provided that the Executive shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that at the Company’s request and expense the Executive shall
submit to an examination by a doctor selected by the Company and such doctor
shall have concurred in the conclusion of the Executive’s doctor.

 

For purposes of this
Agreement, “Good Reason” means, without the Executive’s prior written consent,
the occurrence of any one or more of the following: (A) any action by the
Company which results in a material diminution in the nature or status of the
Executive’s position, authority, duties or responsibilities; (B) a failure by
the Company to pay any amounts of Base Salary, Annual Bonus or other amounts
payable hereunder, or to comply with its other obligations and agreements
contained herein; (C) a failure of the Company to obtain an agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 10(c) hereof; (D) Executive no longer reports directly
to the person(s) specified in Section 3 hereof, or (E) any purported
termination by the Company of the Executive’s employment that is not effected
pursuant to a Expiration Notice or a Notice of Termination satisfying the
requirements of Section 2 or subsection 8(e), respectively, and otherwise in
accordance with the terms of this Agreement, and for purposes of this
Agreement, no such termination shall be effective.

 

The Executive’s right to
terminate his employment for Good Reason shall not be affected by his
incapacity due to physical or mental illness, nor shall the Executive’s
continued employment constitute consent to, or a waiver of his rights with
respect to, any circumstances constituting Good Reason.  With respect to the matters set forth in
clauses (A), (B), (C) and (D), above, the Executive shall give the Board
fifteen (15) days prior written notice of his intent to terminate this
Agreement, and the Company shall have the right to cure any such breach or
alleged breach within such fifteen (15) day period.

 

(e)           Notice of Termination. 
Any termination of the Executive’s employment by the Company or by the
Executive (other than termination pursuant to Section 8(a), above) shall be
communicated by written Notice of Termination to the other party hereto given
in accordance with Section 12.  For
purposes of this Agreement, a “Notice of Termination” shall mean a written
notice which indicates the specific termination provision in this Agreement
relied upon and sets 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.  The failure
by the Executive to set forth in any Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from asserting such
fact or circumstance in enforcing his rights hereunder.

 

(f)            Date of Termination. 
“Date of Termination” shall mean (i) if the Executive’s employment is
terminated by his death, the date of his death, (ii) if the Executive’s
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to
the performance of his duties during such thirty (30) day period), (iii) if the
Executive’s 

 

6

 

employment is terminated by the Company for
Cause, the date specified in the Notice of Termination after the expiration of
any cure periods, and (iv) if the Executive’s employment is terminated for any
other reason, the date on which a Notice of Termination is given after the
expiration of any cure periods; provided, that if within thirty (30) days after
any Notice of Termination one party notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date
finally determined to be the Date of Termination, either by mutual written
agreement of the parties or by a binding and final arbitration award or an
adjudication by a court of competent jurisdiction (and in such event the
Company shall continue to perform its obligations hereunder until the date so
determined).

 

9.             Compensation Upon Termination or During Disability.

 

(a)           Death.  If the
Executive’s employment is terminated by reason of his death, the Company shall
pay to such person as the Executive shall have designated in a notice filed
with the Company, or, if no such person has been designated, to his estate, any
unpaid amounts of his Base Salary or Annual Bonus accrued prior to the date of
his death; and upon making such payments, the Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of the Executive’s death pursuant to
Section 5(e)); provided, that the Executive’s spouse, beneficiaries or estate
shall also be entitled to receive any amounts or other benefits payable pursuant
to any pension or employee benefit plan, life insurance policy or other plan,
program or policy then maintained or provided by the Company in accordance with
the terms thereof.  In addition, all
unvested Options (as defined in the Company’s Stock Option Plan — 2001 or any other plan under which stock
options are granted), including, but not limited to, stock options held by the
Executive on the Date of Termination shall continue to vest in accordance with
the vesting schedule for such Options then in effect, and upon vesting shall
become exercisable.  Moreover, each such
stock option that vests pursuant to the preceding sentence, together with any
previously vested and unexercised stock options, shall be exercisable in
accordance with their respective terms for a period of one (1) year following
the date on which it becomes vested (or, in the case of any previously vested
and unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options.

 

(b)           Disability.  During
any period that the Executive fails to perform his duties hereunder as a result
of incapacity due to physical or mental illness, the Executive shall continue
to receive his Base Salary and any Annual Bonus until the Executive’s
employment is terminated pursuant to Section 8(b) hereof, or until the
Executive terminates his employment pursuant to Section 8(d)(ii) hereof,
whichever first occurs.  If the
Executive’s employment is terminated by reason of his Disability, the Company
shall pay to the Executive any unpaid amounts of his Base Salary or Annual
Bonus accrued prior to the date of such termination; and upon making such
payments, the Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
such termination pursuant to Section 5(e)); provided, that the Executive shall
also be entitled to receive any amounts or other

 

7

 

benefits payable pursuant to any pension or
employee benefit plan, life insurance policy or other plan, program or policy
then maintained or provided by the Company in accordance with the terms
thereof.  In addition, all unvested
Options held by the Executive on the Date of Termination shall continue to vest
in accordance with the vesting schedule for such Options then in effect, and
upon vesting shall become exercisable. Moreover, each such stock option that
vests pursuant to the preceding sentence, together with any previously vested
and unexercised stock options, shall be exercisable in accordance with their
respective terms for a period of one (1) year following the date on which it
becomes vested (or, in the case of any previously vested and unexercised
options, one (1) year following the Date of Termination) or, if earlier, until
the then scheduled expiration date(s) of such options. Notwithstanding anything
in this section to the contrary, all such vesting of Options shall discontinue
immediately, and any unexercised options shall terminate and be cancelled
immediately upon a breach by the Executive of the provisions of Section 7
hereof or the Executive’s acceptance of employment with another entity.

