1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, effective as of the 1st day of
October, 1996 (the "Agreement"), by and between COAST DENTAL SERVICES, INC., a
Delaware corporation, (the "Company"), and XXXX XXXXXX, D.D.S. (the
"Executive").
WHEREAS, the Company is presently engaged in the business of
providing dental practice management services and related services to dental
practice groups and other dental care providers;
WHEREAS, the Executive has had many years of experience in the
dental profession and is currently the Chief Operating Officer and President of
the Company;
WHEREAS, the Company wishes to assure itself of the continued
services of the Executive for the period provided in this Agreement and the
Executive is willing to serve in the employ of the Company for such period upon
the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties, intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT
The Company hereby agrees to continue to employ the Executive
upon the terms and conditions herein contained, and the Executive hereby agrees
to accept such employment for the term described below. The Executive agrees to
serve as the Company's Chief Operating Officer and President, and to perform the
duties and functions customarily performed by the Chief Operating Officer of a
publicly traded practice management corporation during the term of this
Agreement. In such capacity, the Executive shall report only to the Company's
Chief Executive Officer and Board of Directors, and shall have such powers and
responsibilities consistent with his position as the Board may assign to him.
Throughout the term of this Agreement, the Executive shall
devote his best efforts and such of his business time and services to the
business and affairs of the Company as is reasonably necessary to fulfill his
obligations under this Agreement. The Company recognizes that the Executive
is a licensed dentist and the owner of the Coast Florida P.A. (the "P.A.") such
that he is obligated to also devote time and services to the P.A.
2. TERM OF AGREEMENT
The five (5) year initial term of the Executive employment
under this Agreement shall commence as of October 1, 1996 (the "Effective
Date"). After the expiration of such initial five year employment period, the
term of the Executive's employment hereunder shall automatically be extended
without further action by the parties for successive one (1) year renewal terms,
provided that if either party gives the other party at least thirty (30) days
advance written notice of his or its intention to not renew this Agreement for
an additional term, the Agreement shall terminate upon the expiration of the
current term.
Notwithstanding the foregoing, the Company shall be entitled
to terminate this Agreement immediately, subject to a continuing obligation to
make any payments required under Section 5 below, if the Executive (i) becomes
disabled as described in Section 5(b), (ii) is terminated for Cause, as defined
in Section 5(c), or (iii) voluntarily terminates his employment before the
current term of this Agreement expires, as described in Section 5(d).
2
3. SALARY AND BONUS
(a) Salary. The Executive shall receive a base salary during
the term of this Agreement at a rate of not less than $90,000 per annum during
the first year of the term of this Agreement, and not less than $115,000 per
annum for subsequent years. this base salary shall be payable in installments
consistent with the Company's normal payroll schedule. The Compensation
Committee of the Board shall review this base salary at annual intervals, and
may adjust the Executive's annual base salary from time to time as the Committee
deems to be appropriate.
(b) Annual Bonus. The Executive shall also be eligible to
receive an annual incentive bonus from the Company for each fiscal year of the
Company during the term of this Agreement, in an amount up to 100 percent of his
annual base salary in effect on the last day of the year, with the actual amount
of such bonus to be determined by the Compensation Committee of the Company's
Board, based on the Company's achievement of such performance measures as the
Committee deems to be appropriate.
If, for any fiscal year of the Company, the annual bonus
anticipated to be payable for such fiscal year, when added to the Executive's
base salary and other remuneration from the Company for such fiscal year, is
expected to cause the total remuneration to the Executive for such fiscal year
to exceed $1,000,000, the Company's Compensation Committee shall follow the
following procedures with respect to the performance-based portion of the bonus
payable for such fiscal year:
(1) The performance goals for such bonus shall be
determined and approved by the Compensation Committee of the Board of
the Company, which for this purpose, shall be compromised solely of two
or more outside directors, during the first sixty (60) days of such
fiscal year;
(2) The material terms under which such annual bonus
is to be paid, including the performance goals, shall be disclosed to
shareholders and approved by a majority of the vote in a separate
shareholder vote before payment of such bonus is made;
(3) Before any payment of such annual bonus, the
Compensation Committee of the Board referred to above must certifies
that the performance goals and any other material terms were in fact
satisfied.
The provisions of this paragraph are intended to comply with and shall be
interpreted in accordance with the requirements of Section 162(m) of the
Internal Revenue Code, and accordingly, if the Compensation Committee of the
Board follows the foregoing requirements and the annual bonus is disapproved by
the Compensation Committee of the Board or the shareholders in accordance with
said requirements, the Executive shall not be paid the performance-based portion
of the bonus for the fiscal year at issue.
