EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into as of
this 20 day of October, 2003 ("Effective Date"), by and between Mid Atlantic
Medical Services, Inc., a Delaware corporation with its principal executive
offices at 0 Xxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000 ("Company"), and Xxxxxx X.
Xxxxxx ("Executive").
WHEREAS, the Company wishes to assure itself of the services of Executive
for the period provided in this Agreement, and Executive is willing to serve in
the employ of the Company on a full-time basis for said period;
WHEREAS, the Company and Executive desire to set forth the amounts payable
and benefits to be provided by the Company to Executive while in the employment
of the Company and in the event of a termination of Executive's employment with
the Company under the circumstances set forth herein;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto hereby agree as follows:
1. Employment. The Company agrees to continue Executive in its employ, and
Executive agrees to remain in the full time employ of the Company, for the
period stated in Section 3 hereof and upon the other terms and conditions herein
provided.
2. Position and Responsibilities. The Company employs Executive, and
Executive agrees to serve, as Associate Senior Executive Vice President and
General Counsel of the Company on the conditions hereinafter set forth.
Executive agrees to perform such services consistent with her position as shall
from time to time be assigned to him by the Company's Board of Directors
("Board") or another executive designated by the Board. Such duties may include,
in addition to her duties as Associate Senior Executive Vice President and
General Counsel, the appointment of Executive as an officer and/or director of
any present or future subsidiary or affiliate of the Company without any
additional remuneration under this Agreement. Executive shall devote all of her
business time, attention, skill, and efforts to the faithful performance of the
duties hereunder.
3. Term. The period of Executive's employment under this Agreement with the
Company shall be deemed to have commenced as of January 1, 2004 and remain in
effect for three years and will continue thereafter on a year-to-year basis in
the absence of notice by either party pursuant to this Agreement or unless
otherwise extended.
4. Compensation and Reimbursement of Expenses.
(a). General. For all services rendered by Executive as Associate
Senior Executive Vice President and General Counsel in addition to any
other capacity during employment under this Agreement (including, without
limitation, services as an executive, officer, or director of the Company,
or any subsidiary or affiliate of the Company, or as a member of any
committee of the Board of Directors of the Company or any subsidiary or
affiliate of the Company), the Company shall pay Executive as compensation
(i) an annual salary ("Base Salary"); (ii) such bonuses if any, as may be
awarded to Executive from time to time pursuant to any Bonus Plan adopted
by the Company for its senior management; (iii) such other bonuses as may
be awarded by the Board or by a committee designated by the Board as
described below ("Performance Bonus"); (iv) stock options as forth in
Section 4(b).
(b). Stock Options. (i). On January 1, 2004 and on each subsequent
January 1 that this Agreement is in effect, the Company will grant
Executive options to purchase no less than 100,000 shares of MAMSI common
stock at the stock price on the date of grant. The Compensation Committee
of the Board will annually consider and submit to the Board a
recommendation for option grants in excess of the minimum of 100,000. All
of such options, except for options granted in 2001, will vest 50% on the
date of grant and 50% based on performance targets to be determined by the
Stock Option Committee and the Board at the first Board meeting in the year
of the grant.
(ii). The number and kind of shares subject to outstanding
options, the purchase price or exercise price of such options, the
limit now set forth in Section 5.01 of the Company's stock option plan
(and any similar successor plan or provision) and the number and kind
of shares available for options subsequently granted shall be
appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other
change in capitalization with a similar substantive effect upon the
options granted. The Stock Option Committee shall have the power and
sole and absolute discretion to determine the nature and amount of the
adjustment to be made in each case.
(c). Base Salary. Base Salary shall be $472,392 for 2004. For 2005 and
each year thereafter, the Base Salary will increase by an amount equal to
50% of the percentage increase in the Company's prior year consolidated net
income as determined by the Company, and audited by the Company's
independent certified public accountant but any annual increase may not be
greater than 8 percent. There shall be no decreases in Executive's Base
Salary, as adjusted, during the term of this Agreement. Items of a
non-recurring nature may be excluded in the calculations as mutually agreed
to by the Company and the Executive.
