1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into this 1st day of September, 1996, effective as set
forth in Section 2 below, by and between COASTAL PHYSICIAN GROUP,
INC., a Delaware corporation ("Employer") and XXXXXX XXXXXXXX-
XXXX ("Employee").
WHEREAS, Employee has significant experience and background
in the business in which the Employer and its affiliates operate;
WHEREAS, subject to the terms and conditions hereinafter
provided, Employer desires 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,
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. hereby accepts such employment, subject to the terms and
conditions stated herein.
2. TERM. This Agreement shall commence effective as of
EMPLOYMENT. Employer hereby employs Employee, and Employee
September 1, 1996 (the "Effective Date") and shall continue
through and including September 30, 1998 (the "Initial Term"),
unless this Agreement is (a) otherwise terminated in accordance
with the provisions contained herein, or (b) extended by written
consent of Employer and Employee.
3. DUTIES. Employee shall perform the following duties
pursuant to this Agreement:
(a) Employee shall be given the title of "President of
Coastal's Managed Care Division" and shall be president of
Coastal Managed Healthcare, Inc. ("CMH") and an officer of
Health Enterprises, Inc. ("HEI"), Healthplan Southeast, Inc.
("HPSE") and shall serve on the Board of Directors of HEI,
HPSE, Better Health Plan, Inc. ("BHP") and Doctors Health
Plan, Inc. ("DHP"). Employee may be removed at anytime from
any officer position and/or board seat as deemed appropriate
by (i) Price Waterhouse as plan manager (the "Plan Manager")
under the engagement letter between Employer and Price
Waterhouse dated April 4, 1996 pursuant to which the Plan
Manager implements the Management Action Plan referred to
therein (the "Management Action Plan"), (ii) the Board of
Directors of Employer or (iii) the shareholder of the
applicable entity.
(b) As President of Employer's Managed Care Division,
Employee shall be principally responsible for the overall
operations of CMH and its affiliates in managed care.. In
addition Employee shall be available to assist Employer and
its related entities in connection with the management and
operation of their respective businesses, including without
limitation coordinating the managed care activities of
Employer, CMH,
2
HEI, HPSE, BHP and DHP and other related entities. Employee
shall perform all duties and responsibilities normally
associated with the officer and director positions with such
entities and shall carry out such other duties and
responsibilities and as otherwise may be reasonably assigned
to Employee by the Plan Manager or the Employer's Board of
Directors, including but not limited to, being involved and
consulted in determining major business decisions regarding
the development and strategic expansion affecting the
managed care subisidiaries of Employer.
(c) Employee shall be expected to travel as may be
determined by Employer to be necessary or appropriate to
Employee's performance of her duties hereunder.
(d) 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. CHANGE OF MANAGEMENT OR CONTROL. A change in management or
control of Employer shall not be considered a breach of this
Agreement by Employer or a termination of Employee by Employer so
long as the Plan Manager is retained and continues to implement
the Management Action Plan, and this Agreement will continue in
full force and effect. However, Employee will have the option to
deem termination of the agreement between Employer and the Plan
Manager a termination of this Agreement without cause by the
Employer as described in paragraph 15(a), and Employee will have
thirty (30) days to elect to continue employment under this
Agreement or to accept the termination without cause provisions
as outlined in paragraphs 15(a) and (b) below. If Employee
elects to accept the termination without cause provisions due to
a termination of the Plan Manager, then Employee shall provide a
minimum of thirty (30) days notice of termination. In the event
that the agreement between Employer and the Plan Manager or Price
Waterhouse is terminated for any reason, then the President of
Employer will fulfill all duties of the Plan Manager under this
Agreement.
6. DEVOTION OF TIME. During the term of this Agreement,
Employee shall devote her full time and attention to the business
of Employer and its subsidiaries in a manner and to an extent
commensurate with the commitment of other executive officers of
Employer, to fulfill her duties and responsibilities under the
Agreement and to advance the business interests and good
reputation of Employer.
7. CONFIDENTIALITY AND NON-DISCLOSURE. Employee acknowledges
that, during this employment, he/she will gain access to, or
possession or knowledge of, numerous trade secrets, confidential
information, other valuable properties not generally available to
the public and
3
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 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 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 property
(including, without limitation, Confidential Information) in
Employee's possession or control.
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 operating subsidiaries 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 operating
subsidiaries that will be a valuable asset thereof. Accordingly,
Employee agrees as follows:
(a) Employee agrees that, during this Agreement and for a
period of eighteen (18) months after termination of this
Agreement, she will not solicit, nor will she in any way
affiliate herself with (as an employee, agent, principal,
consultant or otherwise) any individual or entity that
solicits, any hospital, health maintenance organization,
independent practice association, physician hospital
organization, managed care company, insurance company,
employer, payor, hospital, clinic, healthcare facility or
any other client having a contractual or business
relationship with Employer or any of its affiliates or
subsidiaries, or any prospective entity or individual to
which a marketing proposal, presentation or contact was made
during the six (6) month period immediately preceding the
termination of this Agreement (collectively, all such
current and prospective clients, the "Clients"), for the
purpose of providing healthcare or healthcare related
services similar to the services provided by Employer or any
of its affiliates or subsidiaries.