 

(c)           Cause; Other than for Good Reason.  If the Executive’s employment is terminated
by the Company for Cause, or by the Executive for other than Good Reason, the
Company shall pay the Executive his Base Salary and accrued vacation pay
through the Date of Termination at the rate in effect at the time Notice of
Termination is given (or on the Date of Termination if no Notice of Termination
is required hereunder) plus all other amounts to which the Executive is
entitled under any plan, program, policy or practice of the Company or
otherwise at the time such payments are due and such payments shall, assuming
the Company is in compliance with the provisions of this Agreement, fully
discharge the Company’s obligations hereunder. 
In addition, all unvested Options shall terminate.

 

(d)           Good Reason; Other than Cause or Disability.  If the Company terminates the Executive’s
employment other than for Cause or Disability, or the Executive terminates his
employment for Good Reason, then:

 

(i)            within thirty (30)
days after the Date of Termination, the Company shall pay the Executive an
amount equal to the sum of: (i) his accrued but unpaid Base Salary through the
Date of Termination at the rate in effect at the time Notice of Termination is
given (or the Date of Termination where no Notice of Termination is required
hereunder) and (ii) a pro rata portion of the most recent Annual Bonus paid to
the Executive (taking into consideration any accrued but unpaid Annual Bonus
which is paid pursuant to this Section 9(d)(i)) based on the number of days
elapsed in the current fiscal year prior to the Date of Termination, together
with any accrued incentive compensation and other amounts to which the
Executive is then entitled under any plan, policy, practice or program of the
Company at the time such payments are due; and

 

(ii)           in lieu of any further
salary, incentive compensation or other payments for periods subsequent to the
Date of Termination, and as a severance benefit to the Executive, the Company
will pay to the Executive in a prompt lump-sum 

 

8

 

payment, payable in cash, no
later than thirty (30) days following the date of termination an amount equal
to the sum of three (3) times the Executive’s annual Base Salary in effect at
the time Notice of Termination is given (or the Date of Termination where no
Notice of Termination is required hereunder), plus (B) an amount equal to three
(3) times the greater of (x) the average Annual Bonus paid to the Executive for
the prior three years or (y) the amount of the most recent Annual Bonus paid to
the Executive.

 

(e)           Acceleration of Vesting; Sale of Shares.  Unless the Company terminates the
Executive’s employment for Cause, the Executive terminates his employment for
other than Good Reason or the Executive’s employment is terminated due to his
death or Disability, upon (i) termination of the Executive’s employment or (ii)
a Change of Control, all unvested Options held by the Executive on the Date of
Termination shall immediately vest and upon vesting shall become exercisable.  Moreover, each such stock option that is
deemed vested pursuant to the preceding sentence, together with any previously
vested and unexercised stock options, shall be exercisable by the Executive in
accordance with their respective terms for a period of one (1) year following the
Date of Termination or the date of the Change in Control, as the case may be,
or, if earlier, until the then scheduled expiration date(s) of such options.
The Company shall provide the Executive such cooperation and assistance as may
reasonably be necessary to effect cashless exercises of such stock options
beneficially owned by the Executive at the Date of Termination.  For the purposes of this Agreement, the
“Fair Market Value” of the Company’s common stock as of any given date shall be
(i) the closing sale price per share reported on a consolidated basis for the
common stock as listed on the Nasdaq National Market or the principal stock
exchange or market on which the common stock is traded on the date as of which
such value is being determined or, if there is no sale on that date, then on
the last previous day on which a sale was reported or (ii) if the common stock
is not listed on an exchange or market, the fair market value of the common
stock as determined by the Board.

 

For purposes of this
Agreement, a “Change in Control” means and shall be deemed to have occurred if:
(i) any person, entity or “group”, within the meaning of Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), other than (A) the Company, its subsidiaries or any employee benefit
plan established and maintained by the Company or its subsidiaries, or (B) the
Executive or any of the Executive’s affiliates, becomes the “beneficial owner”
(within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company representing forty percent (40%) or
more of the combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of directors; (ii) the individuals
who, as of the date hereof constitute the Company’s Board of Directors (as of
the date hereof, the “Incumbent Board”) cease for any reason to constitute a
majority of the Board of Directors, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than the
election or nomination of an individual whose initial assumption of office is
in connection with an actual or threatened 

 

9

 

election contest relating to the election of
the directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or (iii) the shareholders of the Company approve (A) a reorganization,
merger or consolidation with respect to which persons who were the shareholders
of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company’s then outstanding voting
securities, (B) a liquidation or dissolution of the Company, or (C) the sale of
all or substantially all of the assets of the Company, unless the approved
reorganization, merger, consolidation, liquidation, dissolution or sale is
subsequently abandoned.