(d). Bonuses.
(i). Executive shall be paid a bonus as may be determined under
the applicable Bonus Plan adopted by the Company for its senior
management.
(ii). In addition, for 2004 and each year thereafter, the
Executive shall be paid a Performance Bonus based on the percentage
increase in the Company's net income, as determined by the Company and
as audited by the Company's independent certified public accountant,
according to the following formula:
Percentage Increase in Company Performance Bonus Percentage
Net Income
0% - 8.00% -0-
8.01% -15.00% 50% of % increase in net income
15.01% - 25.00% 75% of % increase in net income
25.0% and up 100% of % increase in net income up
to 50% of Base Salary
The current year's Base Salary shall be multiplied times the Performance Bonus
percentage earned in the applicable year. The maximum Performance Bonus that may
be paid for any year is 50% of that year's Base Salary.
(iii). Items of a non-recurring nature may be excluded in the
calculations as mutually agreed to by the Company and the Executive.
(e). Reimbursements. The Company shall also reimburse Executive, in
accordance with such policies and procedures as the Board may establish
from time to time, for all reasonable travel and other expenses incurred by
Executive in the performance of her obligations under this Agreement.
Executive shall also be entitled to participate in all benefit plans
established by the Company for which Company executives are or shall become
eligible.
5. Termination of Employment. Executive's employment under this Agreement
may be terminated by the Company or Executive as follows:
(a). Disability. (i) If Executive fails to perform any of her duties
under this Agreement on account of Disability (as hereinafter defined), the
Company may give notice to Executive to terminate this Agreement on a date
not less than one hundred and eighty (180) days thereafter ("Notice
Period") and, if Executive has not resumed full performance of her duties
under this Agreement within such Notice Period, then Executive's employment
under this Agreement will terminate on the date provided in the notice
("Disability Termination Date"). Notwithstanding the above, the Executive
is specifically entitled to receive all benefits in Section 5(a)(ii).
(ii). Executive shall be paid her Base Salary by the Company
during the Notice Period. Within thirty (30) days after the Disability
Termination Date, the Company shall pay Executive's Base Salary as
then in effect that has accrued to the last day of the month in which
the Disability Termination Date occurs as well as any other payments
or benefits that Executive is entitled to as an employee of the
Company. Executive shall also be entitled to receive a fully vested
retirement benefit and tax gross up thereon when payable pursuant to
Sections 5(d) and 5(h) and health insurance benefits pursuant to
Section 8 below.
(iii). Until the end of the last day of the month in which the
Disability Termination Date occurs, the Company shall maintain and pay
for health and other insurance benefits for Executive at least equal
to those she had at the commencement of such Disability.
(iv). As used in this Agreement, the term "Disability" shall mean
the inability of Executive to perform all of her duties under this
Agreement by reason of her medical, mental, or emotional disability,
as determined by an independent physician selected with the approval
of the Board and Executive.
(b). Death. If Executive dies while employed under this Agreement, her
employment under this Agreement will terminate as of the date of her death
("Date of Death"). Within thirty (30) days after the Date of Death, the
Company shall pay to Executive's legal representative Executive's Base
Salary as then in effect that has accrued to the last day of the month in
which the Date of Death occurs as well as any other payments or benefits
that Executive is entitled to as an employee of the Company. If the
Executive dies while receiving payments pursuant to Section 5(c) below,
said payment shall continue for the period remaining and shall be paid to
the estate or named beneficiary of the Executive. Executive's beneficiary
shall receive 80% of the Executive's fully vested retirement benefit and
tax gross up thereon when payable pursuant to Sections 5(d) and 5(h) and
health insurance benefits pursuant to Section 8 below. On the Date of
Death, all granted stock options shall immediately vest and Executive's
heirs or estate shall be treated as if Executive remained an employee for
exercise purposes consistent with the terms of the applicable stock option
plan.