(b) Employee further agrees to refrain, for the term of
this Agreement and for a period of eighteen (18) months
following the termination of this Agreement, from any
activity of any nature intended or reasonably calculated to
result in the termination, cancellation or diversion of any
contractual or business arrangement between Employer or any
of its affiliates or subsidiaries and any Clients. The
above restriction applies, without limitation, to activities
undertaken through relationships with competitors of
Employer or
4
any of its affiliates or subsidiaries, as well as activities
undertaken at the direct request of, and perhaps based upon
any employment relationship with, any such Clients.
(c) 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. Employee shall not during
the term of this Agreement and for eighteen (18) months after the
termination of this Agreement, solicit or seek or influence,
either directly or indirectly, any employee or any physician or
healthcare provider under contract with Employer or any of its
affiliates or subsidiaries, 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 affiliates or subsidiaries.
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. Accordingly, Employee agrees that in addition to
any rights or remedies available to Employer for a breach by
Employee of Sections 7, 8 or 9, Employer shall be entitled
to injunctive relief to enforce the obligations of Employee
contained in such Sections. Nothing herein shall be
construed as prohibiting Employer 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. 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 to earn
a livelihood.
11. BENEFITS.
(a) Employee shall be eligible to participate in employee
benefits programs commensurate with those accorded to
executive officers of Employer. Additionally, Employer
shall be entitled to the following:
5
i) four (4) weeks of paid vacation per year;
ii) reimbursement, in accordance with Employer's
policies and procedures, for reasonable and necessary
business expenses incurred in connection with the
performance of the duties hereunder; and
ii) if Employee agrees to relocate (Employer shall not
require Employee to relocate during the term of this
Agreement), Employee will be reimbursed for Employee's
relocation expenses in accordance with Employer's
policies as are then in effect.
(b) Employer shall have the right and option, in its sole
discretion and at its cost and expense, to purchase "key
man" or other life insurance with respect to Employee, and,
in the event Employer elects to purchase such insurance,
Employee shall cooperate as may be necessary in connection
with the purchase of such insurance, including undergoing
physical examinations in connection therewith.
12. VACATION AND SICK LEAVE. All earned, accrued and unused
vacation pay will be payable to Employee upon termination. Any
unused sick pay, upon termination, will be governed by Employer's
then current policies.
13. WRITTEN AGREEMENT; ATTORNEYS' FEES. Employee shall be
reimbursed for all reasonable attorneys' fees incurred in
reviewing and preparing this Agreement, but not to exceed $2,000.
Reimbursement may be deferred by the Plan Manager at his
discretion until December 1, 1996.
14. OFFICE SPACE AND EQUIPMENT. Employer shall provide
Employee, as needed, with a computer, one fax machine and one
phone line for Employee's home office. In addition, Employer
shall provide one fax machine, one printer and one phone line for
Employee's administrative assistant, Xxxxxx Xxxx, to operate at
her home office. This is in lieu of any other office equipment
or space rental in Baltimore, Maryland. Employer shall also
designate office space in Durham, North Carolina for Employee.
15. 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 one hundred twenty (120) days' prior
written notice to Employer. This ninety or one hundred
twenty 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 her 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. If Employer
terminates this Agreement without cause, the non-compete
portion (Sections 8 and 9) of this Agreement becomes
invalid. Notwithstanding the above stated Notice Periods,
in the event that
6
Employee elects, under Section 5, to treat a termination of
the Plan Manager as a termination of Employee by Employer
without cause, then the Notice Period shall be considered to
be the thirty (30) day period after Employee notifies
Employer that she is electing to treat the termination of
the Plan Manager as a termination of Employee by Employer
without cause.
(b) If this Agreement is terminated WITHOUT CAUSE by
Employer at any time through September 30, 1998, Employer
shall pay Employee an amount equal to the annual Base Salary
in effect on the date of termination plus any earned
Performance Bonus (see EXHIBIT A) to be paid out in equal
installments over the twelve months following the date of
termination, beginning in the month after 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 15(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;
continuous performance of duties at a level significantly
below the performance level expected from an employee in a
similar position and at a similar compensation level within
Employer's industry; 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 may be terminated by Employee at any
time for cause upon written notice to Employer, which notice
shall specify the reason for termination. For purposes of
this Subsection 15(d), cause shall include, but shall not be
limited to, the following: fraud, dishonesty; knowing and
intentional unlawful criminal activities, for which there is
a finding of probable cause that Employer or any of its
subsidiaries or control persons has been engaged in, not
occasioned by Employee's actions or omissions, and material
breach of this Agreement.
(e) In the event Employee terminates this Agreement
pursuant to Subsection 15(d), Employer shall pay Employee an
amount equal to the then applicable annual Base Salary plus
any Performance Bonus that has accrued as of the date of
termination.
(f) 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/she
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.
(g) 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.
7
16. 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.
17. 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.
18. 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.
19. GOVERNING LAW. This Agreement is made and entered into in
the State of Maryland and is to be construed in accordance with
and take effect under the laws of the State of Maryland without
regard to principles of conflicts of laws.