 

(f)            Maintenance of Benefit. 
Unless the Executive is terminated for Cause, the Company shall maintain
in full force and effect, for the continued benefit of the Executive and/or his
family for one (1) year after termination for any reason, all employee medical,
health and hospitalization plans and programs in which the Executive and/or his
family was entitled to participate in immediately prior to the Date of
Termination provided that the continued participation of the Executive and/or
his family is possible under the general terms and provisions of such plans and
programs.  In the event that the
participation of the Executive and/or his family in any such plan or program is
barred, the Company shall arrange to provide the Executive and/or his family
with benefits substantially similar to those which the Executive and/or his
family would otherwise have been entitled to receive under such plans and
programs from which his or their continued participation is barred.

 

10.           Successors.

 

(a)           This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive other than by will or the laws of descent and distribution.  This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees.  If the Executive dies while any amounts
would still be payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to the Executive’s personal or legal representatives or, if there be no such
persons, the Executive’s estate.

 

(b)           This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

 

(c)           The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such

 

10

 

succession had taken place.  Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as he would be
entitled to hereunder if he terminated his employment for Good Reason, except
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, the term
“Company” means the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers an assumption
and agreement provided for in this Section 10(c) or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law, or
otherwise.

 

11.           Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive’s
continuing future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any stock
option or other agreements with the Company or any of its subsidiaries.  Except as herein specifically provided,
amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of the Company or any of
its subsidiaries at or subsequent to the Date of Termination shall be payable
in accordance with such plan, policy, practice or program.

 

12.           Notice.  All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Roy
Brown

(home
address)

 

If to the Company:

 

HealthTronics Surgical
Services, Inc.

1841 West Oak Parkway

Marietta, Georgia 30062

Attn: Chief Executive
Officer

 

or to such other address as either party
shall have furnished to the other in writing in accordance herewith.  Notices and communications shall be
effective when actually received by the addressee.

 

11

 

13.           Miscellaneous.

 

(a)           This Agreement has been approved by the Compensation Committee.  No provisions of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
agreed to in a writing signed by the Executive and such officer as may be
specifically designed by the Compensation Committee or the Board.

 

(b)           The failure by either party hereto to insist upon
compliance with any condition or provision of this Agreement shall not be
deemed a waiver of such condition or provision or any other provision hereof.

 

(c)           No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement and this
Agreement supersedes any other agreement or understanding between the Company and
the Executive relating to the Executive’s employment and any compensation or
benefits in respect thereof (including, without limitation, the Prior
Employment Agreement).

 

(d)           The Company may withhold from any accounts payable under
this Agreement all Federal, state or other taxes as legally shall be required.

 

(e)           The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Georgia,
without reference to principles of conflicts of laws.

 

(f)            The invalidity or unenforceability of any provision or
provisions 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.

 

(g)           This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.

 

12

 

 

IN WITNESS WHEREOF, the
parties have executed this Employment Agreement as of the date and year first
above written.

 

 

	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
  Company

  
	
   

  	
   

  
	
   

  	
  /s/ Argil J. Wheelock

  	
   

  
	
   

  	
   

  
	
   

  	
  Executive:

  
	
   

  	
   

  
	
   

  	
  /s/ Roy Brown

  	
   

  
	
   

  	
  Roy Brown

  

 

13EMPLOYMENT
AGREEMENT

 

This EMPLOYMENT AGREEMENT is
made this 17th day of December, 2001, (the “Agreement”) between HealthTronics
Surgical Services Inc., a Georgia corporation (the “Company”), and Martin
McGahan (the “Executive”).

 

PRELIMINARY
STATEMENTS

 

A.            The Company desires to secure the services of the
Executive and the Executive desires to be employed by the Company, on the terms
and subject to the conditions set forth in this Agreement.

 

B.            The Executive is a key employee of the Company and his
services and knowledge with respect to the Company and its business strategies
and operations are critical to maintaining the Company’s position in its
industry against its competitors.

 

C.            The Compensation Committee (“Compensation Committee”) of
the Board of Directors of the Company (the “Board”) has approved the execution
and delivery by the Company of this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the premises and mutual covenants set forth herein, the
parties agree as follows:

 

1.             Employment.  The
Company hereby agrees to continue to employ the Executive and the Executive
hereby agrees to continue to serve the Company, on the terms and conditions set
forth in this Agreement.

 

2.             Term of Agreement. 
This Agreement shall be deemed to commence on January 1, 2002, and
unless it is terminated earlier in the manner provided in this Agreement, shall
continue for a term of three (3) years and upon each anniversary date of this
Agreement shall be deemed to automatically renew for a new three year term from
such anniversary date (the “Term”).  Not
later than sixty (60) days prior to each anniversary date of this Agreement,
either party shall have the right to provide written notice of his or its
intention to have the Agreement expire at the end of the then pending
three-year term period without automatic renewal.

