UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q
{X} Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996
OR
{ } Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to _________
Commission File Number 001-13460
COASTAL PHYSICIAN GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1379244
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2828 CROASDAILE DRIVE, DURHAM, NC 27705
Address of principal executive offices) (Zip Code)
(919) 383-0355
(Registrant's telephone number including area code)
NONE
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
{ } Yes {X} No
As of July 31, 1996 there were outstanding 23,862,146 shares
of common stock, par value $.01 per share.
COASTAL PHYSICIAN GROUP, INC.
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at December
31, 1995 and June 30, 1996 (Unaudited)
Unaudited Consolidated Statements of
Operations
Unaudited Consolidated Condensed
Statements of Cash Flows
Notes to Consolidated Financial Statements
(Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES
COASTAL PHYSICIAN GROUP, INC.
Consolidated Balance Sheets
(In thousands of U.S. dollars, except per share data)
June 30, December
1996 31,
1995
(unaudite
d)
Assets
Current assets:
Cash and cash equivalents 11,455 8,147
Marketable securities 7,543 9,303
Trade accounts receivable, net 135,550 149,891
Accounts receivable, other 16,298 11,315
Notes receivable from shareholders 1,791 1,879
Refundable income taxes --- 12,804
Prepaid expenses and other current 9,584 3,882
assets
Deferred income taxes 4,265 4,265
Total current assets 186,486 201,486
Property and equipment, at cost, less
accumulated depreciation 25,036 33,441
Excess of cost over fair value of net
assets acquired, net 52,557 53,836
Deferred income taxes 2,327 2,244
Other assets 20,231 22,050
Total assets 286,637 313,057
Liabilities and Shareholders' Equity
Current liabilities:
Current maturities and other short-term
borrowings 46,892 5,210
Accounts payable 16,334 19,600
Accrued physicians fees and medical 33,081 38,468
costs
Accrued expenses 21,894 26,138
Total current liabilities 118,201 89,416
Long-term debt, excluding current 57,180 77,270
maturities
Total liabilities 175,381 166,686
Shareholders' equity:
Preferred stock $.01 par value; shares
authorized 10,000; none issued or
outstanding --- ---
Common stock $.01 par value; shares
authorized 100,000; shares issued
and outstanding 23,862 and 23,754,
respectively 239 238
Additional paid-in capital 142,945 142,345
Common stock warrants 987 ---
Retained earnings (accumulated deficit) (32,964) 3,626
Unrealized appreciation of available-
for-sale securities 49 162
Total shareholders' equity 111,256 146,371
Total liabilities and shareholders'
equity 286,637 313,057
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
Unaudited Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
Three months ended
June 30,
1996 1995
Operating revenue, net 146,038 211,342
Costs and expenses:
Physician and other provider services 114,127 161,250
Medical support services 23,094 35,761
Selling, general and administrative 31,215 26,737
Total costs and expenses 168,436 223,748
Operating loss (22,398) (12,406)
Other income (expense):
Interest expense (2,124) (1,886)
Interest income 77 274
Other, net (415) (2,302)
Total other expense (2,462) (3,914)
Loss before income taxes (24,860) (16,320)
Benefit for income taxes --- (5,829)
Net loss (24,860) (10,491)
Net loss per share (1.04) (0.44)
Weighted average number of shares
outstanding 23,839 23,657
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
Unaudited Consolidated Statements of Operations
(In thousands of U.S. dollars, except per share data)
Six months ended
June 30,
1996 1995
Operating revenue, net 298,772 419,201
Costs and expenses:
Physician and other provider services 227,692 305,414
Medical support services 47,271 66,740
Selling, general and administrative 56,116 48,073
Total costs and expenses 331,079 420,227
Operating loss (32,307) (1,026)
Other income (expense):
Interest expense (4,227) (3,051)
Interest income 202 467
Other, net (258) (2,281)
Total other expense (4,283) (4,865)
Loss before income taxes (36,590) (5,891)
Benefit for income taxes --- (1,767)
Net loss (36,590) (4,124)
Net loss per share (1.54) (0.17)
Weighted average number of shares
outstanding 23,815 23,598
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Cash Flows
(In thousands of U.S. dollars)
Six months ended
June 30,
1996 1995
Net cash used in operating activities (27,417) (2,887)
Cash flows from investing activities:
Sales of marketable securities and
investments, net 5,660 2,983
Sales (purchases) of property and
equipment, net 4,208 (16,689)
Acquisition of subsidiaries, net of
cash acquired --- (41,458)
Disposition of subsidiaries, net of
cash disposed (82) ---
Net cash provided by (used
in)investing activities 9,786 (55,164)
Cash flows from financing activities:
Repayments of long-term debt (8,786) (5,523)
Borrowings on long-term debt 30,704 63,045
Cash payments for debt issue costs (1,558) ---
Net proceeds from issuances of common
stock 579 1,104
Net cash provided by
financing activities 20,939 58,626
Net increase in cash and cash
equivalents 3,308 575
Cash and cash equivalents at beginning
of period 8,147 14,286
Cash and cash equivalents at end of
period 11,455 14,861
Supplemental disclosures of cash flow
information:
Cash payments (refunds) during
the period for:
Interest 4,586 2,916
Income taxes (12,993) (1,722)
See accompanying notes to consolidated financial statements.
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis Of Presentation
The accompanying consolidated financial statements of
Coastal Physician Group, Inc. (the "Company") are unaudited
and, in the opinion of management, include all adjustments
which are necessary for a fair presentation. The unaudited
consolidated financial statements should be read in
conjunction with the Company's audited consolidated
financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995. Operating results for the interim
periods presented are not necessarily indicative of the
results that may be expected for the fiscal year ending
December 31, 1996.
(2) Commitments And Contingencies
The Company procures professional liability insurance
coverage on behalf of its operating subsidiaries on a claims-
made basis. The insurance contracts specify that coverage
is available only during the term of each insurance
contract. Management of the Company presently intends to
renew claims-made coverage annually and expects to be able
to obtain such coverage. When coverage is not renewed, the
subsidiary companies purchase an extended reporting period
endorsement to provide professional liability coverage for
losses incurred prior to, but reported subsequent to, the
termination of the claims-made policies.
The Company and its independent contractor physicians obtain
their professional liability insurance coverages from
various insurance carriers. Several insurance carriers who
underwrote certain portions of these coverages from 1986 to
1992 have announced a moratorium on the payment of claims or
have established plans to pay claims in the future based on
formal plans of arrangement. As of June 30, 1996, the
Company had approximately $2,800,000 in receivables relating
to certain claims for which reimbursement is still pending
and anticipates that substantially all of these amounts will
be collected in full from the carriers. The Company
includes these receivables in other assets in the
accompanying consolidated balance sheets.
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(3) Litigation
The Company is a defendant in certain lawsuits by certain
shareholders with respect to representations concerning the
Company's operations and prospects. The Company believes
these lawsuits are without merit, intends to vigorously
defend its position, and does not expect such litigation to
have a material adverse effect on the Company's financial
position or results of operations.
An operating subsidiary of the Company is a defendant in a
lawsuit regarding billings to and collections from certain
Federal government insurance programs. The Company and its
counsel are reviewing this lawsuit and, at this time,
exposure to the Company is indeterminable.
Simultaneous with the initiation of a proxy contest, in July
1996, Dr. Steven M. Scott, a director and shareholder of the
Company and who, until being placed on sabbatical leave by
the Board of Directors in May of 1996, was the President and
Chief Executive Officer of the Company, and Dr. Bertram E.
Walls, a director of the Company, commenced, on their own
behalf and derivatively on behalf of the Company, an action
against the Company and certain of its directors and
officers. The plaintiffs allege, among other things, that
certain Board members and officers breached their fiduciary
duties and wasted corporate assets by removing Dr. Scott
from his position as President and Chief Executive Officer
of the Company and by approving the entry by the Company
into an employment agreement with Mr. Joseph G. Piemont.
