EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of July, 1997 (the "Effective Date") by and between COASTAL
PHYSICIAN GROUP, INC. (the "Employer" or "Coastal"), a Delaware corporation with
its principal place of business in Durham, North Carolina and XXXXXX X.
XXXXXXXX, XX. ("Employee"), a resident of Durham, North Carolina.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee is currently an employee of Employer pursuant to a
Restated and Amended Employment Agreement dated as of January 15, 1997, the term
of which has been extended on a month-to-month basis since the expiration of its
initial term on April 30, 1997; and
WHEREAS, Employer and Employee desire to substantially and materially
modify the existing terms of employment of Employee in order to, among other
matters, provide for an extended term of employment and to provide for different
and additional duties and other matters; and
WHEREAS, subject to the terms and conditions hereinafter provided, Employer
desires to restate and amend the existing employment arrangement and to employ
Employee, and Employee desires to accept such employment, on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the employment of Employee and the
compensation to be paid by Employer to Employee, and the covenants set forth
herein, Employee hereby accepts employment hereunder subject to the terms and
conditions stated below, including the agreement of Employee not to enter into
certain competitive activities with the Employer, as follows:
1. Employment. Employer hereby employs Employee, and Employee hereby
accepts such employment, subject to the terms and conditions stated herein. This
Agreement shall amend, restate and supersede the existing employment agreements
and arrangements applicable to Employee, including without limitation the
Restated and Amended Employment Agreement dated January 15, 1997.
2. Term. This Agreement shall commence effective as of July 1, 1997 (the
"Effective Date") and shall continue through and including June 30, 1998 (the
"Initial Term"), unless this Agreement is (a) otherwise terminated in accordance
with the provisions contained herein, or (b) extended by mutual agreement of
Employer and Employee. After the Initial Term, this Agreement may be renewed or
extended upon mutual agreement of the parties. If the parties do not agree to an
extension on other terms, then this Agreement shall automatically renew on a
month-to-month basis until either Employer or Employee gives at least thirty
(30) days notice that it or he will not extend the term past the end of the
following calendar month.
3. Duties. Employee shall perform the following duties pursuant to this
Agreement:
(a) Employee shall serve as an Executive Vice President and Chief
Administrative Officer of Employer. Employee is currently serving and will
continue to serve on the Board of Directors of Employer. Employee may be removed
at anytime from any board seat as deemed appropriate by the shareholders of
Employer, and such removal shall not be considered a breach by the Employer of
this Agreement. Removal of Employee from the office of Executive Vice President
and Chief Administrative Officer shall be considered a material breach of the
terms of this Agreement by Employer.
(b) As the Chief Administrative Officer of Employer, Employee shall be
principally responsible for the administrative and operational affairs of
Employer and shall coordinate and supervise the legal affairs of the Employer,
reporting to the Chief Executive Officer of Employer. In addition Employee shall
be available to assist Employer and its related entities in connection with the
management and operation of their respective businesses. Employee shall perform
all duties and responsibilities normally associated with his officer and
director positions and shall carry out such other duties and responsibilities
and as otherwise may be reasonably assigned to Employee by the Chief Executive
Officer of Employer. Employee shall continue to serve as President and Chief
Executive Officer of Coastal Provider Networks, Inc. and shall be principally
responsible for managing the operation and/or sale of that business unit.
Without limiting the generality of the foregoing Employer shall
have the following specific duties and responsibilities during the third and
fourth fiscal quarters of 1997:
(i) Third Quarter. During the third fiscal quarter of 1997 (July
1, 1997 to September 30. 1997), Employee shall:
A. Work with Xxxxxxxxx Management Strategies, Inc., Xxxxxxx X.
Xxxxx III, Ltd., and Xxxxxxxx X. Xxxxxx (the "Consultants"), who have
been engaged by Coastal, to develop a transition plan;
B. Work with the Consultants to develop a corporate group
reduction plan to reduce expenses and functions of Employer as the
holding company for its various subsidiaries;
C. Develop cash management and reporting systems needed in
connection with the financing being provided by affiliates of National
Century Financial Enterprises, Inc.;
D. Continue to provide oversight of the operations of Integrated
Provider Networks, Inc. and Practice Solutions, Inc. and their
affiliates;
E. Oversee and direct the divestiture of Better Health Plan, Inc.
if approved by the Board of Directors of Employer;
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F. Oversee and direct the divestiture, closure or retention of
other business units as appropriate;
G. Participate with the Consultants and other senior management
of the Company in the development of the 1998 budget and cash flow
projections and strategies.