 

3.             Position and Duties. 
The Executive shall serve as the Chief Financial Officer of the Company,
shall perform substantially the same duties as he currently performs and shall
have substantially the same authority as he currently exercises.  The Executive shall report to the Chief
Executive Officer, and shall have such other powers and duties as may from time
to time be delegated to him by the Chief Executive Officer or, following a
Change in Control (as defined below), the senior executive, board or committee
established pursuant to the terms of the Change of Control that is responsible
for the unit, division or subsidiary of which the Company has become a part;
provided that such 

 

 

duties are generally consistent with his
present duties and with the Executive’s position.  The Executive shall devote substantially all of his working time
and efforts during normal business hours to the business and affairs of the
Company in substantially the same manner (both as to working time and effort)
as the Executive has devoted to the Company in the past; provided, that it
shall not be a violation of this Agreement for the Executive to (i) serve on
corporate, civic or charitable boards or committees, and (ii) deliver lectures
or fulfill speaking engagements, so long as such activities are approved by the
executive or body to which the Executive reports and do not interfere with the
performance of the Executive’s responsibilities as an employee of the Company
in accordance with this Agreement.

 

4.             Place of Performance. 
In connection with his employment by the Company, the Executive shall be
based at the Company’s principal executive offices in Atlanta, Georgia except
for required travel on the Company’s business.

 

5.             Compensation and Related Matters.

 

(a)           Base Salary.  The
Executive shall receive a base salary, payable in substantially equal bi-weekly
installments, at the annual rate of at least $200,000 during each fiscal year
during the Term, or such greater amount as shall be determined by the
Compensation Committee or the entire Board, in its sole discretion (the “Base
Salary”).  The Base Salary shall be
reviewed at least annually for merit increases and may, by action and in the
discretion of the Compensation Committee or the Board, be increased at any time
or from time to time.  Any increase in
the Base Salary or other compensation granted by the Compensation Committee or
the Board shall in no way limit or reduce any other obligation of the Company
under this Agreement and, unless otherwise specified by the Compensation
Committee or the Board, once established at an increased specified rate, the
Base Salary shall not thereafter be reduced.

 

(b)           Incentive Compensation. 
In addition to the Base Salary, during the Term the Executive shall be
entitled to receive an annual bonus (the “Annual Bonus”) payable in the form of
either cash or Company stock at the sole discretion of the Company.  The Annual Bonus will be determined based
upon the Company achieving its budgeted earnings per share (“EPS”) target (the
“Target”) for each fiscal year.  The
Target for each fiscal year shall be approved by the Compensation Committee not
later than 90 days after the beginning of each fiscal year.  For purposes of this Section, the term “EPS”
means the Company’s earnings after interest, taxes, depreciation and
amortization divided by the number of outstanding registered shares of the
Company’s stock, as determined in accordance with generally accepted accounting
principles, consistently applied with the Company’s past practices, and as
reflected in the Company’s audited financial statements for the relevant fiscal
year.  If the Company does not achieve
the Target for any fiscal year, any bonus will be made at the sole discretion of
the Compensation Committee.  The Annual
Bonus payable with respect to any fiscal year (net of any tax or other amount
properly withheld therefrom) shall be paid by the Company to the Executive
within sixty (60) days after the end of the fiscal year; provided, that (i) the
amount of Annual Bonus payable for any fiscal year during which the Term
expires or this Agreement is 

 

2

 

terminated shall be prorated and payable only
with respect to the portion of the fiscal year during which the Executive was
employed by the Company and (ii) no Annual Bonus shall be payable with respect
to any fiscal year during which the Executive’s employment is terminated by the
Company for Cause, or by the Executive for other than Good Reason.  In addition to the Annual Bonus, the
Executive shall be entitled to receive such other bonuses or incentive
compensation as the Compensation Committee may determine in its sole
discretion, taking into consideration such criteria as it shall deem relevant.

 

(c)           Stock Options. 
During the Term, the Executive shall be entitled to receive stock option
grants at the sole discretion of the Compensation Committee.  The number of stock options and the terms
and conditions of stock options granted to the Executive shall be determined by
the Compensation Committee in its sole discretion.

 

(d)           Life Insurance Policy. 
The Company will pay for a “whole” life insurance policy (the “Insurance
Policy”) for the Executive with the beneficiary of the Insurance Policy to be
the Executive’s spouse or an individual chosen by the Executive.  If the Executive is terminated for Cause, as
defined below, or the Executive terminates this Agreement for anything other
than Good Reason, as defined below, any equity in the Insurance Policy will
remain property of the Company.  In all
other circumstances, the Insurance Policy, along with any positive equity in
Insurance Policy, will be transferable to the Executive.

 

(e)           Expenses.  During
the Term, the Company, in accordance with its expense reimbursement policies
and procedures in effect for senior management employees from time to time,
shall reimburse the Executive for all reasonable expenses actually paid or
incurred by the Executive in the course of and pursuant to the business of the
Company.