(c). Certain Other Events of Termination. (i) In the event that (A)
the Company terminates Executive's employment for any reason (other than
because of death, Disability, or "just cause" (as defined below), (B) the
term of this Agreement expires and the Company does not offer to extend the
Executive's employment in a similar capacity, (C) Executive terminates her
employment with the Company because of the Company's material breach of
this Agreement, (D) Executive terminates her employment with the Company
because the Company requires Executive to be based anywhere other than
Executive's current location or within seventy-five miles (75) round trip
of the Company's current principal executive offices, or (E) Executive
terminates her employment with the Company because of a substantial
reduction of her duties and responsibilities, then the Executive shall be
entitled to the severance benefits described in Section 5(c)(ii) below. The
date of termination under this Section 5(c)(i) shall be referred to as the
"Executive Termination Date" in this Agreement. Notice of termination
pursuant to this section will be provided in writing by either the
Executive or the Company, as applicable, at least thirty (30) days in
advance of the requested Executive Termination Date.
(ii). Upon the occurrence of an event described in Section
5(c)(i) above, the Executive shall be entitled to the following:
(A). The Company shall pay the Executive an amount equal to
one year's Base Salary as in effect on the Executive Termination
Date with the total amount being paid in equal bi-weekly payments
over a period of one year commencing on the Executive Termination
Date and in accordance with regular payroll practices of the
Company;
(B). The Company shall also pay the Executive the sum of the
maximum bonus under the senior management Bonus Plan of the
Company and the maximum Performance Bonus that Executive could
have been entitled to had she been employed until the end of the
year of termination regardless of whether she receives either
bonus that year using the assumption that the parameters for
earning maximum bonuses were met for that year regardless of the
actual performance of the Company. Such bonus payments shall
occur when bonuses are normally paid by the Company but in no
event later than February 28 of the applicable year; and
(C). All stock options which Executive has been granted
shall immediately vest and become exercisable. For the purposes
of the time period available for exercising such stock options,
Executive shall be considered to be in the continuous employ of
the Company unless terminated pursuant to subsection (e) below.
(D). If the Executive becomes entitled to the benefits
provided in this Section 5(c)(ii), such benefits shall be in lieu
of any other severance benefit that the Company may provide or
adopt except that the Executive shall be entitled to the value of
her fully vested retirement benefits and the tax gross up thereon
when payable provided under Sections 5(d) and 5(h) and health
insurance as set forth in Section 8 below. Nothing in this
section shall limit the discretion of the Board to grant
Executive additional benefits.
(d). Retirement. (i). Subject to the vesting schedule set forth below,
retirement benefits shall be due to Executive beginning on the day
Executive attains age sixty-two (62), (1) if she is at that time still
employed by the Company, and she elects to retire from employment with the
Company, or (2) she is not at the time employed by the Company, and elects
to begin receiving retirement benefits. Notwithstanding the above
provision, the Executive and the Company may agree that the Executive may
continue to be employed by the Company and not to retire at age 62. In
addition, the Executive may elect an early retirement and may elect to
receive payment of the retirement benefit at anytime after attaining age 55
but before age 62 by providing written notice to the Company. Such early
retirement benefit will be adjusted solely for actual retirement age as
described in Section 5(d)(ii) below and will be subject to the vesting
schedule provided below. The date on which the Executive retires shall be
referred to as the "Retirement Termination Date".