20. DISPUTE RESOLUTION. All disputes under this Agreement shall
be resolved by binding arbitration.
21. 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.
22. 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 her last known permanent address according to the
books and records of Employer.
23. 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
8
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.
9
IN WITNESS WHEREOF, the parties sign and seal below,
effective the date first written in this Agreement.
EMPLOYEE: EMPLOYER:
/S/ XXXXXX XXXXXXXX-XXXX COASTAL PHYSIAN GROUP, INC.
Xxxxxx Xxxxxxxx-Xxxx
By: /S/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: President & CEO
10
EXHIBIT A
COMPENSATION
1. BASE SALARY. For all services provided as an employee of
Employer, Employee shall receive, beginning on the Effective Date
and continuing through September 30, 1997 a base salary of
$234,000 per annum (Employee's Base Salary) payable in accordance
with Employer's current payroll practices. The Employee's Base
Salary shall be subject to annual review and adjustment as of
October 1 of each year during the term of employment.
2. EARNED DISCRETIONARY BONUS. In recognition of the progress
in performance made at HPSE from January 1, 1996 to September 1,
1996, Employer will pay a bonus of $20,000 to Employee, to be
paid in two equal installments of $10,000 on the last days of
November and December, 1996.
3. PERFORMANCE BONUS. Employee will be eligible for
performance bonuses (the "Performance Bonuses") based on the
certain performance criteria (the "Performance Drivers"). The
Performance Drivers and the measurement of the Performance
Drivers (the "Performance Measurements") will be established by
Employer as described below. The Performance Drivers will
include at least the following:
(a) Medical Loss Ratio for HPSE;
(b) Enrollment for HPSE;
(c) Administrative Expense for HPSE;
(d) A portion (30-35%) will be based on discretionary
evaluation of performance by Employer. Tasks to be
evaluated will include: Securing a continuing provider
network for HPSE (up to $15,000 in the discretionary
component of the Performance Bonus may be paid upon the
successful negotiation of the physician network);
improving the operations of HPSE; realizing any synergy
between the various Employer affiliated HMO entities;
facilitating the divestiture process and implementing
the Management Action Plan approved by Employer's Board
of Directors relating to BHP; assisting with the growth
and management of DHP; and assisting the Plan Manager
in other operational areas of Employer as considered
necessary by the Plan Manager.
Employer shall establish
Performance Measurements for each of the Performance
Drivers above (other than the discretionary portion of
the plan) based upon the Business Plan and Financial
Budgets established for HPSE for Employer's lending
group (the "Banks"). The expected completion date of
the Business Plan and Financial Budgets is September
30, 1996 or within 45 days thereafter. Employer will
provide the Performance Measurements to Employee within
15 days after approval of the completed Financial
Budgets by the Employer's Board of Directors and the
Employer's Bank Group and the final "setting" of the
Bank Loan Covenants. All calculations of Performance
Measurements will be based upon the HPSE financial
statements
11
prepared consistently and in accordance with GAAP and will
exclude any charges to HPSE by Employer under the name of
Management Fees.
The Performance Measurements will be based on the period
from October 1 to the following September 30 during each year of
the term of this Agreement. Each calendar quarter, beginning
October 1, 1996, shall constitute a measurement period.
Performance Bonuses will be earned on a quarterly basis and will
be paid in three (3) equal payments on the last day of each of
the three months following the quarter end. New Performance
Measurements will be established for each year during the term of
this Agreement as of October 1 of each year.
The maximum amount of the Performance Bonus (including any
discretionary component) will be $90,000.
4. PAYMENT OF PERFORMANCE BONUS UPON EARLY TERMINATION. In the
event that the Employee is terminated without cause prior to
Employer providing the Performance Measurements for the
Performance Drivers for the year commencing October 1, 1996 to
Employee, Employee will be entitled to 1/3 of the maximum amount
of the Performance Bonus ($30,000).
5. DIVESTITURE BONUS PROGRAM. In the event that HEI or HPSE
is divested during the term of Employee's employment hereunder
and prior to September 30, 1998, Employee shall be entitled to
receive a bonus equal to one-tenth of one percent (0.1%) of the
net proceeds. (the "Divestiture Bonus"). "Net Proceeds" shall be
defined as the net cash received by Employer from the sale of HEI
(or HEI from the sale of HPSE) after payment of professionals
fees, including investment bankers, accounting and legal fees and
all operating expenses or liabilities retained by seller and
accrued through the date of sale. Extraordinary expenses
incurred by Employer and any other corporate expenses incurred by
Employer in connection with the sales process (e.g., travel
expenses of Employer's employees, agents, or expenses of Plan
Manager and Price Waterhouse personnel assigned to this project)
and federal taxes will not be deducted in determining Net
Proceeds. In the event that the accounts receivable of the
clinical sites are retained by Employer and not transferred to
the buyer(s), the reasonable value of such accounts receivable as
determined by Employer shall be added in determining the Net
Proceeds, and any and all liabilities and future operating costs
to wind down the business, if any, not transferred shall be
deducted in determining Net Proceeds.