The plaintiffs allege that these actions were taken to
wrongfully remove Dr. Scott and to enrich the defendants at
the expense of the Company and its stockholders, and that
these and other recent actions of the Board of Directors,
including the approval of efforts to sell certain corporate
assets, were taken in breach of the Board of Directors' duty
of care. The Company believes the lawsuit is without merit
and intends to vigorously defend its position.
The Company has filed an answer and counterclaims in
response to the action. The counterclaims allege, among
other things, that Dr. Scott breached his fiduciary duties
to the Company and engaged in a scheme to tortiously
interfere with and damage the Company's business.
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Although the Company believes the lawsuit commenced by Drs.
Scott and Walls is without merit, it also believes that such
litigation, even if successfully defended, is likely to
cause the Company to incur costs which would have an adverse
effect on the Company's financial position and results of
operations. Such litigation and related costs are currently
estimated at approximately $2.75 million.
In addition, as of June 30, 1996, certain of the Company's
operating subsidiaries were defendants in various
malpractice and other lawsuits. Management believes that
these lawsuits should not result in judgments which, after
consideration of professional liability and general
insurance coverage, would have a material adverse effect on
the Company's financial position or results of operations.
(4) Credit Facilities
During the first and second quarters (until May - see below)
of 1996, the Company had a senior credit facility ( the
"Senior Credit Facility") with a group of commercial lenders
pursuant to which the Company could borrow (prior to the
restructuring described below) up to $161,750,000,
consisting of a $50,000,000 three-year revolving credit
facility to be used for working capital purposes (the
"Working Capital Facility") and a $111,750,000 seven-year
reducing revolving credit facility to be used for
acquisitions (the "Acquisition Facility"). Borrowings
outstanding as of March 31, 1996 under these facilities were
$45,875,000 and $36,625,000, respectively.
Prior to the restructuring described below, due primarily to
the operating loss generated for the three months ended
December 31, 1995, the Company was in violation of certain
financial covenants under the Senior Credit Facility. A
number of temporary waivers of default and any resulting
events of default were received by the Company, the latest
through May 31, 1996. On May 29, 1996, the Company entered
into new credit agreements which restructured the existing
Acquisition and Working Capital facilities and which provide
the Company up to $40,000,000 of additional borrowing
availability under a new facility (the "Overline Facility").
Under the terms of the restructured existing Senior Credit
Facility (the "Restructured Facility"), outstanding amounts
under the Working Capital Facility were transferred to the
COASTAL PHYSICIAN GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Acquisition Facility, the Working Capital Facility was
canceled and no additional borrowings are permitted under
the Acquisition Facility. The Restructured Facility and the
Overline Facility require total principal payments of at
least $40,000,000 by January 2, 1997, at which time the
availability of additional working capital borrowings under
the Overline Facility declines to $10,000,000. Outstanding
amounts under the Restructured Facility and the Overline
Facility are due on July 1, 1997. Interest on loans under
the Restructured Facility and the Overline Facility will
accrue at the agent bank's prime rate plus 1.5% and 2.0%,
respectively, payable monthly in arrears. Borrowings
outstanding on the Restructured Facility and the Overline
Facility as of June 30, 1996 were $83,042,000 and
$10,500,000, respectively.
The Overline Facility prohibits borrowings for purposes
other than working capital requirements, requires compliance
with other financial covenants and imposes limitations on
certain investments, dispositions of assets, additional
indebtedness and capital expenditures. As collateral for
the loans, the Company has granted a security interest in
substantially all of its assets, including trade accounts
receivable and contract rights and the common stock of
substantially all of its subsidiaries, and has provided a
guaranty from substantially all of the Company's
subsidiaries secured by the assets of the guarantor
subsidiaries. The Company has also granted common stock
purchase warrants to the lenders entitling them to purchase
at par value (over a vesting period) up to 5% of its fully
diluted common stock, of which 10% had vested as of June 30,
1996. A portion of the remaining warrants may be canceled
by repayment of certain loan principal amounts by certain
dates.
COASTAL PHYSICIAN GROUP, INC.
Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
INTRODUCTION
The following discussion provides an assessment of the
Company's results of operations, liquidity and capital
resources, and trends and uncertainties and should be read
in conjunction with the consolidated financial statements of
the Company and notes thereto included elsewhere in this
document.
RESULTS OF OPERATIONS
Second Quarter Ended June 30, 1996 Compared to the Second
Quarter Ended June 30, 1995.
Net operating revenue ("operating revenue") decreased 30.9%
for the second quarter of 1996 to $146,038,000 from
$211,342,000 in the second quarter of 1995. The decrease in
operating revenue due to dispositions completed since the
first quarter of 1995 for which prior periods' results were
not restated was approximately $55,178,000 or 26.1%. This
decrease was primarily due to the sale of 47 of the
Company's south Florida clinics on November 30, 1995. The
increase in operating revenue due to acquisitions completed
since the first quarter of 1995 for which prior periods'
results were not restated was approximately $3,962,000 or
1.9%. This increase was primarily due to the acquisition of
Better Health Plan, Inc. ("BHP") on May 5, 1995, which was
accounted for as a purchase. Operating revenue not related
to disposed or acquired entities decreased approximately
$14,088,000 or 6.7%. Higher contract attrition rates and
less new business development during the second half of 1995
in the Company's hospital-based contract management
division, as well as lower net collections per patient visit
by the Company's billing and accounts receivable management
services division in 1996, were the primary factors that
reduced operating revenue in the second quarter of 1996 as
compared to the second quarter of 1995 when disposition and
acquisition-related revenues are excluded.
Operating expenses decreased 24.7% to $168,436,000 in the
second quarter of 1996 from $223,748,000 in the second
quarter of 1995. The net decrease in operating expenses due
to dispositions and acquisitions completed since the first
quarter of 1995 for which prior periods' results were not
restated was approximately $54,766,000 or 24.5%. Operating
expenses not related to disposed or acquired entities
decreased approximately $546,000 or 0.2%. This minimal
change was a function of decreases due to higher contract
attrition and lower new business development during the
second half of 1995 (as discussed above), offset by
increased expenses associated with the growth in the number
of enrollees in each of the Company's health plans in New
York, North Carolina and Florida, increased medical
malpractice costs, increased investments in information
technology, increased professional fees and provisions for
lease terminations and severance costs related to the
closure of offices.
The changes in operating revenue and operating expenses
described above resulted in an operating loss of $22,398,000
for the second quarter of 1996, compared to an operating
loss of $12,406,000 in the second quarter of 1995. In
addition to the factors noted above, contributing to the
higher operating loss was the increase in physician
compensation expense as a percentage of net revenues in the
Company's hospital-based contract management division.
Other expenses decreased 37.1% or $1,452,000 in the second
quarter of 1996 to $2,462,000 as compared to $3,914,000 in
the second quarter of 1995. A portion of this decline was
due to a decrease in acquisition and related expenses of
$919,000, as there were no such expenses incurred during the
second quarter of 1996. Other, net expenses decreased an
additional $968,000 due primarily to the write-off of
capitalized computer software in the second quarter of 1995.
These expense reductions were offset by an increase in
interest expense of $238,000 and a decrease in interest
income of $197,000. The increase in interest expense
resulted primarily from additional borrowings required to
fund operating activities, while the decline in interest
income reflects the decline in the balance of marketable
securities from June 30, 1995 to June 30, 1996.
There was no benefit for income taxes for the second quarter
of 1996, as compared to a benefit of $5,829,000 for the
second quarter of 1995. The Company expects to record no
tax expense or benefit until the Company returns to
profitability in the future.
Overall, the Company incurred a net loss of $24,860,000 in
the second quarter of 1996 as compared to a net loss of
$10,491,000 in the second quarter of 1995 for the reasons
discussed above.
Weighted average shares outstanding increased 0.8% from
23,657,000 shares in the second quarter of 1995 to
23,839,000 shares in the second quarter of 1996, primarily
as a result of shares issued in connection with both the
exercise of stock options and the Company's employee stock
purchase plan.