(ii) Fourth Quarter. During the fourth fiscal quarter of 1997
(October 1, 1997 to December 31, 1997), Employee shall:
A. Continue and complete matters described in (i) above,
including completion of the transition plan and the corporate group
reduction plan;
B. Develop specific cash management and operating improvements
plans for specific significant business units ("SBUs");
C. Develop and implement incentive compensation programs for SBU
leaders;
D. Working with the Chief Financial Officer, review and recommend
financial and management reporting systems for Employer and the SBUs;
E. Develop and implement a real estate/facilities management
plan;
F. Develop a corporate compliance plan for all subsidiaries and
holding companies of Coastal, similar to that currently in place at
Healthcare Business Resources, Inc.
(c) Employee shall at all times abide and observe Employer's policies
and procedures as are in effect from time to time. Employee acknowledges that
Employer is an equal opportunity employer and that Employer's established policy
is not to discriminate on the basis of age, marital status, race, color, sex,
religion or national origin, or to violate any federal or state
anti-discrimination law. Employee shall be responsible for carrying out and
implementing the foregoing policy throughout the operations and activities of
Employer.
4. Compensation. For the services provided by Employee as an employee of
Employer, Employer shall pay Employee the annual base salary (the "Base Salary")
and other compensation identified on Exhibit A.
5. Additional Benefits. Commencing on or about the Effective Date, and
thereafter during the Initial Term of this Agreement, Employee shall be entitled
to and Employer shall provide to Employee all employment benefits which are
generally provided to senior executive officers of Employer. In addition,
Employer will provide Employee an office and administrative support appropriate
to Employee's position, and Employer will pay the cost of continuing legal
education required to maintain the law license of Employee and provide
reimbursement of usual and customary dues and license fees consistent with other
senior management.
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6. Devotion of Time. During the term of this Agreement, Employee shall
devote his full time and attention to the business of Employer and its
affiliates in a manner and to an extent commensurate with the commitment of
other executive officers of Employer, to fulfill his duties and responsibilities
under the Agreement and to advance the business interests and good reputation of
Employer and the direct and indirect subsidiaries of Employer.
7. Confidentiality and Non-Disclosure. Employee acknowledges that, during
this employment, he will gain access to, or possession or knowledge of, numerous
trade secrets, confidential information, other valuable properties not generally
available to the public and proprietary information, including but not limited
to, hospital and healthcare facility client lists, client files and records,
lists of potential clients, prospects or targets, and/or other market and
marketing data and plans, price books, promotional devices and methods, business
methods, manuals and plans, business and sales techniques, strategic plans,
computer programs, hospital and physician contracts, and research and
development (hereinafter referred to collectively as "Confidential
Information"). Employee acknowledges that such Confidential Information is
unique and a valuable asset which is owned solely by Employer (or affiliates of
Employer) and is to be used only for Employer's or its affiliates' (other than
any natural persons) benefit. Employee shall not, during or after the term of
this Agreement, disclose, divulge, reveal, transfer, reproduce, sell, capitalize
upon or take advantage of such Confidential Information and, in addition,
Employee shall exercise all reasonable efforts and precautions to protect
against such Confidential Information from misappropriation, misuse, disclosure,
breach of confidentiality, or other conduct or action inconsistent with
Employer's rights; provided, however, that Confidential Information may be
disclosed to the extent (i) required by law or court order or (ii) generally
available to the public other than by unauthorized disclosure. Upon termination
of this Agreement, Employee shall return immediately to Employer all of
Employer's (or its affiliates) property (including, without limitation,
Confidential Information) in Employee's possession or control. Any materials,
manuals, documents or records developed, written, edited or designed by Employee
while employed by Employer are the exclusive property of Employer.