4. ADDITIONAL COMPENSATION AND BENEFITS
The Executive shall receive the following additional
compensation and welfare and fringe benefits:
(a) Life and Disability Insurance. During the term of this
Agreement, the Company shall continue to maintain the same life insurance
coverage for the Executive in effect on the date of this Agreement, as well as a
disability policy for Executive with a monthly benefit in an amount of not less
than $90,000 per year, or, if less, the maximum amount for which a reputable
insurance broker mutually acceptable to the Company and the Executive will
provide a quote on standard terms. The Executive will submit to such medical
examination and supply such information as is necessary for the Company to
obtain such insurance coverage.
(b) Medical Insurance. The Company shall provide the Executive
and his dependents with health insurance coverage no less favorable than that
from time to time made available to other key employees.
-2-
3
(c) Educational Leave and Expenses. The Executive shall be
entitled to up to ten (10) days educational leave annually to devote to
continuing dental education or other attendance at other seminars related to his
professional development. The Company shall reimburse the Executive for expenses
of up to $3,000 per year incurred by the Executive while attending educational
meetings and for professional publications, association memberships, and other
materials related to medical management.
(d) Vacation. The Executive shall be entitled to up to five
weeks of vacation during each year during the term of this Agreement and any
extensions thereof, prorated for partial years.
(e) Business Expenses. The Company shall reimburse the
Executive for all reasonable expenses he incurs in promoting the Company's
business, including expenses for travel, entertainment of business associates
and similar items, upon presentation by the Executive from time to time of an
itemized account of such expenditures.
In addition to the benefits provided pursuant to the preceding
paragraphs of this Section 4, the Executive shall be eligible to participate in
such other executive compensation and retirement plans of the Company as are
applicable generally to other officers, and in such welfare benefit plans,
programs, practices and policies of the Company as are generally applicable to
other key employees.
5. PAYMENTS UPON TERMINATION
(a) Involuntary Termination. If the Executive's employment is
terminated by the Company during the term of this Agreement, the Executive shall
be entitled to receive his base salary accrued through the date of termination.
The Executive shall also receive any nonforfeitable benefits already earned and
payable to him under the terms of any deferred compensation, incentive or other
benefit plan maintained by the Company, payable in accordance with the terms of
the applicable plan.
If the termination is not for death, disability as described
in paragraph (b), for Cause as described in paragraph (c) or a voluntary
termination by the Executive as described in paragraph (d), the Company shall
also be obligated to make a series of monthly payments to the Executive for each
month during the remaining term of this Agreement, but not less than twenty-four
(24) months. Each monthly payment shall be equal to one-twelfth (1/12th) of the
Executive's annual base salary, as in effect on the date of termination,
provided that if the Executive obtains a replacement position with any new
employer (including a position as an officer, employee, consultant, or agent, or
self-employment as a partner or sole proprietor), the payments shall be reduced
by all amounts the Executive receives as compensation for services performed
during such period.
(b) Disability. The Company shall be entitled to terminate
this Agreement, if the Board determines that the Executive has been unable to
attend to his duties for at least ninety (90) days because of a medically
diagnosable physical or mental condition, and has received a written opinion
from a physician acceptable to the Board that such condition prevents the
Executive from resuming full performance of his duties and is likely to continue
for an indefinite period. Upon such termination, the Company shall pay to
Executive a monthly disability benefit equal to one-twenty-fourth (1/24th) of
his current annual base salary at the time he became permanently disabled.
Payment of such disability benefit shall commence on the last day of the month
following the date of the termination by reason of permanent disability and
cease with the earliest of (i) the month in which the Executive returns to
active employment, either with the Company or otherwise, (ii) the end of the
initial term of this Agreement, or the current renewal term, as the case may be,
or (iii) the twenty-fourth month after the date of the termination. Any amounts
payable under this Section 5(b) shall be reduced by any amounts paid to the
Executive under any long-term disability plan or other disability program or
insurance policies maintained or provided by the Company.
(c) Termination for Cause. If the Executive's employment is
terminated by the Company for Cause, the amount the Executive shall be entitled
to receive from the Company shall be limited to his base salary accrued through
the date of termination, and any nonforfeitable benefits already earned and
payable to the Executive under the terms of deferred compensation or incentive
plans maintained by the Company.