Six Months Ended June 30, 1996 Compared to the Six Months
Ended June 30, 1995.
Operating revenue decreased 28.7% for the six months ended
June 30, 1996 to $298,772,000 from $419,201,000 for the six
months ended June 30, 1995. The decrease in operating
revenue due to dispositions completed during 1995 for which
prior periods' results were not restated was approximately
$109,695,000 or 26.2%. This decrease was primarily due to
the sale of 47 of the Company's south Florida clinics on
November 30, 1995. The increase in operating revenue due to
acquisitions completed during 1995 for which prior periods'
results were not restated was approximately $15,083,000 or
3.6%. This increase was primarily due to the acquisition of
BHP on May 5, 1995, which was accounted for as a purchase.
Operating revenue not related to disposed or acquired
entities decreased approximately $25,817,000 or 6.1%.
Higher contract attrition rates and less new business
development during the second half of 1995 in the Company's
hospital-based contract management division, as well as
lower net collections per patient visit by the Company's
billing and accounts receivable management services division
in 1996, were the primary factors that reduced operating
revenue in the first six months of 1996 as compared to the
first six months of 1995 when disposition and acquisition-
related revenues are excluded.
Operating expenses decreased 21.2% to $331,079,000 for the
six months ended June 30, 1996 from $420,227,000 for the six
months ended June 30, 1995. The net decrease in operating
expenses due to dispositions and acquisitions completed
during 1995 for which prior periods' results were not
restated was approximately $93,755,000 or 22.3%. Operating
expenses not related to disposed or acquired entities
increased approximately $4,607,000 or 1.1%. This increase
was primarily a result of increased expenses associated
with the growth in the number of enrollees in each of the
Company's health plans in New York, North Carolina and
Florida, increased medical malpractice costs, increased
investments in information technology, increased
professional fees and provisions for lease terminations and
severance costs related to the closure of offices. These
increases were partially offset by decreases in operating
expenses due to higher contract attrition and lower new
business development during the second half of 1995 (as
discussed above).
The changes in operating revenue and operating expenses
described above resulted in an operating loss of $32,307,000
for the six months ended June 30, 1996, compared to an
operating loss of $1,026,000 for the six months ended June
30, 1995. In addition to the factors noted above,
contributing to the higher operating loss was the increase
in physician compensation expense as a percentage of net
revenues in the Company's hospital-based contract management
division.
Other expenses decreased 12.0% or $582,000 for the six
months ended June 30, 1996 to $4,283,000 from $4,865,000 for
the six months ended June 30, 1995. A portion of this
decline was due to a decrease in acquisition and related
expenses of $919,000, as there were no such expenses
incurred during the first six months of 1996. Other, net
expenses decreased an additional $1,104,000 due primarily to
the write-off of capitalized computer software in the second
quarter of 1995. These expense reductions were offset by an
increase in interest expense of $1,176,000 and a decrease in
interest income of $265,000. The increase in interest
expense resulted primarily from additional borrowings
required to fund operating activities, while the decline in
interest income reflects the decline in the balance of
marketable securities from June 30, 1995 to June 30, 1996.
There was no benefit for income taxes for the six months
ended June 30, 1996, as compared to a benefit of $1,767,000
for the six months ended June 30, 1995. The Company expects
to record no tax expense or benefit until the Company
returns to profitability in the future.
Overall, the Company incurred a net loss of $36,590,000 for
the six months ended June 30, 1996 as compared to a net loss
of $4,124,000 for the six months ended June 30, 1995 for the
reasons discussed above.
Weighted average shares outstanding increased 0.9% from
23,598,000 shares for the six months ended June 30, 1995 to
23,815,000 shares for the six months ended June 30, 1996,
primarily as a result of shares issued in connection with
both the exercise of stock options and the Company's
employee stock purchase plan.
LIQUIDITY AND CAPITAL RESOURCES
On May 29, 1996, the Company entered into new credit
agreements which restructured the existing Acquisition and
Working Capital facilities and which provide the Company up
to $40,000,000 of additional borrowing availability under a
new facility (the "Overline Facility"). Under the terms of
the restructured existing Senior Credit Facility (the
"Restructured Facility"), outstanding amounts under the
Working Capital Facility were transferred to the Acquisition
Facility, the Working Capital Facility was canceled and no
additional borrowings are permitted under the Acquisition
Facility. The Restructured Facility and the Overline
Facility require total principal payments of at least
$40,000,000 by January 2, 1997, at which time the
availability of additional working capital borrowings under
the Overline Facility declines to $10,000,000. Outstanding
amounts under the Restructured Facility and the Overline
Facility are due on July 1, 1997. Interest on loans under
the Restructured Facility and the Overline Facility will
accrue at the agent bank's prime rate plus 1.5% and 2.0%,
respectively, payable monthly in arrears. Borrowings
outstanding on the Restructured Facility and the Overline
Facility as of June 30, 1996 were $83,042,000 and
$10,500,000, respectively.
The Overline Facility prohibits borrowings for purposes
other than working capital requirements, requires compliance
with other financial covenants and imposes limitations on
certain investments, dispositions of assets, additional
indebtedness and capital expenditures. As collateral for
the loans, the Company has granted a security interest in
substantially all of its assets, including trade accounts
receivable and contract rights and the common stock of
substantially all of its subsidiaries, and has provided a
guaranty from substantially all of the Company's
subsidiaries secured by the assets of the guarantor
subsidiaries. The Company has also granted common stock
purchase warrants to the lenders entitling them to purchase
at par value (over a vesting period) up to 5% of its fully
diluted common stock, of which 10% had vested as of June 30,
1996. A portion of the remaining warrants may be canceled
by repayment of certain loan principal amounts by certain
dates.
Net cash used in operating activities for the six months
ended June 30, 1996 was $27,417,000 as compared to net cash
used in operating activities for the six months ended June
30, 1995 of $2,887,000. The net loss of $36,590,000 for the
six months ended June 30, 1996 was the primary reason for
the significant increase in the use of cash.
The Company expects to satisfy its anticipated demands and
commitments for cash in the next twelve months from amounts
available under its Overline Facility, cash generated from
operations and through divestitures. On March 19, 1996, the
Board of Directors approved the implementation of a
management action plan (the "Management Action Plan") that
provided for (i) a continuing review of all aspects of the
Company's operations and business units and (ii) the
implementation of actions to improve the cash flow and
financial results of the Company as a whole and to improve
the contribution of each business unit to the Company's
overall financial and strategic objectives. The Company has
entered into a contract with a specialized unit of Price
Waterhouse LLP ("Price Waterhouse") to assist the Company in
implementing the Management Action Plan under which named
representatives of Price Waterhouse have been designated as
plan managers. The plan managers have broad authority to
implement the plan and affect the operations of the
Company's businesses and report directly to a special
committee composed of the independent members of the Board
of Directors. On July 8, 1996, complementing the Management
Action Plan, and following a study of alternatives available
to the Company undertaken in conjunction with Price
Waterhouse and Morgan Stanley and Co., Incorporated ("Morgan
Stanley"), the Board of Directors approved a comprehensive
strategic and financial plan (the "Strategic and Financial
Plan," which together with the Management Action Plan,
comprises the "Comprehensive Business Plan") to maximize
shareholder value.
If the Company is unable to achieve the objectives of the
Comprehensive Business Plan, it will likely experience a
material decrease in liquidity, thus increasing its reliance
on financing under the Overline Facility and decreasing the
likelihood of cancellation of part of the warrants.
TRENDS AND UNCERTAINTIES
The Company experienced a decline in revenue for the first
six months of 1996 as compared to the first six months of
1995 when excluding revenues related to recent dispositions
and acquisitions. The decline was primarily attributable to
higher contract attrition and lower new business development
during the second half of 1995 in the hospital-based
contract management division.