(ii). If Executive retires on or after reaching age 62, Executive
will be entitled to receive from the Company, at the Executive's
written election, either in the form of cash or an annuity, a
retirement benefit which will provide an annual lifetime benefit in an
amount equal to three percent of the average annual Base Salary and
all bonus compensation for the two years with the highest compensation
beginning on or after January 1, 2001 times the total number of months
of service with the Company, including all months prior to January 1,
2001, which shall be divided by 12 . The annual retirement benefit so
caluculated will be limited to 60% of Executive's total compensation
which is defined as the total amount of annual Base Salary and maximum
annual senior management bonus and Performance Bonus (using the
assumption that the parameters for earning maximum bonus were met for
that year regardless of the actual performance of the Company) that
Executive could have earned in the calendar year of Executive's
termination of employment with the Company had she been employed until
the end of the year in which termination occurs regardless of whether
she receives either bonus that year. For the purposes of determining
the two years with the highest compensation under this paragraph,
compensation shall be based on all wages, salaries and bonus amounts
earned in an applicable year rather than paid in that year. In
addition, in the event of a Change in Control as defined in Section
5(g), the Executive shall have been considered to have earned the
total amount of annual Base Salary and maximum annual senior
management bonus and Performance Bonus (using the assumption that the
parameters for earning maximum bonus were met for that year regardless
of the actual performance of the Company) that the Executive could
have earned in the calendar year of the Change in Control and for the
purposes of calculating the Executive's retirement benefit, such year
shall be considered in the determination of the Executive's two years
with highest compensation. If the Change in Control occurs in 2001,
the Executive's 2001 Base Salary, maximum senior management bonus and
maximum Performance Bonus that could have been earned in that year
regardless of actual company performance shall count as the average
compensation on which the amount of the retirement benefit is
calculated. However, in no event will the lump sum payment provided in
Section 5(g)(2) be considered as compensation under the calculation of
the retirement benefit under this paragraph. In the event of a Change
in Control, an additional twenty-four (24) month period shall be added
to the total months of service for the purpose of calculating the
Executive's retirement benefit under this paragraph. If Executive
elects early retirement and retires after reaching age 55 but before
age 62, the annual benefit amount shall be reduced by .25% (.0025) per
month for each month that the actual retirement age is prior to age
62. The annual retirement benefit amount shall be increased at a rate
of 2.5% annually beginning in the year of retirement. For the purposes
of determining the net present value of the annual retirement benefit,
a fixed interest rate of 5% per annum will be used.
(iii). Retirement benefits will vest 50% upon the effective date
of this Agreement and the remaining 50% will vest if the Executive is
employed by the Company on January 1, 2002 and will vest 100% upon a
Change in Control (as defined in Section 5(g)(1) below, death or
Disability.
(iv). At any time, Executive may elect a beneficiary to receive a
survivor benefit which will be 80% of the Executive's retirement
benefit upon the Retirement Termination Date. If Executive dies prior
to retirement without naming a beneficiary, then Executive's surviving
spouse shall be deemed to be her named beneficiary or if Executive has
no surviving spouse, to her issue per stirpes.
(v). If Executive is employed by the Company on the Retirement
Termination Date, the Company shall pay to Executive her Base Salary
as then in effect that has accrued to the last day of the month in
which the Retirement Termination Date occurs, any payment or benefit
that Executive is entitled to as an employee of the Company, and any
non-reimbursed business expenses. In addition, the Executive shall
receive the compensation set forth in Section 5(f) and must comply
with Section 6. The retirement benefit payable under this Section 5(d)
is in addition to, and shall not be offset against, any other
retirement benefits to which the Executive may be entitled under any
qualified or non-qualified retirement or deferred compensation plan of
the Company.
(e). Termination by the Company for Just Cause
(i). The Company may terminate Executive's employment for "Just
Cause" at any time by giving written notice thereof to Executive.
(Except as provided below, the date of such notice is the "Just Cause
Termination Date" unless otherwise provided in the notice). Within
thirty (30) days after the Just Cause Termination Date, the Company
shall pay to Executive her Base Salary as then in effect that has
accrued to the Just Cause Termination Date, as well as any payment or
benefit that Executive is entitled to as an employee of the Company,
and any non-reimbursed business expenses. For the purposes of this
subparagraph, "Just Cause" shall mean termination because of
Executive's willful and intentional business or professional
misconduct, breach of fiduciary duty, intentional failure to perform
stated duties other than such failure due to her disability, the
conviction of Executive of a felony, or a material breach of any
provision of this Agreement. For the purposes of this paragraph, no
act, or failure to act, on Executive's part shall be deemed "willful"
unless done, or omitted to be done, by Executive not in good faith and
without reasonable belief that her action or omission was in the best
interests of the Company. Unless otherwise determined by the Board,
Executive shall have no right to receive compensation or other
benefits under this Agreement after a termination for Just Cause
except for the value of vested retirement benefits and the tax gross
up thereon when payable as described in Sections 5(d) and 5(h), any
stock options that have vested up to and including the Just Cause
Termination Date and health insurance as set forth in Section 8 below.