-3-
4
For purposes of this Agreement, the term "Cause" shall be
limited to (i) any action by the Executive involving willful disloyalty to the
Company, such as embezzlement, fraud, misappropriation of corporate assets or a
breach of the covenants set forth in Sections 9 and 10 below; or (ii) the
Executive being convicted of a felony; or (iii) the Executive being convicted of
any lesser crime or offense committed in connection with the performance of his
duties hereunder or involving moral turpitude; or (iv) the intentional and
willful failure by the Executive to substantially perform his duties hereunder
as directed by the Board (other than any such failure resulting from the
Executive's incapacity due to physical or mental disability).
(d) Voluntary Termination by the Executive. If the Executive
resigns or otherwise voluntarily terminates his employment before the end of the
current term of this Agreement, the amount the Executive shall be entitled to
receive from the Company shall be limited to his base salary accrued through the
date of termination, and any nonforfeitable benefits already earned and payable
to the Executive under the terms of any deferred compensation or incentive plans
of the Company.
For purposes of this paragraph, a resignation by the Executive
shall not be deemed to be voluntary if the Executive resigns during the period
of three months after the date he is (1) assigned to a position other than the
Chief Operating Officer or President of the Company (other than for Cause, or by
reason of permanent disability), (2) assigned duties materially inconsistent
with such position, or (3) directed to report to anyone other than the Company's
Chief Executive Officer or Board of Directors.
6. EFFECT OF CHANGE IN CORPORATE CONTROL
(a) In the event of a Change in Corporate Control, the vesting
of any stock options or other awards granted to the Executive under the terms of
the Company's 1995 Stock Option Plan shall become immediately vested in full
and, in the case of stock options, exercisable in full.
In addition, if, at any time during the period of twelve (12)
consecutive months following the occurrence of a Change in Corporate Control,
the Executive is involuntarily terminated (other than for Cause) by the Company,
the Executive shall be entitled to receive as severance pay in lieu of the
monthly payments described in Section 5(a) above, a series of thirty-six (36)
equal monthly payments, each equal to one-twelfth (1/12th) of the sum of (i) the
Executive's annual base salary in effect at the time of the Change in Corporate
Control plus (ii) the annual bonus paid to the Executive with respect to the
last fiscal year of the Company ending prior to the Change in Corporate Control.
(b) For purposes of this Agreement, a "Change in Corporate
Control" shall include any of the following events:
(1) The acquisition in one or more transactions of
more than thirty percent of the Company's outstanding Common Stock by
any corporation, or other person or group (within the meaning of
Section 14(d)(3) of the Securities Exchange Act of 1934, as amended);
(2) Any merger or consolidation of the Company into
or with another corporation in which the Company is not the surviving
entity, or any transfer or sale of substantially all of the assets of
the Company or any merger or consolidation of the Company into or with
another corporation in which the Company is the surviving entity and,
in connection with such merger or consolidation, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged
for other stock or securities of any other person, or cash, or any
other property.
(3) Any election of persons to the Board of Directors
which causes a majority of the Board of Directors to consist of persons
other than (i) persons who were members of the Board of Directors on
September 1, 1996, and (ii) persons who were nominated for election as
members of the Board by the Board of Directors (or a Committee of the
Board) at a time when the majority of the Board (or of such Committee)
consisted of persons who were members of the Board of Directors on
September 1, 1996; provided, that any person nominated for election by
the Board of Directors composed entirely of
-4-
5
persons described in (i) or (ii), or of persons who were themselves
nominated by such Board, shall for this purpose be deemed to have been
nominated by a Board composed of persons described in (i).
(4) Any person, or group of persons, announces a
tender offer for at least thirty percent (30%) of the Company's Common
Stock.
provided that, no acquisition of stock by any person in a public offering or
private placement of the Company's common stock or other transaction approved by
the Company's Board of Directors shall be considered a Change in Corporate
Control.
(c) Notwithstanding anything else in this Agreement, the
amount of severance compensation payable to the Executive as a result of a
Change in Corporate Control under this Section 6, or otherwise, shall be limited
to the maximum amount the Company would be entitled to deduct pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended.
7. DEATH
If the Executive dies during the term of this Agreement, the
Company shall pay to the Executive's estate a lump sum payment equal to the sum
of the Executive's base salary accrued through the date of death plus the total
unpaid amount of any bonuses earned with respect to the fiscal year of the
Company most recently ended. In addition, the death benefits payable by reason
of the Executive's death under any retirement, deferred compensation or other
employee benefit plan maintained by the Company shall be paid to the beneficiary
designated by the Executive in accordance with the terms of the applicable plan
or plans.