The Company has recently reorganized the management team in
this division. Under the direction of the new management,
many unprofitable contracts have been terminated and a
number of others have been renegotiated to provide a fair
profit margin going forward. The termination of
unprofitable contracts is expected to improve future
earnings. In addition, new business development during the
first six months of 1996 has been successful when compared
with the same period in 1995.
The Company believes successful competition in the health
care industry will increasingly require information systems
to rapidly provide a broad range of data related to both
clinical and financial aspects of medical practice. The
Company has committed to substantial investments over the
next ten years in information technology related to clinical
management information systems, computerized billing
operations, and its own internal financial reporting
systems.
The Company experienced a decline in operating margins
during the first six months of 1996 compared to the first
six months of 1995. The operating margin for the six months
ended June 30, 1996 was negative 10.8% versus a negative
0.2% for the same period in the prior year. These operating
margins are expected to improve to the extent the Company
achieves the objectives of the Management Action Plan.
The Company operates in an industry characterized by
consolidation and combination led by a number of major
health care companies. The Company completed numerous
acquisitions during 1994 and 1995 but is now directing its
efforts and resources to improvements in existing operations
(as discussed above) and the execution of certain
divestitures (as more fully described below). This change
in strategy is due to the deterioration in revenue growth,
increases in costs and the associated operating losses
incurred in the Company's traditional lines of business, as
well as the principal payment requirements of the
Restructured Facility and Overline Facility as previously
described.
Following a study of alternatives available to the Company
undertaken in conjunction with Price Waterhouse and Morgan
Stanley, the Board of Directors approved the Strategic and
Financial Plan to refocus the Company on its core operations
and to divest certain operating units to address its debt
service requirements and improve the enterprise value of the
Company. The Company has begun to actively market selected
assets, including the Company's clinical operations in
Florida, Maryland, New Jersey and North Carolina, its
Preferred Provider Organization in North Carolina, and its
New York-based prepaid health services plan for Medicaid
recipients.
Citing a potential conflict of interest resulting from his
employer's interest in acquiring one or more of the
businesses the Company has indicated is for sale, Dr.
Richard Janeway resigned from the Company's Board of
Directors on August 6, 1996. The Company had intended to
nominate Dr. Janeway, age 63, for re-election at its 1996
Annual Meeting. The Company intends to announce a
replacement nominee shortly to fill the vacancy on its nine-
member board.
On August 8, 1996, the Company announced that Coastal's
management team and committee of independent directors have
determined to actively pursue and evaluate all strategic
alternatives to maximize shareholder value, including the
possible sale or disposition of assets in addition to the
above-mentioned assets currently slated for sale, an
investment from strategic or financial partners or the sale
of the entire Company. There can be no assurance that such
evaluation or discussions will lead to any proposed
transaction, or that any proposed transaction, which would
be subject to approval of the Board of Directors, would be
consummated.
In July 1996, Dr. Steven M. Scott, a director and
shareholder of the Company and who, until being placed on
sabbatical leave by the Board of Directors in May of 1996,
was the President and Chief Executive Officer of the
Company, announced his intention to solicit proxies in
support of the election of two new independent directors at
the Company's 1996 annual meeting of shareholders. Coastal
has a nine-member classified Board of Directors, of which
three directors will be elected at this year's meeting.
In addition, Dr. Scott intends to seek shareholder approval
of a non-binding resolution requesting that a new committee
of independent directors be established to consider and
recommend the best available means by which shareholder
value may be maximized.
The outcome of the proxy contest initiated by Dr. Scott,
including his proposed resolution for a new committee, and
their effect, if any, on the Company's operations and
strategic alternatives, are not likely to be definitively
known prior to the Company's annual meeting currently
scheduled for September 27, 1996. Additional proxy costs to
be incurred by the Company due to the proxy contest being
staged by Dr. Scott are estimated at approximately $750,000.
Simultaneous with the initiation of the proxy contest, Dr.
Scott and Dr. Bertram E. Walls, another director of the
Company, commenced, on their own behalf and derivatively on
behalf of the Company, an action against the Company and
certain of its directors and officers. The plaintiffs
allege, among other things, that certain members of the
Board breached their fiduciary duties and wasted corporate
assets by removing Dr. Scott from his position as President
and Chief Executive Officer of the Company and by approving
the entry by the Company into an employment agreement with
Mr. Joseph G. Piemont. The plaintiffs allege that these
actions were taken to wrongfully remove Dr. Scott and to
enrich the defendants at the expense of the Company and its
stockholders, and that these and other recent actions of the
Board of Directors, including the approval of efforts to
sell certain corporate assets, were taken in breach of the
Board of Directors' duty of care. The Company believes the
lawsuit is without merit and intends to vigorously defend
its position.
The Company has filed an answer and counterclaims in
response to the action. The counterclaims allege, among
other things, that Dr. Scott breached his fiduciary duties
to the Company and engaged in a scheme to tortiously
interfere with and damage the Company's business.
Although the Company believes the lawsuit commenced by Drs.
Scott and Walls is without merit, it also believes that such
litigation, even if successfully defended, is likely to
cause the Company to incur costs which would have an adverse
effect on the Company's financial position and results of
operations. Such litigation and related costs are currently
estimated at approximately $2.75 million.
Forward-looking Information or Statements: Except for
statements of historical fact, statements made herein are
forward-looking in nature and are inherently subject to
uncertainties. The actual results of the Company may differ
materially from those reflected in the forward-looking
statements based on a number of important risk factors,
including, but not limited to: receipt of sufficient
proceeds from divested assets, and the timing of any
divestitures; the level and timing of improvements in the
operational efforts; the possibility of poor accounts
receivable collection and/or reimbursement experience; the
possibility of increased medical expenses due to increased
utilization; the possibility that the Company may not be
able to improve operations or execute its divestiture
strategy as planned; and other important factors disclosed
from time to time in the Company's Form 10-K, Form 10-Q and
other Securities and Exchange Commission filings.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement By and Between Coastal Physician
Group, Inc. and Joseph G. Piemont
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter for
which this report is filed:
1. On June 15, 1996, the Company filed a report on Form 8-K
dated May 31, 1996, filing under Item 2 thereof. The report
disclosed that on May 29, 1996, the Company entered into an
amendment to its existing Senior Credit Facility which
reduced the borrowing availability thereunder to the
outstanding balance of approximately $83 million and also
entered into an agreement establishing a new facility that
will provide up to $40 million of additional borrowing
availability.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
COASTAL PHYSICIAN GROUP, INC.
(Registrant)
Date: August 14, 1996 By: /S/STEPHEN D. CORMAN
Stephen D. Corman
Director, Executive Vice
President and Chief
Financial Officer
Date: August 14, 1996 By: /S/TIMOTHY W. TROST
Timothy W. Trost
Vice President, Corporate
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ACCOMPANYING BALANCE SHEET AS OF JUNE 30, 1996 AND STATEMENT OF
OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1996 AND FOR
THE SIX MONTH PERIOD FOR THE PERIOD ENDED JUNE 30, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,455,000
<SECURITIES> 7,543,000
<RECEIVABLES> 135,550,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 186,486,000
<PP&E> 25,036,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 286,637,000
<CURRENT-LIABILITIES> 118,201,000
<BONDS> 0
0
0
<COMMON> 239,000
<OTHER-SE> 111,017,000
<TOTAL-LIABILITY-AND-EQUITY> 286,637,000
<SALES> 298,772,000
<TOTAL-REVENUES> 298,772,000
<CGS> 0
<TOTAL-COSTS> 331,079,000
<OTHER-EXPENSES> 56,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,227,000
<INCOME-PRETAX> (36,590,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (36,590,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,590,000)
<EPS-PRIMARY> (1.54)
<EPS-DILUTED> (1.54)
</TABLE>
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and
entered into as of the 1st day of June, 1996 by and between
Coastal Physician Group, Inc., a Delaware corporation
("Employer"), and Joseph G. Piemont ("Employee").