(ii). Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for Just Cause unless and until the
occurrence of the following two events:
(A). The Executive is given a notice from the Board of
Directors of the Company that identifies with reasonable
specificity the grounds for the proposed termination of the
Executive's employment and notifies the Executive that she shall
have an opportunity to address the Board with her counsel present
with respect to the alleged grounds for termination at a meeting
of the Board called and held for the purpose of determining
whether the Executive engaged in conduct described in Section
5(e)(i). The notice shall, except as is otherwise provided in the
last sentence of the subsection (i), provide the Executive with
thirty (30) days from the day such notice is given to cure the
alleged grounds of termination contained in this Agreement. The
Board of Directors shall determine, reasonably and in good faith,
whether the Executive has effectively cured the alleged grounds
of termination. If, in the reasonable good faith opinion of the
Board, the grounds for termination under Section 5(e)(i) may not
reasonably be cured by the Executive, then the notice required by
this Section 5(e)(ii)(A) need not provide for any cure period;
and
(B). The Executive is given a copy of certified resolutions,
duly adopted by the affirmative vote of not less than a majority
of the entire membership of the Board (excluding the Executive,
if applicable) at a meeting of the Board called and held for the
purpose of finding that, in the reasonable good faith opinion of
a majority of the Board, the Executive was guilty of conduct set
forth in Section 5(e)(i), which specify in detail the grounds for
termination and indicate that the grounds for termination have
not been cured within the time limits, if any, specified in the
notice referred to in Section 5(e)(ii)(A).
(f). Termination by Executive Without Cause. Executive may terminate
this Agreement without cause upon the provision of twelve (12) weeks' prior
notice to the Company. The date of such termination shall be referred to as
the "Without Cause Termination Date" in this Agreement. Upon such a
termination, the Executive shall receive an amount equal to one year's Base
Salary in effect at the time of termination, the full bonus under the
senior management Bonus Plan of the Company based on the actual performance
of the Company under the Bonus Plan and not pro-rated for months of service
in the year of termination, and the full Performance Bonus that Executive
would have received under this Agreement based on the actual performance of
the Company and not pro-rated for months of service in the year of
termination. Executive also shall be entitled to receive the value of the
vested retirement benefit and the tax gross up thereon when payable in
accordance with Sections 5(d) and 5(h) of this Agreement and any other
non-reimbursed business expenses and health insurance as set forth in
Section 8 below. Executive must comply with Section 6 below. All stock
options which are vested through the Without Cause Termination Date can be
exercised by the Executive under the terms of the applicable option plan as
if the Executive remained in the Company's employ. No other payment shall
be made to Executive under this Agreement other than that provided in this
paragraph. Executive will receive payment under this section as long as
notice of termination is given during the term of the Agreement even if the
Without Cause Termination Date extends beyond the term of the Agreement.
(g). Change in Control. Notwithstanding any other provision to the
contrary, the following provisions will govern in the event of a Change in
Control as defined herein.
(1). Change in Control shall be deemed to have occurred upon the
occurrence of any one of the following events:
(A). The acquisition of, in one or more transactions by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act), shares in excess of
fifty percent (50%) of the then-outstanding voting stock of the
Company; provided, however, that the term "Change in Control"
shall not include any such acquisition by any entity with respect
to which, following such acquisition, more than 50% of the
then-outstanding shares of common stock of such entity is then
beneficially owned, directly or indirectly by individuals and
entities who were beneficial owners of the then-outstanding
voting stock of the Company immediately prior to such acquisition
in substantially the same proportion as their ownership
immediately prior to such acquisition of the then-outstanding
voting stock of the Company; or
(B). The consummation of a merger, reorganization,
consolidation, share exchange, transfer of assets or other
transaction having similar effect involving the Company
("Merger"), unless, following such Merger, stock possessing at
least fifty percent (50%) of the total combined voting power of
the issued and outstanding shares of all classes of Company stock
of the corporation resulting from such Merger is beneficially
owned, directly or indirectly, by individuals and entities who
were beneficial owners of the then-outstanding voting stock of
the Company immediately prior to such Merger in substantially the
same proportion as their ownership immediately prior to such
Merger; or
(C). Consummation of a complete liquidation or dissolution
of the Company.