8. WITHHOLDING
The Company shall, to the extent permitted by law, have the
right to withhold and deduct from any payment hereunder any federal, state or
local taxes of any kind required by law to be withheld with respect to any such
payment.
9. PROTECTION OF CONFIDENTIAL INFORMATION
The Executive agrees that he will keep all confidential and
proprietary information of the Company or relating to its business (including,
but not limited to, information regarding the Company's customers, pricing
policies, methods of operation, proprietary computer programs and trade secrets)
confidential, and that he will not (except with the Company's prior written
consent), while in the employ of the Company or thereafter, disclose any such
confidential information to any person, firm, corporation, association or other
entity, other than in furtherance of his duties hereunder, and then only to
those with a "need to know." The Executive shall not make use of any such
confidential information for his own purposes or for the benefit of any person,
firm, corporation, association or other entity (except the Company) under any
circumstances during or after the term of his employment. The foregoing shall
not apply to any information which is already in the public domain, or is
generally disclosed by the Company or is otherwise in the public domain at the
time of disclosure.
The Executive recognizes that because his work for the Company
will bring him into contact with confidential and proprietary information of the
Company, the restrictions of this Section 9 are required for the reasonable
protection of the Company and its investments and for the Company's reliance on
and confidence in the Executive.
10. COVENANT NOT TO COMPETE
The Executive hereby agrees that he will not, either during
the Employment Term or during the period of twenty-four (24) months from the
time the Executive's employment under this Agreement is terminated, engage in
any business activities on behalf of any enterprise which competes with the
Company in the business of managing dental practices in the State of Florida.
The Executive will be deemed to be engaged in such competitive business
activities if he participates in such a business enterprise as an employee,
officer, director, consultant, agent,
-5-
6
partner, proprietor, or other participant; provided that neither (i) the
ownership of no more than 2 percent of the stock of a publicly traded
corporation engaged in a competitive business, nor (ii) the practice of
dentistry on his own behalf, without management of other dentists' practices,
shall be deemed to be engaging in competitive business activities.
The Executive agrees that he shall not, for a period of one
year from the time his employment under this Agreement ceases (for whatever
reason), or, if later, during any period in which he is receiving monthly
severance payments under Section 5 or Section 6 of this Agreement,
(i) solicit any employee or full-time consultant of the
Company for the purposes of hiring or retaining such employee
or consultant, or
(ii) contact any present or prospective client of the Company
to solicit such a person to enter into a management contract
with any organization other than the Company or a related
entity.
For this purpose, the Executive shall be considered to be receiving monthly
severance payments under Section 6 of this Agreement during any period for which
he would have received such severance payments had they not been offset by
compensation received from a successor employer.
11. INJUNCTIVE RELIEF
The Executive acknowledges and agrees that it would be
difficult to fully compensate the Company for damages resulting from the breach
or threatened breach of the covenants set forth in Sections 9 and 10 of this
Agreement and accordingly agrees that the Company shall be entitled to temporary
and injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, to enforce such provisions in any action
or proceeding instituted in the United States District Court for the Western
District of Florida or in any court in the State of Florida having subject
matter jurisdiction. This provision with respect to injunctive relief shall not,
however, diminish the Company's right to claim and recover damages.
It is expressly understood and agreed that although the
parties consider the restrictions contained in this Agreement to be reasonable,
if a court determines that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction on the activities of
the Executive, no such provision of this Agreement shall be rendered void but
shall be deemed amended to apply as to such maximum time and territory and to
such extent as such court may judicially determine or indicate to be reasonable.
12. SEPARABILITY
If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect.
13. ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit
of the heirs and representatives of the Executive and the assigns and successors
of the Company, but neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Executive.
14. ENTIRE AGREEMENT
This Agreement represents the entire agreement of the parties
and shall supersede any and all previous contracts, arrangements or
understandings between the Company and the Executive. The Agreement may be
amended at any time by mutual written agreement of the parties hereto.
-6-
7
15. GOVERNING LAW
This Agreement shall be construed, interpreted, and governed
in accordance with the laws of the State of Florida, other than the conflict of
laws provisions of such laws.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed, and the Executive has hereunto set his hand, as of the day and
year first above written.
Attest: COAST DENTAL SERVICES, INC.
/s/ Xxxxxx X. Xxxxx By /s/ Xxxxx Xxxxxx
----------------------------- ------------------------------
Secretary Title: Chief Executive Officer
Witness: EXECUTIVE:
/s/ Xxxx Xxxxxx
----------------------------- ----------------------------------
Xxxx Xxxxxx, D.D.S.
-7-