WHEREAS, Employer currently employs Employee but desires to
retain the services of Employee as Chief Executive Officer and
President of Employer ("Chief Executive Officer and President");
WHEREAS, subject to and upon the terms and conditions
hereinafter provided, Employer desires to retain Employee and
Employee desires to continue in his employment with Employer.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and the continued 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, as follows:
1. Employment. Employer shall continue to employ Employee, and
Employee hereby accepts such employment effective as of June 1,
1996 (the "Effective Date"). Employee shall be employed as Chief
Executive Officer and President of Employer. During the Term of
this Agreement, Employer's Board of Directors (the "Board") shall
nominate Employee, if otherwise fit and qualified, for election
to the Board as a member of the management slate at Employer's
1996 annual meeting of shareholders if a directorship is
available to be filled on the Board (and if such directorship is
not available, then the Board shall use its best efforts to elect
Employee as a member of the Board as soon as such directorship
shall be available) and at each annual and special meeting of
shareholders thereafter at which his seat shall become open for
election and the Board shall use its best efforts to cause
Employee to be elected as a member of the Board. Upon Employee's
election to the Board, the Board shall use its best efforts to
cause Employee to be elected as a member of the Executive
Committee of the Board.
2. Term. This Agreement shall commence on the Effective Date
and shall continue until terminated in accordance with the
provisions set forth herein or, if not terminated, for a period
extending through the close of business on December 31, 1996 (the
"Initial Term"). Employer shall have the right to extend the
term of this Agreement for an additional term of six months
through June 30, 1997 (the "Extended Term") by giving written
notice to Employee on or before December 31, 1996. If Employer
exercises its right to extend the term of this Agreement for the
Extended Term, Employer shall have the right to extend the term
of this Agreement for an additional term of one year and eleven
months through May 31, 1999 (the "Renewal Term") by giving
written notice to Employee on or before May 1, 1997. The term of
this Agreement shall be automatically extended for a period of
one year each June 1 beginning June 1, 1999 unless notice to the
contrary ("Notice of Nonrenewal") is given by either party on or
before 90 days prior to the yearly renewal period. As used in
this Agreement the word "Term" shall include the Initial Term,
the Extended Term, if any, the Renewal Term, if any, and all
automatic extensions unless terminated by a Notice of Nonrenewal.
3. Duties. Employee shall perform the following duties
pursuant to this Agreement:
a. Employee shall serve as Employer's Chief Executive Officer
and President and shall perform all duties and responsibilities
and shall have all control, rights and authority which are
normally associated with such position or as otherwise reasonably
may be assigned to Employee by the Board, provided such duties
are consistent with Employee's position as Chief Executive
Officer and President. Without limiting the generality of the
foregoing, Employee shall, subject to the control and direction
of the Board, be in charge of the operations of Employer with the
power and authority to make decisions on behalf of Employer, to
hire and terminate employees and consultants (other than officers
appointed by the Board), to enter into agreements on behalf of
Employer and generally to direct the activities of Employer.
Employee's services shall be performed at the principal office of
Employer in Durham, North Carolina or any office which is the
headquarters of Employer and is less than thirty-five miles from
such location.
b. Employee understands that the Board has agreed to implement
a Management Action Plan (the "Plan") prepared by Price
Waterhouse LLP ("PW") and is a party to an Engagement Letter
pursuant to which PW has been engaged to implement such Plan
under the supervision and direction of the Board acting through
the Management Action Plan Committee of the Board (the "Plan
Committee"). In carrying out his duties under this Agreement,
Employee, subject to the provisions of Employer's Engagement
Letter with PW, as the same may be modified from time-to-time,
will use his best efforts to implement the provisions of the
Plan, and will consult with the persons appointed by PW as its
representatives to carry out the Plan and with the Chairman of
the Board of Employer. Should serious disagreements arise
between Employee and the persons appointed by PW with regard to
the operation of Employer or the implementation of the Plan,
Employee will bring such disagreements to the Plan Committee for
such resolution as the Plan Committee considers appropriate and
in the best interests of Employer, provided that such resolution
shall not change any of the provisions of this Agreement.
4. Devotion of Time During the Term of this Agreement. During
the Term, and excluding any periods of vacation and sick leave to
which Employee is entitled, Employee shall devote his full time
to carrying out his duties under this Agreement, and to the
extent necessary to discharge the responsibilities of Employee
under this Agreement, to use Employee's reasonable best efforts
to perform faithfully and efficiently such responsibilities.
During the Term it shall not be a violation of this Agreement for
Employee to
a. serve on corporate, civic, political or charitable boards or
committees or perform services for charitable, civic or political
organizations;
b. deliver lectures, fulfill speaking engagements or teach at
educational institutions; and
c. manage personal investments and those of members of his
family;
so long as such activities do not significantly interfere
with the performance of Employee's responsibilities as an
employee of Employer in accordance with this Agreement.
5. Compensation Package. For all services provided by Employee
as an employee of Employer, Employee shall be compensated as
follows:
a. Annual Salary. Effective as of the Effective Date, Employer
shall pay Employee an annual base salary of Three Hundred Fifty
Thousand Dollars ($350,000) ("Employee's Base Salary"), payable
in equal monthly installments on the first day of each month.
After the end of each fiscal year of Employer ("Fiscal Year")
during the Term, upon the earlier of March 31st or the completion
of Employer's audited financial statements, Employee's Base
Salary shall be reviewed by the Compensation Committee of the
Board (the "Compensation Committee") and shall be increased (but
not decreased without Employee's written consent) at any time and
from time to time at least in an amount as shall be substantially
consistent with increases in base salary generally awarded in the
ordinary course of business to other peer executives of Employer
and its affiliated companies. The term Employee's Base Salary as
utilized in this Agreement shall refer to Employee's Base Salary
as so increased. Any increase in Employee's Base Salary shall
not serve to limit or reduce any other obligation to Employee
under this Agreement. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by,
controlling or under common control with Employer.
b. Incentive Compensation. On or before August 1, 1996 for the
1996 Fiscal Year and on or before January 31 of each Fiscal Year
thereafter during the Term, the Compensation Committee shall
formulate, following discussions with Employee, criteria for
assessing Employee's performance under this Agreement during such
Fiscal Year. After the end of each such Fiscal Year during the
Term, upon the earlier of March 31st or the completion of
Employer's audited annual financial statements, Employee's
performance during the preceding Fiscal Year shall be reviewed by
the Compensation Committee in light of the criteria formulated
for such Fiscal Year. The Compensation Committee shall determine,
on or before April 30, based upon such review, the amount of
incentive compensation Employee shall receive for the Fiscal Year
just ended. Such incentive compensation, if any, shall be not
more than fifty percent (50%) (the "Maximum Rate") of Employee's
Base Salary for the Fiscal Year just ended, prorated for each
portion of each year falling within such Fiscal Year, and shall
be paid as soon after the end of each Fiscal Year as is
reasonably practicable and, in any event, substantially
concurrently with similar payments to other peer executives of
Employer.
c. Compensation for Serving on Boards. Employee shall be
entitled to no extra compensation for serving on Employer's or
its affiliated companies' Boards of Directors or committees
thereof.
d. Benefits. During the Term Employee shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of Employer and its affiliated companies. During
the Term Employee and/or Employee's family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by Employer and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer
executives of Employer and its affiliated companies.
e. Expenses. During the Term, Employee shall be entitled to
receive prompt reimbursement for (or Employer shall pay directly)
all reasonable employment expenses incurred by Employee in
accordance with the most favorable policies, practices and
procedures of Employer and its affiliated companies in effect for
other peer Executives of Employer and its affiliated companies.
