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COAST DENTAL SERVICES, INC.
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the 18th day of February, 1999
(the "Agreement"), by and between COAST DENTAL SERVICES, INC., a Delaware
corporation, (the "Company"), and XXXX X. XXXXX (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 as a senior
management employee and has the experience and skills to serve as the Chief
Operating Officer 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 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, President and Board of Directors, and shall have such powers and
responsibilities consistent with his position as the CEO and Board may assign to
him.
Throughout the term of this Agreement, the Executive shall devote his
best efforts and substantially all of his business time and services to the
business and affairs of the Company.
2. TERM OF AGREEMENT
The four (4) year initial term of the Executive employment under this
Agreement shall commence as of March 22, 1999 (the "Effective Date"). After the
expiration of such initial four (4) 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).
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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 $150,000 per annum during the first
year of the term of this Agreement. 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 increase 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 20 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 exceeding market analysts' consensus earnings per
share estimates by at least $.01 each quarter.
4. ADDITIONAL COMPENSATION AND BENEFITS
The Executive shall receive the following additional compensation and
welfare and fringe benefits:
(a) Stock Options. As of the Effective Date of this Agreement at a
strike price of $7.00 per share, the Executive shall be granted nonstatutory
stock options with respect to 50,000 shares of common stock pursuant to the
terms of the Company's 1995 Stock Option Plan, with options to vest in a series
of three equal annual installments with the third and final installment vesting
on the third anniversary of the grant date. During the remaining term of the
Agreement, any additional stock option awards under the 1995 Stock Option Plan
shall be at the discretion of the Compensation Committee of the Company's Board
of Directors.
(b) Medical Insurance. The Company shall reimburse the Executive with
up to 75% of the premium of his health insurance coverage.
(c) Educational Leave and Expenses. The Executive shall be entitled to
up to five (5) days educational leave annually to devote to continuing
professional 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 two weeks of
vacation during his first year of employment and three weeks for each year
thereafter 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.
(f) Relocation Assistance. The Company has asked the Executive to
relocate his residence from Northborough, Massachusetts to the Tampa-St.
Petersburg metropolitan area. The Executive acknowledges that the Company will
pay the Executive a relocation allowance of $25,000 to reimburse Executive for
his moving expenses of which $10,000 will be advanced upon the
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commencement of this Agreement and the balance upon presentation by the
Executive of his moving expenses.
(g) Car Allowance. Executive shall be entitled to a car allowance of
$300.00 per month payable by the Company to cover Executive's reasonable travel
expenses.
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 six (6) monthly payments to the Executive,
each monthly payment to 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
(and bonus to be pro-rated).
(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 sixth
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. The Employee is unaware of any existing medical factors
for which he has been diagnosed which are likely to create an event of
disability during this term.
(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.
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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 upon sixty (60) days written notice to the Company, 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.
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 six (6) 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 fifty
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 February 1, 1999, 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 February 1, 1999; provided, that any
person nominated for election by the Board of
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Directors composed entirely of 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 fifty percent (50%) 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.
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10. COVENANT NOT TO COMPETE
The Executive hereby agrees that he will not, either during the
Employment Term or during the period of eighteen (18) 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 States of Florida, Georgia,
Tennessee, Virginia or any other state in which the Company has a dental office
during the term of this Agreement. 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, 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 eighteen (18)
months 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. This Section 10 shall be of no
force or effect unless Executive is employed by the Company for a period of at
least ninety (90) days.
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.
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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.
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.
16. ARBITRATION
Subject to the Company's right to seek injunctive relief for any
violations of the covenants set forth in Sections 9 and 10 of this Agreement,
any controversy or claim arising out of this Agreement, or the breach thereof,
other than a claim for injunctive relief shall be settled by binding arbitration
in accordance with the Rules of the American Arbitration Association which shall
occur in Tampa, Florida or at such other location as may be mutually agreed to
by the parties.
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/ /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, Chief Executive Officer
WITNESS: EXECUTIVE:
/s/ /s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
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