8. Covenant Not To Compete. Employee will, as a result of this employment,
be responsible for the executive management and direction of substantial
business resources and assets of Employer and its affiliates and will develop
additional contacts and relationships with numerous individuals, executives,
companies, insurers, providers and health maintenance organizations which are
also involved in the managed healthcare business. Such individuals and
organizations will have business and contractual relationships with Employer or
its affiliates that will be a valuable asset thereof. Employee therefore agrees
as follows:
(a) Employee agrees that for a period of six (6) months after
termination of this Agreement, Employee will not become employed by, own,
operate, manage, or provide consulting services to any business that provides
the same type of services as Employer currently provides in the states where
Employer is providing services as of the date of termination of this Agreement.
(b) Employee agrees for a period of twelve (12) months after
termination of this Agreement, not to solicit any hospital, clinic, healthcare
facility or other client having a
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contractual or business relationship with Employer or of any subsidiary of
Employer, or of any prospect or potential client to which a marketing proposal
or presentation was made within six (6) months of termination, and of which
Employee was aware, involving the provision of healthcare services, which
solicitation would be for the purpose of providing healthcare or healthcare
related services.
(c) Employee further agrees to refrain for a period of twelve (12)
months following the termination of this Agreement, from any activity of any
nature intended or reasonably calculated to result in the termination or
cancellation of any contractual or business arrangement between the Employer or
any subsidiary of Employer, and any insurer, client, facility or other business
or entity.
(d) Employee agrees to notify any entity or organization of which he
is a director, significant shareholder (or other equity owner), manager, general
partner, executive officer or as to which he is otherwise a controlling party or
over whom he exerts significant influence (an "Affiliate") of the provisions of
Sections 7, 8 and 9 of this Agreement, and Employee agrees that he will not
cause or permit such Affiliate to engage in any activity that would be
prohibited for Employee personally under this Agreement.
(e) Nothing in this Agreement shall prevent Employee from making
passive investments in third parties so long as such investments do not require
Employee to perform any services in connection with any such investments in such
third parties.
9. Solicitation of Other Employees.
(a) Employee agrees that he shall not, for a period of twelve (12)
months after the termination of this Agreement, solicit or seek to influence,
either directly or indirectly, any employee or any physician or healthcare
provider under contract with Employer at any time during Employee's employment
by Employer or any of its subsidiaries or affiliates, to enter into any
employment agreement, independent contractor arrangement, or any other
contractual arrangement whereby such individual would perform services for
compensation, either directly or indirectly, for any person, firm, corporation
or other entity or business that provides products or services in competition
with Employer or any of its subsidiaries or affiliates.
(b) Employee further agrees that neither he nor any Affiliate shall,
for a period of twelve (12) months after the termination of this Agreement,
hire, employ, enter into any employment agreement, independent contractor
arrangement, or any other contractual arrangement whereby a "Coastal Employee"
(as defined below) would perform services for compensation for Employee or such
entity. For the purposes hereof, "Coastal Employee" shall mean any person who
has been employed by Coastal or any or its direct or indirect subsidiaries at
any time during the six (6) month period immediately preceding the termination
of this Agreement.
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10. Breach and Remedies.
(a) Employee acknowledges that the breach or threatened breach of any
of the covenants set forth in Sections 7, 8 or 9 may result in immediate and
irreparable injury to Employer or its affiliates. Accordingly, Employee agrees
the provisions of Sections 7, 8 and 9 shall inure to the benefit of and may be
enforced by Employer or any if its affiliates. In addition to any rights or
remedies available to Employer for a breach by Employee of Sections 7, 8 or 9,
Employer and its affiliates shall be entitled to injunctive relief to enforce
the obligations of Employee contained in such Sections. Nothing herein shall be
construed as prohibiting Employer or its affiliates from pursuing any other
legal or equitable remedies that may be available to it for any such breach or
threatened breach, including the recovery of damages from Employee.
(b) The periods of time provided for in Sections 7, 8 or 9 shall be
extended by any period of violation or periods of time required to resolve by
arbitration, not to exceed 45 days, any dispute regarding the provisions
thereof.