 

(f)            Other Benefits. 
The Executive shall be entitled to participate in or receive benefits
under any employee benefit plan or arrangement made available generally by the
Company to its executives, subject to and on a basis consistent with the terms,
conditions and overall administration of such plan or arrangement.  The Company shall also provide the Executive
such coverage under any directors and officers liability policies it maintains
as is provided to its other senior management employees.  Nothing paid or provided to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary or any other obligation
payable to the Executive pursuant to this Agreement.

 

(g)           Vacation.  The
Executive shall be entitled to the greater of (i) four (4) weeks of paid
vacation per year, or (ii) the number of paid vacation days in each calendar
year determined by the Company from time to time for its senior executive officers.  The Executive shall also be entitled to all
paid holidays given by the Company to its senior executive officers.

 

(h)           Perquisites and Fringe Benefits.  The Executive shall be entitled to continue to receive all
perquisites and fringe benefits provided or available to senior

 

3

 

executive officers of the Company in
accordance with present practice and as may be changed from time to time with
respect to all senior executive officers of the Company.

 

(i)            Working Facilities. 
The Company shall furnish the Executive with an office, a secretary and
such other facilities and services suitable to his position and adequate for
the performance of his duties hereunder.

 

6.             Other Offices. 
The Executive agrees to serve without additional compensation as an
officer and/or director of any of the Company’s present or future subsidiaries;
provided, that the Executive shall be indemnified for serving in any and all
such capacities on a basis no less favorable than may be from time to time
provided to other senior executives of the Company.

 

7.             Restrictive Covenants.

 

(a)           Noncompetition. 
The Executive agrees that he will not, either during the Term and for a
period of one (1) year following any termination of this Agreement, directly or
indirectly, engage in, operate, have any investment or interest or otherwise
participate in any manner (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) in any sole
proprietorship, partnership, corporation or business or any other person or
entity that engages, directly or indirectly, in a Competing Business; provided,
that the Executive may continue to hold Company securities and/or acquire,
solely as an investment, shares of capital stock or other equity securities of
any company which are publicly traded, so long as the Executive does not
control, acquire a controlling interest in, or become a member of a group which
exercises direct or indirect control of, more than five percent (5%) of any
class of capital stock of such corporation. For purposes of this Agreement, the
term “Competing Business” means any business providing any of the following
services within a 50 mile radius of any office or treatment location of the
Company or any subsidiary of the Company: (a) Lithotripsy services, (b) any
business providing treatment of orthopedic or podiatric conditions using
extracorporeal shock wave treatments or shock wave treatments, or (c) any
business involving the service, maintenance or upkeep of machines providing
such services.

 

(b)           Unauthorized Disclosure. 
During the Term and for a period of one year following any termination
of this Agreement, the Executive shall not, without the written consent of the
Board or a person authorized thereby, disclose to any person, other than an
employee of the Company (or its subsidiaries) or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of his duties as an executive of the Company, any confidential
information obtained by him while in the employ of the Company with respect to
any of the Company’s customers, suppliers, creditors, lenders, investment
bankers, methods of distribution or methods of marketing; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the
Executive).  Notwithstanding the
foregoing, nothing herein shall be deemed to restrict the Executive from disclosing
Confidential Information to the extent required by law.

 

4

 

(c)           Nonsolicitation of Employees.  During the Term and for a period of six (6) months following any
termination of this Agreement, the Executive shall not directly or indirectly,
for himself or for any other person, firm, corporation, partnership,
association or other entity, attempt to employ or enter into any contractual
arrangement with any employee or former employee of the Company, unless such
employee or former employee has not been employed by the Company for a period
in excess of three months.

 

8.             Termination.  The
Executive’s employment under this Agreement may be terminated without any
breach of this Agreement only on the following circumstances:

 

(a)           Death.  The
Executive’s employment under this Agreement shall terminate automatically upon
his death.

 

(b)           Disability.  If, as
a result of the Executive’s incapacity due to physical or mental illness, the
Executive is absent from the performance of his duties under this Agreement for
a period of four (4) months during any twelve-month period, and within 10 days
after written notice of termination is given, the Executive does not return to
the performance of his duties under this Agreement, the Company may terminate
the Executive’s employment under this Agreement for “Disability.”

 

(c)           Cause.  The Company
may at any time terminate the Executive’s employment under this Agreement for
Cause.  For purposes of this Agreement,
“Cause” means: (i) the willful and continued failure by the Executive to
substantially perform his duties under this Agreement (other than any such
failure resulting from the Executive’s incapacity due to physical or mental
illness or from the termination of this Agreement by the Executive for Good
Reason), after a demand for substantial performance is delivered to the
Executive by the Company specifically identifying the manner in which the
Company believes the Executive has not substantially performed his duties, and
the Executive shall have failed to resume substantial performance of such
duties within thirty (30) days of receiving such demand, (ii) the willful
engaging by the Executive in criminal conduct (including embezzlement and
criminal fraud) which is demonstrably and materially injurious to the Company,
monetarily or otherwise, or (iii) the conviction of the Executive of a felony
(other than a traffic violation).  For
purposes of this paragraph, no act, or failure to act, on the Executive’s part
shall be considered “willful” unless done, or omitted to be done, by him not in
good faith and without reasonable belief that his action or omission was in the
best interest of the Company. 
Notwithstanding anything herein to the contrary, the Executive shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution, duly adopted by the
affirmative vote of not less than a majority of the members of the Board then
in office (other than the Executive) at a meeting of the Board called and held
for such purpose (after reasonable notice to the Executive and an opportunity
for him, together with his counsel, to be heard before the Board), finding that
in the good faith opinion of the Board the Executive was guilty of conduct set
forth in clause (i), (ii) or (iii), above, and specifying the particulars
thereon in detail.