(2). In the event of a Change in Control as defined in Section
5(g)(1) above, the Executive shall be entitled to the following
benefits regardless of whether Executive remains employed by the
Company, terminates her employment with the Company, or is terminated
after the Change in Control:
(A). The Company shall pay the Executive in a single lump
sum cash payment at the time of Closing (i.e., the legal
consummation of the Change in Control) an amount equal to two
times the sum of (1) the Executive's current Base Salary; and (2)
the maximum Performance Bonus that Executive could have earned
for the year in which such Change in Control occurs (50% times
the then-current Base Salary as defined in Section 4 above) had
she been employed until the end of the year regardless of whether
she receives a Performance Bonus that year; and (3) the maximum
annual senior management bonus the Executive could have earned
had she been employed until the end of the year regardless of
whether she receives a senior management bonus that year using
the assumption that the parameters for earning maximum bonus were
met for that year regardless of the actual performance of the
Company under the applicable Bonus Plan for the year in which
such Change in Control occurs in lieu of payment under the Bonus
Plan. In addition, the Executive will receive the value of the
Executive's fully vested retirement benefit and tax gross up
thereon in cash, if so elected by the Executive pursuant to
Section 5(g)(2)(D) below. Upon payment of the lump sum provided
under the subsection, the obligation of the Company to employ
Executive under this Agreement shall cease;
(B). All stock options which Executive has been granted
shall immediately vest and become exercisable in accordance with
the applicable option plan and agreements;
(C). The Company shall pay to the Executive at the time of
Closing an amount equal to the sum of (x) any excise taxes
imposed on the Executive under Section 4999 of the Internal
Revenue Code and (y) income and other payroll taxes due from the
Executive with respect to the payment of the amount in (x) above
as well as the payment for income and other payroll taxes under
this subsection 5(g)(2)(C). The determination of whether an
excise tax is due in respect of any payment or benefit, the
amount of the excise tax and the amount of the gross-up payment
shall be made by an independent accountant jointly selected by
the Company and the Executive and paid by the Company. If the
Executive and the Company cannot agree on the firm to serve as
the accountant, then the Executive and the Company shall each
select one nationally recognized accounting firm and those two
firms shall jointly select the nationally recognized accounting
firm to serve as the accountant; and
(D). At or prior to Closing and based solely upon the
Executive's written election, the Company shall either purchase
for the Executive an annuity as set forth in Section 5(h) below
based on the fully vested retirement benefit and tax gross up
thereon provided in Section 5(d) above or pay the Executive the
equivalent amount in cash. For the purposes of calculating the
amount of such retirement benefits under Section 5(d)(ii), an
additional twenty-four (24) months shall be added to the total
number of months of service Executive shall have worked for the
Company and, in addition, the Executive shall have been
considered to have earned the total amount of annual Base Salary
and maximum annual senior management bonus and Performance Bonus
(using the assumption that the parameters for earning maximum
bonus were met for that year regardless of the actual performance
of the Company) that the Executive could have earned had she been
employed until the end of the year regardless of whether she
receives either bonus that year in the calendar year of the
Change in Control and such year shall be considered in the
determination of the Executive's two years with highest
compensation under Section 5(d)(ii). However, in no event will
the lump sum payment(s) provided in Section 5(g)(2) be considered
as compensation under the calculation of the retirement benefit
under this paragraph.