(c) Employee hereby acknowledges that the covenants set forth in
Sections 7, 8 and 9 are reasonable in all respects and are necessary to protect
the legitimate business interests of Employer and its affiliates. In the event
that any of the provisions of this Agreement are found to be unenforceable or
void (either in whole or in part), then the offending portion shall be construed
as valid and enforceable only to the extent permitted by law and the balance of
this Agreement will remain in full force and effect. It is the intention of
parties to restrict the activities of Employee only to the extent necessary to
protect the legitimate business interests of Employer, its subsidiaries and/or
affiliates, and not to deprive Employee of the right or ability to earn a
livelihood.
11. Vacation and Sick Leave. All earned, accrued and unused vacation and
any unused sick pay, upon termination, will be governed by Employer's then
current policies.
12. Termination. This Agreement may be terminated as follows:
(a) Employer may terminate this Agreement without cause at any time
upon thirty (30) days' prior written notice to Employee, and Employee may
terminate this Agreement without cause at any time upon sixty (60) days' prior
written notice to Employer. This thirty or sixty day period (as applicable) is
hereafter referred to as the "Notice Period." In the event of such termination,
Employee, if requested by Employer, shall continue to perform his obligations
and duties under this Agreement and assist with the transition of duties to a
new employee during the Notice Period. Employer, at its option, may notify
Employee at any time during the Notice Period that no further services are to be
performed. In the event that this Agreement is terminated without cause by
either party, the covenants set forth in Sections 7, 8 and 9 shall continue in
effect, and the applicable start date for the periods of time in Sections 7, 8
or 9 shall be the later of the date that notice of termination is given or the
last date upon which services are performed.
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(b) Upon expiration of the Initial Term or any extended term
(including month to month extensions) of this Agreement without renewal or
extension or if this Agreement is terminated without cause by Employer at any
time during the term hereof, Employer shall pay Employee an amount equal to
one-half of the annual Base Salary then in effect (see Exhibit A), all to be
paid out in equal installments over the six (6) months following the date of
termination, beginning thirty (30) days from the date of termination.
(c) This Agreement may be terminated by Employer at any time for cause
upon written notice to Employee, which notice shall specify the reason for
termination. For purposes of this Subsection 12(c), cause shall include, but
shall not be limited to, the following: fraud; dishonesty; substantial and
continuous nonperformance of assigned duties; failure to comply with a material
written policy of Employer; failure by Employee to perform or meet objective and
measurable standards; unlawful activities for which Employee is indicted or
convicted in a jurisdiction of the United States; and material breach of this
Agreement.
(d) This Agreement shall terminate upon the death or total and
permanent disability of Employee. In the event that this Agreement terminates
due to Employee's death or total and permanent disability, Employer shall pay
upon such termination to Employee, Employee's Base Salary accrued through the
date of Employee's death or the date he becomes totally and permanently
disabled, as the case may be. Permanent disability for purposes of this
Agreement shall mean the inability to perform the functions of Employee's
position for a continuous period of six (6) months.
(e) This Agreement may be terminated by Employee upon a material
breach of the terms of this Agreement by Employer, and if this Agreement is
terminated at any time during the term hereof by Employer under this subsection,
then Employer shall pay Employee an amount equal to one-half of the annual Base
Salary then in effect (see Exhibit A), all to be paid out in equal installments
over the six (6) months following the date of termination, beginning thirty (30)
days from the date of termination.
(f) Except as expressly set forth herein, all of Employer's
obligations for compensation or other benefits shall terminate upon the
effective date of the termination of this Agreement.
13. Compliance With Securities Laws. Employee agrees to comply with all
applicable federal and state securities laws and with all applicable policies of
Employer concerning the buying and selling of stock of Employer by employees to
the extent such policies do not restrict Employee's express rights under this
Agreement.
14. Entire Agreement. This Agreement contains the entire understanding
between the parties and supersedes and cancels any prior oral and written
understanding and/or agreements between them respecting the subject matter of
this Agreement. This Agreement may be amended or modified only in writing signed
by both parties.
15. Severability. If any provision, term, condition, or clause of this
Agreement or the application thereof shall be invalid or unenforceable to any
extent, the remainder of this
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Agreement shall not be affected thereby and shall be enforced to the greatest
extent permitted by law.