 

5

 

(d)           Termination by the Executive.  The Executive may terminate his employment under this Agreement
(i) for Good Reason, or (ii) if his health should become impaired to any extent
that makes the continued performance of his duties under this Agreement
hazardous to his physical or mental health or his life, provided that the
Executive shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that at the Company’s
request and expense the Executive shall submit to an examination by a doctor
selected by the Company and such doctor shall have concurred in the conclusion
of the Executive’s doctor.

 

For purposes of this
Agreement, “Good Reason” means, without the Executive’s prior written consent,
the occurrence of any one or more of the following: (A) any action by the
Company which results in a material diminution in the nature or status of the
Executive’s position, authority, duties or responsibilities; (B) a failure by
the Company to pay any amounts of Base Salary, Annual Bonus or other amounts
payable hereunder, or to comply with its other obligations and agreements
contained herein; (C) a failure of the Company to obtain an agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 10(c) hereof; (D) Executive no longer reports directly
to the person(s) specified in Section 3 hereof, or (E) any purported
termination by the Company of the Executive’s employment that is not effected
pursuant to a Expiration Notice or a Notice of Termination satisfying the
requirements of Section 2 or subsection 8(e), respectively, and otherwise in
accordance with the terms of this Agreement, and for purposes of this
Agreement, no such termination shall be effective.

 

The Executive’s right to
terminate his employment for Good Reason shall not be affected by his
incapacity due to physical or mental illness, nor shall the Executive’s
continued employment constitute consent to, or a waiver of his rights with
respect to, any circumstances constituting Good Reason.  With respect to the matters set forth in
clauses (A), (B), (C) and (D), above, the Executive shall give the Board
fifteen (15) days prior written notice of his intent to terminate this
Agreement, and the Company shall have the right to cure any such breach or
alleged breach within such fifteen (15) day period.

 

(e)           Notice of Termination. 
Any termination of the Executive’s employment by the Company or by the
Executive (other than termination pursuant to Section 8(a), above) shall be
communicated by written Notice of Termination to the other party hereto given
in accordance with Section 12.  For
purposes of this Agreement, a “Notice of Termination” shall mean a written
notice which indicates the specific termination provision in this Agreement
relied upon and sets 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.  The failure
by the Executive to set forth in any Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason shall not waive any
right of the Executive hereunder or preclude the Executive from asserting such
fact or circumstance in enforcing his rights hereunder.

 

(f)            Date of Termination. 
“Date of Termination” shall mean (i) if the Executive’s employment is
terminated by his death, the date of his death, (ii) if the 

 

6

 

Executive’s employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the performance of his duties
during such thirty (30) day period), (iii) if the Executive’s employment is
terminated by the Company for Cause, the date specified in the Notice of
Termination after the expiration of any cure periods, and (iv) if the
Executive’s employment is terminated for any other reason, the date on which a
Notice of Termination is given after the expiration of any cure periods;
provided, that if within thirty (30) days after any Notice of Termination one
party notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date finally determined to be
the Date of Termination, either by mutual written agreement of the parties or
by a binding and final arbitration award or an adjudication by a court of
competent jurisdiction (and in such event the Company shall continue to perform
its obligations hereunder until the date so determined).

 

9.             Compensation Upon Termination or During Disability.

 

(a)           Death.  If the
Executive’s employment is terminated by reason of his death, the Company shall
pay to such person as the Executive shall have designated in a notice filed
with the Company, or, if no such person has been designated, to his estate, any
unpaid amounts of his Base Salary or Annual Bonus accrued prior to the date of
his death; and upon making such payments, the Company shall have no further
liability hereunder (other than for reimbursement for reasonable business
expenses incurred prior to the date of the Executive’s death pursuant to
Section 5(e)); provided, that the Executive’s spouse, beneficiaries or estate
shall also be entitled to receive any amounts or other benefits payable
pursuant to any pension or employee benefit plan, life insurance policy or other
plan, program or policy then maintained or provided by the Company in
accordance with the terms thereof.  In
addition, all unvested Options (as defined in the Company’s Stock Option Plan — 2001 or any other
plan under which stock options are granted), including, but not limited to,
stock options held by the Executive on the Date of Termination shall continue
to vest in accordance with the vesting schedule for such Options then in
effect, and upon vesting shall become exercisable.  Moreover, each such stock option that vests pursuant to the
preceding sentence, together with any previously vested and unexercised stock
options, shall be exercisable in accordance with their respective terms for a
period of one (1) year following the date on which it becomes vested (or, in
the case of any previously vested and unexercised options, one (1) year
following the Date of Termination) or, if earlier, until the then scheduled
expiration date(s) of such options.