(3). The payment of any benefits described in Section 5(g)(2) and
5(h) of this Agreement shall become the joint and several obligation
and responsibility of the Company and the successor company or
"person" noted in Section 5(g) above if applicable. (4). If the
Executive becomes entitled to the benefits provided under Section
5(g)(2) above, such benefits shall be in lieu of any other severance
or similar benefits that would otherwise be payable under any other
agreement, plan, program or policy of the Company; provided, however,
that this section shall not apply to any retirement benefit under
Sections 5(d) and 5(h) herein and shall not be offset against any
other retirement benefits to which the Executive may be entitled under
any qualified or non-qualified retirement or deferred compensation
plan of the Company.
(h). Payment of Retirement Benefit. Upon termination of the
Executive's employment for any reason under this Section 5 and based solely
upon the Executive's written election, the Company shall either pay the
Executive the earned retirement benefits and tax gross up thereon in cash
or purchase for her benefit an annuity that guarantees the payment of the
earned retirement benefits for the life of Executive and the life of her
beneficiary at a 20% reduction should he predecease such beneficiary. If
the annuity purchase is elected, the annuity must be issued by a Company
with at least an A+ rating from Best's or a AA rating from Standard &
Poor's. For the purposes of the purchase of such an annuity, the Executive
may elect the commencement date of the annuity payment. Such annuity must
be purchased within 90 days of termination except in the case of a Change
in Control as defined below in which case the annuity must be purchased by
the successor company at or prior to Closing unless an alternate date of
purchase is mutually agreed to in writing by the Company, the Executive and
the successor company. The parties recognize that the amount the Company or
successor company pays the Executive in cash or for the annuity purchase
will be taxable income to the Executive and the Company or successor
company agrees to reimburse the Executive for all taxes, including taxes on
the tax gross up, related to the annuity purchase or cash payment. In the
case of a Change in Control, for the purposes of calculating any reduction
in payments for early retirement in the value of the retirement benefit,
the Executive shall be deemed to be the greater of (1) age 55 or (2)
Executive's actual age, plus 2 years. If the Executive selects the annuity
purchase option, retirement payments will commence when Executive attains
the age of 55. If the cash option is selected, the sum payable will
discounted back to a present value in accordance with Section 5(d)(ii) to
reflect the number of years between Executive's current age and age 55.
6. Covenant Not to Compete. Executive covenants and agrees that, in
consideration of the amounts to be paid Executive under this Agreement pursuant
to Sections 5(d) and 5(f) and other good and valuable consideration, for a
period of one (1) year beyond the Without Cause Termination Date or the
Retirement Termination Date, Executive shall not be employed as an executive
officer of, or control, manage, or otherwise participate in the management of
the business of a "significant competitor" of the Company within the Company's
service area. The term "significant competitor" shall mean any company or
division of a company that, on the Without Cause Termination Date or the
Retirement Termination Date, directly or indirectly, is materially (10% or more
of its revenues) engaged in the operation or management of a health maintenance
organization or any other similar provider, payer or insurer for medical
services. The Company and Executive agree that the terms and conditions of this
Section 6 shall survive the termination of this Agreement following the Without
Cause Termination Date or the Retirement Termination Date.
7. Health Insurance. Upon termination of this Agreement for any reason,
including but not limited to, retirement, death, Disability, Change of Control,
or termination of Executive with or without cause, both the Executive and the
spouse of the Executive and in the event of the Executive's death, the surviving
spouse of the Executive will receive or be provided health coverage from the
Company or its successor during the term of their respective lives. Such health
coverage shall be equivalent to that which was available to the Executive on the
date of termination and shall be paid for by Executive or the spouse of the
Executive with the normal Company contribution for active employees in effect at
the date of termination.
8. Confidential Information. Executive shall fully comply with and abide by
the provisions of the Company's Employee Manual and other announced policies in
effect from time to time, including those provisions relating to the protection
of the Company's confidential information. The Company and Executive agree that
the foregoing provision shall survive the termination of this Agreement for any
reason whatsoever.
9. Indemnification. Executive shall be entitled to indemnification to the
full extent provided for or allowed by applicable law, including indemnification
for administrative and criminal matters, irrespective of insurance, and to
advances for expenses in defending against such claims. The Company and
Executive agree that the foregoing provision shall survive the termination of
this Agreement for any reason whatsoever. Notwithstanding the above, the Board
shall have the discretion not to reimburse or indemnify the Executive for any
expenses related to a just cause termination as defined in Section 5(e) wherein
such action or omission was done, or omitted to be done, by Executive not in
good faith and without reasonable belief that her action or omission was in the
best interests of the Company.