16. Governing Law. This Agreement is made and entered into in the State of
North Carolina and is to be construed in accordance with and take effect under
the laws of the State of North Carolina without regard to principles of
conflicts of laws.
17. Assignment. No party shall have any right to assign, mortgage, pledge,
hypothecate or encumber this Agreement in whole or in part, or any benefit or
any right accruing hereunder, without in any such case first obtaining the prior
written consent of the other party hereto, except that Employer may assign this
Agreement to one of its affiliates or wholly-owned subsidiaries, provided that
in the event of such an assignment, Employer shall remain primarily responsible
for its obligations hereunder. All rights hereunder are personal to the Employee
and shall cease upon the termination of this Agreement unless otherwise stated
herein; provided, however, that the provisions hereof shall inure to the benefit
of the personal representatives, heirs and legatees of Employee.
18. Notice. Any notice, or other written communication to be given pursuant
to this Agreement for whatever reason shall be deemed duly given and received
(a) if delivered personally, from the date of delivery, or (b) by certified
mail, postage pre-paid, return receipt requested, three (3) days after the date
of mailing, addressed: in the case of Employer, to its principal office and
marked "Attention: President," and in the case of Employee, to his last known
permanent address according to the books and records of Employer.
19. Miscellaneous. Any protection, benefits, rights or other provisions
given to Employer in this Agreement shall also be deemed to apply to, protect
and inure to the benefit of Employer's affiliates and subsidiaries. All rights
of Employer expressed in this Agreement are in addition to any rights available
under the common law or other legal principles. Section or paragraph titles or
captions contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof. All pronouns
and any variation thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of person or persons, firm or firms,
corporation or corporations, and as context may require.
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IN WITNESS WHEREOF, the parties sign and seal below, effective the date
first written in this Agreement.
EMPLOYEE:
(SEAL)
--------------------------------------
Xxxxxx X. Xxxxxxxx, Xx.
EMPLOYER:
COASTAL PHYSICIAN GROUP, INC.
By:
-----------------------------------
Xxxxxx X. Xxxxx, President and
Chief Executive Officer
ATTEST:
By:
--------------------------
Assistant Secretary
[CORPORATE SEAL]
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EXHIBIT A
---------
COMPENSATION
------------
1. Base Salary. For services provided as an employee of Employer, Employee shall
receive, beginning on the Effective Date, a base salary of $180,000 per annum
(the "Base Salary") payable in accordance with Employer's current payroll
practices; provided that during the Initial Term, the Base Salary will be paid
monthly at a rate of $160,000 per annum with $10,000 (one-half of the balance)
paid December 31, 1997 and $10,000 (one-half of the balance) paid June 30, 1998.
The Base Salary shall be subject to annual review and adjustment as of each July
1 during the term of this Agreement (or such other times as may be determined by
Employer), but if renewed by agreement of Employer and Employee for the period
from July 1, 1998 through June 30, 1999, the Base Salary shall be expected to
increase by seven and one-half percent (7.5%) or by an amount intended to bring
Employee's Base Salary in line with other senior executives (this provision
shall not create any right or obligation of Employer or Employee to extend the
term of this Agreement or to prevent Employer and Employee from extending upon
such terms and conditions as they determine by mutual agreement).
2. Incentive Bonus. Employee shall be entitled to an incentive or performance
bonus (the "Incentive Bonus") equal to $90,000 (one-half of annual base pay),
based on the following:
(a) Employee must be employed by Employer on June 30, 1998 unless
Employee's employment has been terminated (i) by Employer without cause under
Section 12(a), (ii) by death or disability of Employee under Section 12(d) where
such death or disability occurs within the last four months of the Initial Term
or (iii) by Employee because of a material breach by Employer as provided in
Section 12(e);
(b) Employer and its consolidated subsidiaries must have achieved a
positive Consolidated Cash Flow for the second fiscal quarter of 1998. For
purposes of this Agreement, the following definitions and calculations shall
apply:
(i) "Consolidated Cash Flow" for any period shall mean the sum of (A)
Consolidated Net Income (or minus Consolidated Net Loss) for that period of
Coastal and its subsidiaries, (B) provisions for taxes based on income or
profit that reduced that Consolidated Net Income (or increased that
Consolidated Net Loss) for that period, and (C) depreciation and
amortization expenses and other noncash items that reduced that
Consolidated Net Income (or increased that Consolidated Net Loss) for that
period.