 

(b)           Disability.  During
any period that the Executive fails to perform his duties hereunder as a result
of incapacity due to physical or mental illness, the Executive shall continue
to receive his Base Salary and any Annual Bonus until the Executive’s
employment is terminated pursuant to Section 8(b) hereof, or until the
Executive terminates his employment pursuant to Section 8(d)(ii) hereof,
whichever first occurs.  If the
Executive’s employment is terminated by reason of his Disability, the Company
shall pay to the Executive any unpaid amounts of his Base Salary or Annual
Bonus accrued prior to the date of such termination; and upon making such
payments, the Company 

 

7

 

shall have no further liability hereunder
(other than for reimbursement for reasonable business expenses incurred prior
to the date of such termination pursuant to Section 5(e)); provided, that the
Executive shall also be entitled to receive any amounts or other benefits
payable pursuant to any pension or employee benefit plan, life insurance policy
or other plan, program or policy then maintained or provided by the Company in
accordance with the terms thereof.  In
addition, all unvested Options held by the Executive on the Date of Termination
shall continue to vest in accordance with the vesting schedule for such Options
then in effect, and upon vesting shall become exercisable. Moreover, each such
stock option that vests pursuant to the preceding sentence, together with any
previously vested and unexercised stock options, shall be exercisable in accordance
with their respective terms for a period of one (1) year following the date on
which it becomes vested (or, in the case of any previously vested and
unexercised options, one (1) year following the Date of Termination) or, if
earlier, until the then scheduled expiration date(s) of such options.
Notwithstanding anything in this section to the contrary, all such vesting of
Options shall discontinue immediately, and any unexercised options shall
terminate and be cancelled immediately upon a breach by the Executive of the
provisions of Section 7 hereof or the Executive’s acceptance of employment with
another entity.

 

(c)           Cause; Other than for Good Reason.  If the Executive’s employment is terminated
by the Company for Cause, or by the Executive for other than Good Reason, the
Company shall pay the Executive his Base Salary and accrued vacation pay
through the Date of Termination at the rate in effect at the time Notice of
Termination is given (or on the Date of Termination if no Notice of Termination
is required hereunder) plus all other amounts to which the Executive is
entitled under any plan, program, policy or practice of the Company or
otherwise at the time such payments are due and such payments shall, assuming
the Company is in compliance with the provisions of this Agreement, fully
discharge the Company’s obligations hereunder. 
In addition, all unvested Options shall terminate.

 

(d)           Good Reason; Other than Cause or Disability.  If the Company terminates the Executive’s
employment other than for Cause or Disability, or the Executive terminates his
employment for Good Reason, then:

 

(i)            within thirty (30) days after the
Date of Termination, the Company shall pay the Executive an amount equal to the
sum of: (i) his accrued but unpaid Base Salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given (or the Date
of Termination where no Notice of Termination is required hereunder) and (ii) a
pro rata portion of the most recent Annual Bonus paid to the Executive (taking
into consideration any accrued but unpaid Annual Bonus which is paid pursuant
to this Section 9(d)(i)) based on the number of days elapsed in the current
fiscal year prior to the Date of Termination, together with any accrued
incentive compensation and other amounts to which the Executive is then
entitled under any plan, policy, practice or program of the Company at the time
such payments are due; and

 

8

 

(ii)           in lieu of any further salary,
incentive compensation or other payments for periods subsequent to the Date of
Termination, and as a severance benefit to the Executive, the Company will pay
to the Executive in a prompt lump-sum payment, payable in cash, no later than
thirty (30) days following the date of termination an amount equal to the sum
of three (3) times the Executive’s annual Base Salary in effect at the time
Notice of Termination is given (or the Date of Termination where no Notice of
Termination is required hereunder), plus (B) an amount equal to three (3) times
the greater of (x) the average Annual Bonus paid to the Executive for the prior
three years or (y) the amount of the most recent Annual Bonus paid to the
Executive.

 

(e)           Acceleration of Vesting; Sale of Shares.  Unless the Company terminates the
Executive’s employment for Cause, the Executive terminates his employment for
other than Good Reason or the Executive’s employment is terminated due to his
death or Disability, upon (i) termination of the Executive’s employment or (ii)
a Change of Control, all unvested Options held by the Executive on the Date of
Termination shall immediately vest and upon vesting shall become
exercisable.  Moreover, each such stock
option that is deemed vested pursuant to the preceding sentence, together with
any previously vested and unexercised stock options, shall be exercisable by
the Executive in accordance with their respective terms for a period of one (1)
year following the Date of Termination or the date of the Change in Control, as
the case may be, or, if earlier, until the then scheduled expiration date(s) of
such options. The Company shall provide the Executive such cooperation and
assistance as may reasonably be necessary to effect cashless exercises of such
stock options beneficially owned by the Executive at the Date of
Termination.  For the purposes of this
Agreement, the “Fair Market Value” of the Company’s common stock as of any
given date shall be (i) the closing sale price per share reported on a consolidated
basis for the common stock as listed on the Nasdaq National Market or the
principal stock exchange or market on which the common stock is traded on the
date as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported or (ii) if the
common stock is not listed on an exchange or market, the fair market value of
the common stock as determined by the Board.