Employer shall pay Employee's reasonable attorneys' fees and
expenses incurred in the negotiation, drafting and approval of
this Agreement.
f. Fringe Benefits. During the Term, Employee shall be
entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of Employer and its
affiliated companies in effect for other peer executives of
Employer and its affiliated companies.
g. Office and Support Staff. During the Term, Employee shall
be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal
secretarial and other assistance normally provided to a person
fulfilling the position of Chief Executive Officer and President.
h. Vacation. During the Term, Employee shall be entitled to
paid vacation of four weeks per year.
i. Stock Options.
i. As used in this Agreement, the term "Common Stock" refers to
the $.01 par value common stock of Employer currently outstanding
or as such stock may be hereafter changed by stock splits, stock
dividends, recapitalizations, mergers, consolidations, etc. As
used in this Agreement the term "New York Stock Exchange" refers
to the New York Stock Exchange or such other market as shall
exist for the Common Stock if not traded on the New York Stock
Exchange. As used in this Agreement the term "Option Plan" shall
mean Employer's 1987 Nonqualified Stock Option Plan, as amended
and the Stock Option Agreement in the forms attached hereto as
Exhibits A and B (such forms adjusted to conform to the terms of
the option granted).
ii. Employer shall immediately grant to Employee, under its
Option Plan (utilizing the Stock Option Agreement in the form
attached hereto as Exhibit A) options to purchase 200,000 shares
of Common Stock at the then fair market value of such stock, such
options to be exercisable for a period of ten years, to vest at
the rate of options to purchase 5,555 shares a month on the first
day of each month for 36 months beginning July 1, 1996 and to be
on the other terms as set forth in the Option Plan.
iii. Employee presently holds options to purchase 71,751 shares
of Common Stock under the Option Plan, of which none have vested.
Employee shall retain such options.
iv. If Employer exercises its option to extend the Term for the
Extended Term, Employer shall grant to Employee an additional
option, under the Option Plan (utilizing the Stock Option
Agreement in the form attached hereto as Exhibit B), to purchase
not more than 50,000 shares of Common Stock, in such amount, if
any, as the Compensation Committee shall determine on or before
the earlier of March 31, 1997 or the completion of Employer's
audited financial statements for the 1996 Fiscal Year, such
option to be exercisable for a period of ten years from the date
of grant at the closing price of Common Stock on the New York
Stock Exchange on the last trading day immediately prior to the
date of grant, such option to be fully vested on December 31,
1997 and to be on the other terms as set forth in the Option
Plan. In determining the number of shares which shall be subject
to the option to be granted to Employee pursuant to this Section
5(i)(iv), the Compensation Committee shall apply the criteria
considered in awarding incentive compensation pursuant to Section
5(b) and such other factors as the Compensation Committee deems
relevant.
v. If Employer exercises its option to extend the Term of this
Agreement for the Renewal Term, each year during the Term,
beginning with the 1998 Fiscal Year, Employer shall grant to
Employee, on or before the earlier of March 31 or the completion
of Employer's audited financial statements for such year, an
additional option under the Option Plan (utilizing the Stock
Option Agreement in the form attached hereto as Exhibit B) to
purchase not more than 50,000 shares of Common Stock, in such
amounts as the Compensation Committee shall determine, such
option to be exercisable for a period of ten years from the date
of grant at the closing price of Common Stock on the New York
Stock Exchange on the last trading day immediately prior to the
date of grant, such option to be fully vested on the following
December 31 (provided that any option granted for the 1998 Fiscal
Year (granted on or before March 31, 1999) shall be fully vested
on May 31, 1999). In determining the number of shares which
shall be subject to the option granted pursuant to this Section
5(i)(iv), the Compensation Committee shall apply the criteria
considered in awarding incentive compensation pursuant Section
5(b) and such other factors as the Compensation Committee deems
relevant.
6. Confidentiality. Non-Disclosure and Ownership of
Confidential Information.
a. Employee acknowledges that during his 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 of
Employer, including but not limited to, Employer's operating pro
cedures, plans, strategies, prospects, lists of potential
prospects or targets, plans for disposition of assets 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
(collectively "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 affiliated companies' benefit. Employee shall
not, during or after the Term, 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 such
Confidential Information from misappropriation, rnisuse,
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 (but only if Employee has
theretofore given Employer prior written notice of the proposed
disclosure in a timely fashion so as to permit Employer, at
Employer's own expense, to effectively contest the applicability
of such law or court order to its Confidential Information) or
ii. it is generally available to the public other than by
unauthorized disclosure by Employee or
iii. as is expressly permitted by Employer to be disclosed by
Employee or is disclosed in connection with arbitration or
litigation to resolve disputes between Employer and Employee.
Upon termination of this Agreement, Employee shall return
immediately to Employer all of Employer's property (including,
without limitation; all tangible manifestations of the Con
fidential Information) in Employee's possession or control,
provided that Employee may retain one copy solely for archival
purposes or in case of disputes between Employer and Employee.
b. The provisions of this Section 6 shall survive termination
of this Agreement.
7. Solicitation of Other Employees.
a. Except on behalf of Employer and in furtherance of its
interests, Employee shall not, for the period of his employment
under this Agreement and for a one (1) year period after
termination of this Agreement, without the prior consent of
Employer, 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 affiliated companies,
or any person who was such an employee, physician or healthcare
provider during Employee's employment under 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 affiliated companies;
provided, however, that upon termination of his employment with
Employer, the solicitation by Employee of his personal secretary
to work with or for him thereafter shall not violate the
provisions of this Section 7.
b. The provisions of this Section 7 shall survive the
termination of this Agreement.
8. Breach and Remedies.
a. Employee acknowledges that the breach or threatened breach
of any of the covenants set forth in Sections 6 and 7 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 6 or
7, 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 6 or 7 shall be
extended by any period of violation.
c. Employee hereby acknowledges that the covenants set forth in
Sections 6 and 7 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 such
provision shall be construed as valid and enforceable only to the
extent permitted by law and the other provisions of this
Agreement will remain in full force and effect. It is the
intention of the parties to restrict the activities of Employee
only to the extent necessary to protect the legitimate business
interests of Employer and its affiliate companies, and not to
deprive Employee of the right to earn a livelihood.
d. The provisions of this Section 8 shall survive the
termination of this Agreement.
9. Insurance; No Additional Severance.
a. 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.
b. Employee acknowledges that he shall not be eligible to
participate in any severance plans or arrangements offered by
Employer to other employees, and that his rights set forth in
Section 11 of this Agreement are in lieu of all such plans and
arrangements.
10. Indemnification: Director and Officer Liability Insurance.
a. During the Term of this Agreement and thereafter, Employer
shall indemnify and hold harmless Employee to the maximum extent
permitted by law in accordance with its Certificate of
Incorporation and bylaws and with applicable provisions of
Delaware law as then in effect for liabilities, costs and
expenses (including reasonable attorneys' fees) of Employee by
reason of or arising out of Employee's service as a director,
officer and employee of Employer or any of its affiliated
companies.
b. Throughout the Term and for a period of three years
thereafter, Employer shall maintain in effect directors and
officers liability insurance providing benefits at least as great
as those currently in force for the benefit of Employee against
any or all such liabilities, costs or expenses.