(ii) "Consolidated Net Income" or "Consolidated Net Loss" for any
period means the consolidated net income or net loss of Coastal and its
subsidiaries, excluding intercompany items and after deductions for
minority interests, as determined in accordance with generally accepted
accounting principles; provided that there shall be excluded
(A) gain or loss resulting from the sale, conversion or other
disposition of capital assets (i.e, assets other than current assets),
(C) any gain or loss resulting from the write-up or write-down of
any assets, and
(D) any other gains or losses of any non-operating, non-recurring
or extraordinary nature.
(c) Calculations of Consolidated Cash Flow shall be made as promptly as is
reasonable after the end of the Initial Term by the independent public
accountants of Employer.
(d) If earned, the Incentive Bonus may be paid by the Employer either (i)
in cash or (ii) so long as Employer has common stock traded on a national
securities exchange, in the form of registered common stock of Employer that may
be freely traded (subject to trading blackouts that apply to Employee because of
his position as a director and officer of Employer) on a national securities
exchange, with the number of shares to be equal to 90,000 divided by the closing
price of such stock on June 30, 1998 (or the last trading day prior to June 30,
1998 if June 30, 1998 is not a trading date), provided that the Employer shall
issue cash in lieu of any fractional shares. In the event the Employer elects to
pay in stock but does not have registered common stock available to pay the
Incentive Bonus, then Employer shall pay one-third of the Incentive Bonus
($30,000) in cash and shall issue to Employee unregistered shares of common
stock of Employer for the balance, with the number of shares to be equal to
60,000 divided by the closing price of such stock on June 30, 1998 (or the last
trading day prior to June 30, 1998 if June 30, 1998 is not a trading date),
provided that the Employer shall issue cash in lieu of any fractional shares. In
the event the Employer issues unregistered shares, Employee understands that
such shares will be issued by Employer in a private placement pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Act"). Employee
warrants and represents to Employer that he is acquiring the shares for his own
account for investment purposes and without a view to distributing them to
subsequent purchasers, and Employee understands that legends will be placed on
the certificates evidencing the shares restricting their transfer or other
disposition without registration under the Act or the availability of an
exemption from registration under the Act.
3. Divestiture Bonus. The Restated and Amended Employment Agreement which this
Agreement replaces provides for a Divestiture Bonus (in Section 8 of the
Restated and Amended Employment Agreement). The only remaining assets to which
the Divestiture Bonus applies as of the date of this Agreement are Integrated
Provider Networks, Inc. ("IPN") and Practice Solutions, Inc. ("PSI"). Employee
shall be entitled to any unpaid Divestiture Bonus for assets disposed of prior
to the date of this Agreement, such Divestiture Bonuses to be paid in accordance
with the terms of the Restated and Amended Employment Agreement. In addition,
upon sale or divestiture of IPN and/or PSI during the term of this Agreement or
within ninety (90) days of the termination of Employee's employment under this
Agreement unless employment is terminated by Employer for cause, Employee shall
be entitled to receive a Divestiture Bonus equal to 0.5% of the Net Proceeds, as
hereinafter defined. The Divestiture Bonus shall be earned upon Employer's
receipt of the sales proceeds from a sale or divestiture. For purposes of this
paragraph, Net Proceeds shall have the same meaning as the term
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"Transaction Consideration" set forth in the engagement letter with Advest, Inc.
dated November 22, 1996 (or the equivalent term if another investment banker is
engaged). Payment of any Divestiture Bonus will be made in two equal monthly
installments commencing within thirty days of the receipt of the Net Proceeds by
Coastal for the company for which the Divestiture Bonus is earned.
4. Stock Options or Awards. Employee shall be eligible for stock options and
awards available to other senior management of Employer and its affiliates from
time to time. This subsection shall not be a guarantee of any awards or options,
and Employee recognizes that the awarding of such compensation is governed by
plans adopted by the Board of Directors of Employer from time to time.
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