 

For purposes of this
Agreement, a “Change in Control” means and shall be deemed to have occurred if:
(i) any person, entity or “group”, within the meaning of Sections 13(d)(3) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), other than (A) the Company, its subsidiaries or any employee benefit
plan established and maintained by the Company or its subsidiaries, or (B) the
Executive or any of the Executive’s affiliates, becomes the “beneficial owner”
(within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company representing forty percent (40%) or
more of the combined voting power of the Company’s then outstanding securities
entitled to vote generally in the election of directors; (ii) the individuals
who, as of the date hereof constitute the Company’s Board of Directors (as of
the date hereof, the “Incumbent Board”) cease for any reason to constitute a
majority of the Board of Directors, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the 

 

9

 

Company’s stockholders was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
(other than the election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or (iii) the shareholders of the Company
approve (A) a reorganization, merger or consolidation with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally in the
election of directors of the reorganized, merged or consolidated company’s then
outstanding voting securities, (B) a liquidation or dissolution of the Company,
or (C) the sale of all or substantially all of the assets of the Company,
unless the approved reorganization, merger, consolidation, liquidation,
dissolution or sale is subsequently abandoned.

 

(f)            Maintenance of Benefit. 
Unless the Executive is terminated for Cause, the Company shall maintain
in full force and effect, for the continued benefit of the Executive and/or his
family for one (1) year after termination for any reason, all employee medical,
health and hospitalization plans and programs in which the Executive and/or his
family was entitled to participate in immediately prior to the Date of
Termination provided that the continued participation of the Executive and/or
his family is possible under the general terms and provisions of such plans and
programs.  In the event that the
participation of the Executive and/or his family in any such plan or program is
barred, the Company shall arrange to provide the Executive and/or his family
with benefits substantially similar to those which the Executive and/or his
family would otherwise have been entitled to receive under such plans and
programs from which his or their continued participation is barred.

 

10.           Successors.

 

(a)           This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive other than by will or the laws of descent and distribution.  This Agreement and all rights of the
Executive hereunder shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees.  If the Executive dies while any amounts
would still be payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to the Executive’s personal or legal representatives or, if there be no such
persons, the Executive’s estate.

 

(b)           This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

 

(c)           The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business

 

10

 

and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, to assume expressly and agree
to perform this Agreement in the same manner and 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
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as he would be
entitled to hereunder if he terminated his employment for Good Reason, except
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, the term
“Company” means the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers an assumption
and agreement provided for in this Section 10(c) or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law, or
otherwise.

 

11.           Non-exclusivity of Rights.  Nothing in this Agreement shall prevent or limit the Executive’s
continuing future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices provided by the Company or any of its
subsidiaries and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any stock
option or other agreements with the Company or any of its subsidiaries.  Except as herein specifically provided,
amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of the Company or any of
its subsidiaries at or subsequent to the Date of Termination shall be payable
in accordance with such plan, policy, practice or program.

 

12.           Notice.  All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Martin
McGahan

(home
address)

 

If to the Company:

 

HealthTronics Surgical
Services, Inc.

1841 West Oak Parkway

Marietta, Georgia 30062

Attn:  Chief Executive Officer

 

or to such other address as either party
shall have furnished to the other in writing in accordance herewith.  Notices and communications shall be effective
when actually received by the addressee.

 

11

 

13.           Miscellaneous.

 

(a)           This Agreement has been approved by the Compensation
Committee.  No provisions of this
Agreement may be modified, waived or discharged unless such modification,
waiver or discharge is agreed to in a writing signed by the Executive and such
officer as may be specifically designed by the Compensation Committee or the
Board.

 

(b)           The failure by either party hereto to insist upon compliance
with any condition or provision of this Agreement shall not be deemed a waiver
of such condition or provision or any other provision hereof.

 

(c)           No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement and this
Agreement supersedes any other agreement or understanding between the Company
and the Executive relating to the Executive’s employment and any compensation
or benefits in respect thereof (including, without limitation, the Prior
Employment Agreement).

 

(d)           The Company may withhold from any accounts payable under
this Agreement all Federal, state or other taxes as legally shall be required.

 

(e)           The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Georgia,
without reference to principles of conflicts of laws.

 

(f)            The invalidity or unenforceability of any provision or
provisions 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.

 

(g)           This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.

 

12

 

IN WITNESS WHEREOF, the
parties have executed this Employment Agreement as of the date and year first
above written.

 

 

	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Company:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Argil J. Wheelock

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Executive:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Martin J. McGahan

  	
   

  	
   

  
	
   

  	
   

  	
  Martin J. McGahan

  	
   

  

 

13

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