11. Termination. This Agreement may be terminated as follows:
a. Either party may terminate this Agreement without cause at
any time upon ninety (90) days' prior written notice to the
other. This ninety day period is hereafter referred to as the
"Notice Period." In the event of such termination, the following
provisions apply:
i. In the event that Employer terminates this Agreement without
cause (as defined in Section 11(b)) or fails to exercise its
right to extend the Term of this Agreement for the Extended Term
or the Renewal Term or gives Notice of Nonrenewal or if Employee
terminates this Agreement for Good Reason (as hereinafter
defined) (each such event a "Without Cause 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 Chief Executive Officer and
President. Employer, at its option, may notify Employee at any
time during the Notice Period that no further services are to be
performed.
ii. In the event that Employer terminates this Agreement
pursuant to Section 11(b) or Employee terminates this Agreement
without Good Reason, Employee shall be entitled only to
Employee's Base Salary accrued but unpaid through the effective
date of termination, plus payment of any unpaid accrued but
unused vacation time and any unpaid compensation previously
deferred by Employee (together with any accrued interest or
earnings thereon). In such event, all unvested options held by
Employee to purchase Common Stock, if any, shall terminate on the
effective date of termination. If requested by Employer, Employee
will perform his regular duties during the Notice Period and
assist in the transition of duties to a new Chief Executive
Officer and President.
b. This Agreement may be terminated by Employer at any time for
cause upon written notice to Employee (in the manner provided in
Section 11(f). For purposes of this Section 11(b), cause shall
mean the following: fraud; dishonesty; substantial and continuing
nonperformance of assigned duties which are consistent with
Employee's position hereunder; failure to comply with any
material written policy of Employer generally applicable to other
peer executives of Employer; indictment or conviction of Employee
of an offense involving moral turpitude in any jurisdiction of or
within the United States; any other activity of an egregious
nature which does or can reasonably be anticipated to bring
serious disrepute upon Employer based on its association with
Employee; or material breach of this Agreement by Employee.
c. In the event of a Without Cause Termination pursuant to
Section 11(a)(i), Employer shall pay to Employee, on the
effective date of such Without Cause Termination, the following:
i. an amount equal to Employee's Base Salary and incentive
compensation (at the rate of incentive compensation awarded
during the year for services provided in the immediately
preceding Fiscal Year) accrued but unpaid through the effective
date of such termination, plus payment of any unpaid accrued but
unused vacation time and any unpaid compensation previously
deferred by Employee (together with any accrued interest or
earnings thereon). In addition, Employer shall pay to Employee:
1) if such Without Cause Termination shall occur on or before
May 31, 1997, an amount equal to Employee's Base Salary for
remainder of the Term (including the Extended Term and the
Renewal Term) and the amount of the last incentive
compensation paid to Employee pursuant to Section 5(b) of
this Agreement multiplied by the number of years (and
portions thereof) remaining in the Term;
2) if such Without Cause Termination shall occur after May 31,
1997, an amount equal to two times Employee's Base Salary and
two times the amount of the incentive compensation paid to
Employee for services provided in the immediately preceding
Fiscal Year (if on the effective date of the Without Cause
Termination the incentive compensation for the immediately
preceding Fiscal Year has not as yet been determined, the payment
shall be two times the incentive compensation paid for the last
Fiscal Year for which incentive compensation was paid).
3) If the payment provided for in this Section 11(c)(i) would
violate or cause Employer to be in violation of or in default
under any material loan agreement between Employer and a bank or
other financial institution, such payment shall be made to the
extent that such payment will not so result. The remaining
unpaid amount shall be represented by a negotiable promissory
note containing such terms as Employee shall reasonably request
which shall provide for interest on the declining principal
balance at the rate of two percent over the prime or reference
rate announced by First Union Bank on or for the day immediately
preceding the effective date of the termination, with interest to
be adjusted for changes in the prime or reference rate on the
first day of each calendar quarter of Employer's Fiscal Year.
Monthly payments shall be made on such promissory note, beginning
one month from the effective date of the Without Cause
Termination, in an amount equal to twice the monthly amount of
Employee's Base Salary on the day immediately preceding the
effective date of the Without Cause Termination;
ii. All unvested options to purchase shares of Common Stock held
by Employee immediately prior to such Without Cause Termination
shall be fully vested on the effective date of the Without Cause
Termination and be exercisable in accordance with their terms
without regard to such Without Cause Termination;
iii. For the remainder of the Term (including the Extended Term
and the Renewal Term as if such Without Cause Termination had not
occurred), or such longer period as any plan, program, practice
or policy may provide, Employer shall continue benefits to
Employee and/or Employee's family at least equal to those which
would have been provided to them from time-to-time in accordance
with the plans, programs, practices and policies described in
Section 5(d) if Employee's employment had not been terminated in
accordance with the most favorable plans, practices, programs or
policies of Employer and its affiliated companies as in effect
and applicable generally to other peer executives and their
families; provided, however, that if Employee becomes reemployed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility of Employee for retiree benefits, if any, pursuant to
such plans, practices, programs and policies, Employee shall be
considered to have remained employed until the end of the Term
and to have retired on the last day of such period; and
iv. to the extent not theretofore paid or provided, Employer
shall timely pay or provide to Employee and/or Employee's family
any other amounts or benefits required to be paid or provided or
which Employee and/or Employee's family are eligible to receive
pursuant to this Agreement and under any plan, program, policy or
practice or contract or agreement of Employer and its affiliated
companies as from time-to-time in effect and applicable generally
to other peer executives and their families for the remainder of
the Term (including the Extended Term and the Renewal Term) as if
such Without Cause Termination had not occurred.
d. Employee's employment may be terminated by Employee during
the Term for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean
i. the assignment to Employee of any duties inconsistent in any
respect with Employee's position as Chief Executive Officer and
President (including status, offices, titles and reporting
requirements), or the authority, duties or responsibilities as
contemplated by Section 3(a) or any other action by Employer
which supplants, reduces, replaces or diminishes such position,
rights, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by Employer promptly
after receipt of notice thereof given by Employee;
ii. Employer's appointing a person who does not report to
Employee and is not subject to the direction and control of
Employee to share or hold any part of the control, duties,
responsibilities, rights or authority granted to Employee by this
Agreement;
iii. the members of the Board who were not employed by or
affiliated (except as directors) with Employer on April 4, 1996
(the "Current Independent Directors") do not continue to serve as
members of the Board or any new member is elected to the Board or
appointed to fill a vacancy on the Board (whether created by a
resignation, expansion of the Board or otherwise) whose election
or appointment is not approved by a majority of the Current
Independent Directors;
iv. any failure by Employer to comply with or any breach by
Employer of any of the terms of this Agreement, other than an
isolated, insubstantial and inadvertent failure or breach not
occurring in bad faith and which is remedied by Employer promptly
after receipt of notice thereof given by Employee;
v. Employer's requiring Employee to be based at any office or
location other than that described in Section 3(a);
vi. any purported termination by Employer of Employee's
employment otherwise than as expressly permitted by this
Agreement; or
vii. any failure by Employer to comply with and satisfy Section
18(b), provided that such successor has received at least ten
(10) days prior written notice from Employer or Employee of the
requirements of Section 18(b).
For purposes of this Section 11(d), any good faith
determination of "Good Reason" made by Employee shall be
conclusive.
e. Employee's employment shall terminate upon the death or
total and permanent disability of Employee. The term "total and
permanent disability" shall have the meaning set forth in
Employer's Long Term Disability Plan, if any. Should Employer
not maintain a Long Term Disability Plan, Employee shall be
deemed to be totally and permanently disabled in the event that
Employee's personal physician certifies to that fact and Employee
is unable to regularly and consistently perform his normal duties
as contemplated hereunder for a continuous period of six months.
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, incentive
compensation (at the Maximum Rate) accrued but unpaid through the
date of Employee's death or the end of the six month period
during which he becomes totally and permanently disabled, as the
case may be, and any unpaid accrued but unused vacation time and
any unpaid compensation previously deferred by Employee (together
with any accrued interest or earnings thereon). In addition,
Employer shall pay to Employee, in a lump sum upon such
termination, an amount equal to Employee's Base Salary and
incentive compensation (at the rate of incentive compensation
awarded during the year for services rendered in the immediately
succeeding Fiscal Year) for one year. Options held by Employee
to purchase Common Stock which are vested on the date of
Employee's death or the end of the six month period during which
he becomes totally and permanently disabled, as the case may be,
shall continue in effect as provided in the Option Plan.
f. Any termination by Employer for cause, or by Employee for
Good Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Section 19. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which
i. indicates the specific termination provision in this
Agreement relied upon,
ii. to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Employee's employment under the provision so
indicated and
iii. if the effective date of termination is other than the date
of receipt of such notice, specifies the effective date of
termination (which date shall be not more than fifteen (15) days
after the giving of such notice).