10. Anti-Disparagement. Upon termination of this Agreement for any reason,
both parties agree not to make disparaging or disrespectful comments about each
other orally or in writing or through any other medium to any individual or
entity, professional or trade association, regulator, competitor or media.
11. Nonsolicitation. For a period ending one year after any termination of
this Agreement, the Executive shall not, directly or indirectly, induce any
person in the employment of the Company or any subsidiary or affiliate of the
Company away from the Company or any subsidiary or affiliate of the Company to
accept employment or enter into any consulting arrangement with the Executive or
any entity with which Executive is associated.
12. General Provisions.
(a) Entire Agreement. This Agreement contains the entire understanding
between the parties hereto and supersedes any prior employment agreement
between the Company and Executive.
(b) No Duty to Mitigate. Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise, nor shall any amounts received from other
employment or otherwise by Executive offset in any manner the obligations
of the Company hereunder.
(c) Nonassignability. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof is assignable
by Executive, her beneficiaries, or legal representatives without the
Company's prior written consent; provided, however, that nothing in this
Section 11(c) shall preclude (i) Executive from designating a beneficiary
to receive any benefit payable hereunder upon her death, or (ii) the
executors, administrators, or other legal representatives of Executive or
her estate from assigning any rights hereunder to the person or persons
entitled thereto.
(d) Notices. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by certified
mail, return receipt requested, first-class postage prepaid, to the parties
to this Agreement at the following addresses:
(i) if to the Company at:
Mid Atlantic Medical Services, Inc.
0 Xxxx Xxxxx
Xxxxxxxxx, XX 00000
and
(ii) if to Executive at the address set forth on the
signature page or to such other address as either
party to this Agreement shall have last designated
by notice to the other party.
All such notices and communications shall be deemed to have been received
on the earlier of the date of receipt or the third business day after the date
of mailing thereof.
(e) Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns. Nothing in this Agreement, express or
implied, is intended or shall be construed to give any person, other than
the parties to this Agreement or their respective successors or permitted
assigns, any legal or equitable right, remedy, or claim under or in respect
of any agreement or any provision contained herein.
(f) Waiver. No provision of this Agreement may be amended, waived,
discharged, or terminated except by an instrument in writing and executed
by each party. Any waiver of enforcement of any provision of this Agreement
shall not operate or be construed as a continuing waiver or a waiver of any
other provisions unless expressly stated in such instrument.
(g) Amendment. This Agreement may be terminated, amended, modified, or
supplemented only by a written instrument executed by Executive and the
Company.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of Delaware, regardless of the law
that might be applied under principles of conflict of laws.
(i) Severability. If, for any reason, any provision of this Agreement
is held invalid, such invalidity shall not affect any other provision of
this Agreement not held so invalid, and each such other provision shall, to
the full extent consistent with law, continue in full force and effect. If
any provision of this Agreement shall be held invalid in part, such
invalidity shall in no way affect the rest of such provision not held so
invalid, and the rest of such provision, together with all other provisions
of this Agreement, shall to the full extent consistent with law continue in
full force and effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its seal to be affixed hereunto by its officers thereunto duly authorized,
and Executive has signed this Agreement, all as of the Effective Date.
ATTEST: MID ATLANTIC MEDICAL SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxx, M.D.
______________________________ ____________________________
Name: Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxx, M.D.
(Corporate Seal) Title: Chairman of the Board
APPROVED BY:
Compensation Committee EXECUTIVE: Xxxxxx X. Xxxxxx
By: /s/ Xxxxxx X. Xxxx By: /s/ Xxxxxx X. Xxxxxx
__________________________ _____________________________
Name: Xxxxxx X. Xxxx Address: 4 Xxxx Court
Title: Chairman Xxxxxxxxx, XX 00000
