EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of the 15th day of September, 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 XXXXXXX X. XXXXX,
III ("Employee"), a resident of Durham, North Carolina.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, subject to the terms and conditions hereinafter provided, Employer
desires to directly employ Employee for a term described below, 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.
2. Term. This Agreement shall commence effective as of September 15, 1997
(the "Effective Date") and shall continue through and including August 31, 1999
(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 the Chief
Financial Officer ("CFO") of Employer.
(b) As the CFO Employee shall be principally responsible for the
financial affairs of 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 position and shall carry out such other
duties and responsibilities, not inconsistent with the responsibilities of his
office, as otherwise may be reasonably assigned to Employee by the Chief
Executive Officer of Employer.
(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. In addition, Employer will
reimburse Employee for all reasonable out-of-pocket expenses incurred in
performing duties during the term of this Agreement, including normal and usual
relocation expenses incurred in relocating Employee and his family to North
Carolina.
5. Additional Benefits. Commencing on or about the Effective Date, and
thereafter during the 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 provide reimbursement of usual and customary dues
and license fees consistent with other senior management.
6. Devotion of Time. During the term of this Agreement, Employee shall
devote his best efforts and normal business time and attention (excluding sick
leave and vacation) 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
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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. In consideration of the
Signing Bonus, the grant of options and the incentive bonuses granted to
Employee under this Agreement, Employee 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 contractual or business relationship with
Employer or any subsidiary of Employer at the time of termination, 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.
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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 or any of its subsidiaries or affiliates
at the time of termination of this Agreement, 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.
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, whichever period is lesser.
(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.
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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 ninety (90) days' prior written notice to Employee, and Employee may
terminate this Agreement without cause at any time upon ninety (90) days' prior
written notice to Employer. This ninety day period 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, but Employer
shall continue to pay Employee's Base Salary (as defined on Exhibit A through
the end of the Notice Period. 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.
(b) 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(b), cause shall include, but
shall not be limited to, the following: fraud; dishonesty; substantial and
continuous nonperformance of assigned duties after Employer has provided
Employee with written notice of non-compliance and at least thirty (30) days
thereafter to cure; failure to comply with a material written policy of Employer
after Employer has provided Employee with written notice of non-compliance and
at least thirty (30) days thereafter to cure; failure by Employee to perform or
meet objective and measurable standards of which Employee has been notified in
advance in writing; criminal activities for which Employee is indicted or
convicted in a jurisdiction of the United States; and material breach of this
Agreement provided that Employer has provided Employee with written notice of
breach and at least thirty (30) days thereafter to cure.
(c) 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.
(d) 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. In consideration of the
Signing Bonus provided for in Exhibit A, Employee agrees that he is not entitled
to any severance payment upon termination other than severance pay per
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Employer's general severance policy that is based on years of service (and
payment of Base Salary and benefits through the end of the Notice Period).
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.
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 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. Arbitration. Any differences, claims or matters in dispute arising
between the parties hereto out of this Agreement shall be submitted by the
parties to arbitration as mutually agreed upon. Article 45A of Chapter 1 of the
General Statutes of North Carolina shall apply to such arbitration. In the event
the parties cannot agree upon the means of submission to arbitration, they
thereby agree that any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be submitted by them in Durham, North
Carolina, to arbitration by the American Arbitration Association or its
successor; and the determination of the American Arbitration Association or its
successors shall be final and absolute. The arbitrator
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shall be governed by the duly promulgated rules and regulations of the American
Arbitration Association or its successor, and the pertinent provisions of the
laws of the State of North Carolina relating to arbitration. The decision of the
arbitrator may be entered as a judgment in any court of the State of North
Carolina or elsewhere. The parties further agree that any differences, claims,
or matters in dispute arising between the parties hereto shall be governed by
the laws of the State of North Carolina.
20. 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.
IN WITNESS WHEREOF, the parties sign and seal below, effective the date
first written in this Agreement.
EMPLOYEE:
(SEAL)
--------------------------------------
Xxxxxxx X. Xxxxx, III
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
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COMPENSATION
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1. Signing Bonus. Employee shall receive a signing bonus (the "Signing
Bonus") of Fifty Thousand and No/100 Dollars ($50,000), payable upon the
relocation of Employee's family to North Carolina. Employer and Employee
acknowledge that Employee has previously received a bonus of $50,000 paid to
Employee as a consultant prior to the execution of this Agreement and the
commencement of Employee's employment with Employer.
2. Base Salary. For services provided as an employee of Employer, Employee
shall receive, beginning on the Effective Date, a base salary of $200,000 per
annum (the "Base Salary") payable in accordance with Employer's current payroll
practices. The Base Salary shall be subject to annual review and adjustment as
of each August 1 during the term of this Agreement (or such other times as may
be determined by Employer, but the annual review and adjustment shall occur no
less than once per calendar year).
3. Options. As an inducement essential to Employee entering into this
Agreement, Employer shall recommend that the Compensation Committee issue to
Employee options (the "Options") for one hundred thousand (100,000) shares of
the Employer's common stock (the "Stock"), with an exercise price based on the
market price of the Employer's common stock on the date this Agreement is
executed, or the next preceding trading day is such date is not a trading day.
The Options shall vest over three (3) years, with 33,333 shares vesting on the
first anniversary date of the signing of this Agreement (the "Anniversary
Date"), 33,333 shares vesting on the second Anniversary Date, and 33,334 shares
vesting on the third Anniversary Date; provided that on each such Anniversary
Date, the above Options shall only vest if Employee is a full-time time employee
of Employer on such Anniversary Date.
Employer understands that if the Options are exercised the Stock issued
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 Stock for his own account for
investment purposes and without a view to distributing them to subsequent
purchasers. Employee understands that legends will be placed on the certificates
evidencing the Stock restricting their transfer or other disposition without
registration under the Act or the availability of an exemption from registration
under the Act.
4. Incentive Bonus. Employee shall be entitled to an incentive or
performance bonus (the "Incentive Bonus") of up to $80,000 per annum (forty
percent of annual Base Salary), based on cash flow, audit and timely SEC
reporting, as well as the following:
(a) Employee must be employed by Employer at the end of the fiscal quarter
for which the Incentive Bonus is calculated;
(b) Employer and its consolidated subsidiaries must have achieved a
positive Consolidated Cash Flow for the fiscal quarter(s) for which the
Incentive Bonus is calculated. 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 relevant fiscal quarter 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 an officer of Employer) on a national securities exchange, with
the number of shares to be equal to the dollar amount of the Incentive Bonus
divided by the closing price of such stock on the last trading day of the fiscal
quarter for which the Incentive Bonus is earned, 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-half of the Incentive Bonus
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 one half of
the dollar amount of the Incentive Bonus divided by the closing price of such
stock on the last trading day of the fiscal quarter, 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.
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5. 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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