The failure by Employee or Employer to set forth in the
Notice of Termination any fact or circumstance which contributes
to a showing of Good Reason or cause shall not waive any right of
Employee or Employer hereunder or preclude Employee or Employer
from asserting such fact or circumstance in enforcing Employee's
or Employer's rights hereunder.
g. The provisions of this Section 11 shall survive the
termination of this Agreement.
12. Full Settlement; Resolution of Disputes.
a. Employer's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which Employer may have
against Employee or others. In no event shall Employee be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to Employee under any of
the provisions of this Agreement and such amounts shall not be
reduced whether or not Employee obtains other employment.
Employer agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which Employee may
reasonably incur as a result of any arbitration hereunder or any
contest (regardless of the outcome thereof) by Employer, Employee
or others of the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by
Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment, at
the applicable Federal rate provided for in Section 7872 of the
Internal Revenue Code of 1986, as amended (the "Code").
b. If there shall be any dispute between Employer and Employee
(i) in the event of any termination of Employee's employment by
Employer, whether such termination was for cause, or (ii) in the
event of any termination of employment by Employee, whether Good
Reason existed, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction
declaring that such termination was for cause or that the
determination by Employee of the existence of Good Reason was not
made in good faith, Employer shall pay all amounts, and provide
all benefits, to Employee and/or Employee's family or other
beneficiaries, as the case may be, that Employer would be
required to pay or provide pursuant to Sections 5 and 11 as
though such termination were by Employer without cause or by
Employee with Good Reason; provided, however, that Employer shall
not be required to pay any disputed amounts pursuant to this
Section 12(b) except upon receipt of an undertaking by or on
behalf of Employee to repay all such amounts to which Employee is
ultimately adjudged by such court not to be entitled.
13. Certain Additional Payments by Employer.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or
distribution by Employer to or for the benefit of Employee
(whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this
Section 13) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties
are incurred by Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by
Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including without
limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
b. Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13,
including whether and when a Gross-Up Payment is required and the
amount of such gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the
independent accountants then engaged to audit Employer's
financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to Employer and Employee
within fifteen business days of the receipt of notice from
Employee that there has been a Payment, or such earlier time as
is requested by Employer. All fees and expenses of the Accounting
Firm shall be borne solely by Employer. Any Gross-Up Payment, as
determined pursuant to this Section 13, shall be paid by Employer
to Employee within five days of the receipt of the Accounting
Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Employee, it shall furnish Employee with
a written opinion that failure to report the Excise Tax on
Employee's applicable federal income tax return would not result
in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon
Employer and Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
Employer should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event
that Employer exhausts its remedies pursuant to Section 13(c) and
Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by Employer to or for the benefit of Employee.
c. Employee shall notify Employer in writing of any claim by
the Internal Revenue Service that, if successful, would require
the payment by Employer of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than ten business days after Employee is informed in writing of
such claim and shall apprise Employer of the nature of such claim
and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such notice to
Employer (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If Employer
notifies Employee in writing prior to the expiration of such
period that it desires to contest such claim, Employee shall:
i. give Employer any information reasonably requested by
Employer relating to such claim,
ii. take such action in connection with contesting such claim as
Employer shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
Employer,
iii. cooperate with Employer in good faith in order effectively
to contest such claim, and
iv. permit Employer to participate in any proceedings relating
to such claim;
provided, however, that Employer shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold Employee harmless, on an after-tax basis, for
any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 13(c), Employer shall
control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct Employee to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as
Employer shall determine; provided, however, that if Employer
directs Employee to pay such claim and sue for a refund, Employer
shall advance the amount of such payment to Employee, on an
interest-free basis and shall indemnify and hold Employee
harmless, on the after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to
payment of taxes for the taxable year of Employee with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, Employer's control
of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by Employee of an amount advanced by
Employer pursuant to Section 13(c), Employee becomes entitled to
receive any refund with respect to such claim, Employee shall
(subject to Employer's complying with the requirements of Section
13(c)) promptly pay to Employer the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Employee of an
amount advanced by Employer pursuant to Section 13(c), a
determination is made that Employee shall not be entitled to any
refund with respect to such claim and Employer does not notify
Employee in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
e. Any claim by a state taxing authority of the type referred
to in this Section 13 shall be resolved, and Employee shall be
made whole, in the manner provided for federal taxes in this
Section 13 with the state taxing authority substituted for the
Internal Revenue Service and the state taxing statutes
substituted for the Code.
14. 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 the stock and other securities of Employer by
employees.
15. Entire Agreement. This Agreement and the Option Plan
contain the entire understanding between the parties with respect
to the subject matter hereof and thereof and supersede and cancel
any prior oral and written understanding and/or agreements
between them respecting the subject matter of this Agreement and
the Option Plan. This Agreement may be amended or modified only
in writing signed by both parties. Notwithstanding the
foregoing, Employee participates and may participate in employee
and executive benefit plans maintained by Employer, and the terms
of such plans with respect to the benefits provided thereunder to
Employee are not superseded by this Agreement but shall remain in
full force and effect.
16. 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 this Agreement shall be
enforced to the greatest extent permitted by law.
17. 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.
18. Assignment.
a. Except with respect to transfers on death by will or the
laws of descent and distribution, neither party shall have any
right to assign, transfer (by merger, consolidation or
otherwise), convey, 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. All rights
hereunder are personal to Employer and 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 successors, assigns, personal
representative, heirs and legatees of Employer and Employee.
Notwithstanding the foregoing, Employee may assign his rights and
benefits hereunder, in whole or in part, to a living trust of
which Employee is settlor provided the trustee agrees to be bound
by this Agreement.
b. Employer will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Employer to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that Employer would be required to
perform it if no such succession had taken place. As used in
this Agreement, "Employer" shall mean Employer as hereinbefore
defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
19. 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: Chairman of the Board," and in the
case of Employee, to his last known permanent address according
to the books and records of Employer.
20. Arbitration. Any controversy, dispute or claim of whatever
nature arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement,
including any claims based on contract, tort, or statute, shall
be resolved at the request of either party to this Agreement, by
final and binding arbitration conducted at a location in or as
close as practicable to Durham, North Carolina as determined by
the arbitrator(s) administered by and in accordance with the then
existing Rules of Practice and Procedure of Judicial Arbitration
& Mediation Services, Inc. (J*A*M*S), and judgment upon any award
rendered by the arbitrator(s) may be entered by any State or
Federal Court having jurisdiction thereof. Either party may
commence such proceeding by giving notice to the other party in
the manner set forth in Section 19 hereof. The arbitrator(s) in
any such proceeding shall apply substantive law and rules of
evidence applicable to civil suits to the proceeding. The parties
shall have all rights of discovery applicable to civil suits. The
arbitrator(s) shall have the power to grant all legal and
equitable remedies and award compensatory damages provided by
law, but shall not have the power to award punitive damages. The
arbitrator(s) shall render his decision within 120 days of the
commencement of arbitration. The arbitrator(s) shall prepare in
writing and provide to the parties an award including factual
findings and reasons on which the decision is based. The
arbitrators shall not have the power to commit errors of law or
legal reasoning, and the award may be vacated or corrected for
any such error. The costs and expenses (including reasonable
attorneys' fees) incurred in preparation for and prosecution of
such action and enforcement of or securing recovery under any
order or judgment rendered therein shall be paid in accordance
with Section 12(a) of this Agreement.
21. 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 its
affiliated companies. All rights of Employer and Employee
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. This Agreement was the subject of
negotiation between Employer and Employee and shall not be
construed against either as the drafter thereof. Employee's or
Employer's failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right
Employee or Employer may have under this Agreement, including
without limitation, the right of Employee to terminate employment
for Good Reason pursuant to Section 11(d), shall not be deemed to
be a waiver of such provision or right or any other provision or
right of this Agreement.
IN WITNESS WHEREOF, the parties sign and seal below, effec-
tive the date first written in this Agreement.
COASTAL PHYSICIAN GROUP, INC.
By:________________________________
Jacque J. Sokolov, MD
Chairman of the Board
___________________________________
Joseph G. Piemont
