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EXHIBIT 4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
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CHIEF EXECUTIVE OFFICER
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CHOICECARE CORPORATION (the "ChoiceCare Parent") and CHOICECARE HEALTH
PLANS, INC. (the "ChoiceCare Operating Company" and with the ChoiceCare Parent
and the ChoiceCare Operating Company being collectively referred to as the
"Employer"), and XXXXXX X. XXXXXXXX, M.D. ("Employee"), hereby agree as follows,
effective as of the 1st day of January, 1997 but subject to the execution of a
Definitive Agreement and Plan of Merger (the "Definitive Agreement") by and
among Humana Inc., Humana Acquisition Subsidiary, Inc., the ChoiceCare Parent
and The ChoiceCare Foundation:
1. RECITALS. Employer and Employee are currently parties to an
employment agreement, the original form of which was adopted on December 23,
1994 and the form of which was amended and/or restated certain times since then.
This Agreement amends and restates any prior employment agreement between
Employer and Employee in its entirety, and supersedes any prior employment
agreement between Employer and Employee, effective as of January 1, 1997.
Notwithstanding the foregoing or any other provision of this Agreement, the
effectiveness of this Agreement is conditioned on the Definitive Agreement being
executed by the parties thereto.
2. EMPLOYMENT. Employer agrees to employ Employee, and Employee accepts
such employment, upon the terms and conditions set forth herein.
3. EMPLOYEE'S RESPONSIBILITIES.
3.1 Employee shall serve as the President and Chief Executive
Officer of the ChoiceCare Parent and as the Chief Executive Officer of the
ChoiceCare Operating Company. In such positions, Employee shall be responsible
for the management and supervision of Employer's operations and perform such
other duties and responsibilities as shall be requested by the boards of
directors of Employer, including serving as an executive officer or a member of
the board of any affiliated company. For purposes of this Agreement, an
"affiliated company" means any corporation (other than the Employer) which, now
or at any later time, is part of an unbroken chain of corporations (i) that
includes the Employer and (ii) in which each corporation in such chain either
owns at least 50% of the total combined voting power of all classes of stock in
one of the other corporations in such chain or has at least 50% of the total
combined voting power of all classes of its stock owned by one of the other
corporations in such chain.
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3.2 Employee shall devote his full time and best efforts to his
employment with Employer and perform diligently such duties as are required by
Employer from time to time, which duties shall be consistent with Employee's
position with Employer.
3.3 Without the prior written consent of the ChoiceCare Parent,
which shall not be unreasonably withheld, during the term of this Agreement
Employee shall not, directly or indirectly, render services of a business,
professional or commercial nature to any other person or firm, for compensation
or otherwise, except in the ordinary course of the business of Employer or any
affiliated company. Notwithstanding the foregoing but subject to the following
provisions, Employee may serve as a director or trustee of any company, on
either a compensated or noncompensated basis, that is not a competitor of
Employer or any affiliated company. Employee may retain any director fees,
committee fees, stock options, restricted stock awards or other remuneration
paid or given to Employee by any such company for such services as a director or
trustee. Employee shall notify the ChoiceCare Parent of any appointment to a
board of directors or board of trustees, and, notwithstanding the foregoing,
Employee shall resign from any board upon the request of the ChoiceCare Parent,
provided that the request has a reasonable basis. Employee may also retain any
honoraria paid to him, provided that, if the honoraria to be paid for any one
appearance or presentation exceeds $2,000, the Chairman of the Human Resources
and Compensation Committee of the board of directors of the ChoiceCare Parent
shall determine, in his or her sole discretion, whether Employee is entitled to
retain the amount in excess of $2,000.
4. TERM.
4.1 The initial term of this Agreement shall begin January 1, 1997
and end December 31, 1999.
4.2 This Agreement shall automatically be renewed at the end of its
initial term (or at the end of any renewal term provided hereunder) for a
renewal term of one additional year, unless Employer gives Employee, or unless
Employee gives Employer, written notice by October 1 of the last contract year
of the initial term of this Agreement (or by October 1 of any contract year in
which a renewal term of this Agreement is in effect) that this Agreement shall
terminate at the end of the then-current term. If this Agreement terminates at
the end of a then-current term by reason of Employer giving a timely written
notice to Employee that this Agreement shall terminate at the end of the
then-current term, then Employer shall be deemed to have terminated Employee's
employment for purposes of the other provisions of this Agreement. On the other
hand, if this Agreement terminates at the end of a then-current term by reason
of Employee giving a timely written notice to Employer that this Agreement shall
terminate at the end of the then-current term, then, except as may otherwise be
provided under subsection 14.1 below or any other provision of this Agreement,
Employee shall be deemed to have voluntarily resigned his employment with
Employer for purposes of the other provisions of this Agreement.
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4.3 For all purposes of this Agreement, a "contract year" means a
calendar year, beginning January 1 and ending the following December 31, which
occurs during the term of this Agreement. Also, for all purposes of this
Agreement, a "contract term" means either the initial term of this Agreement or
any renewal term of this Agreement. In addition, also for all purposes of this
Agreement, any reference to the "then-current contract year" refers to the
contract year which is then in effect and any reference to the "then-current
term" refers to the contract term which is then in effect.
4.4 Notwithstanding anything to the contrary in the Employer's
Executive Long-Term Incentive Plan (the "Long-Term Plan"), if Employee ceases to
be an employee of Employer at the end of the initial term or any renewal term of
this Agreement, Employee shall be entitled to be paid, within ninety days after
the expiration of this Agreement, all incentives which have been earned under
the Long-Term Plan in prior contract years, if any, but have not yet been paid
(since an incentive earned for a contract year under such plan is not normally
payable until after a further period of continuous future employment).
5. COMPENSATION AND BENEFITS: During the term of this Agreement:
5.1 Employee shall receive an initial base salary at the annual rate
of $395,000, payable in equal consecutive bi-weekly installments. Such base
salary shall be reviewed annually, effective as of the first pay period
beginning on or after January 1 of each contract year after the initial contract
year of this Agreement, and shall be adjusted on a basis consistent with the
executive compensation philosophy of Employer as evidenced by the application of
such philosophy to the compensation of Employer's other key executives. In no
event shall Employee's base salary be reduced for any contract year (whether or
not such contract year occurs in the initial term of this Agreement or in a
renewal term of this Agreement) below his base salary for the immediately
preceding contract year.
5.2 Employer may during the term of this Agreement, consistent with
its approach to the rest of its executive group:
(a) Award an annual incentive to Employee based on
Employer's overall success as a for-profit community
resource, Employer's accomplishment of strategic
imperatives, Employer's continuous improvements of
quality outcomes and Employee's performance of his
duties under this Agreement during the previous contract
year, in accordance with Employer's Executive Annual
Incentive Plan (the "Annual Incentive Plan"), as amended
from time to time by the boards of directors of
Employer. The amount of any incentive under the Annual
Incentive Plan shall be determined by Employer's boards
of directors in a manner consistent with the terms and
practices of the Annual Incentive Plan. However, in the
event of a change in control (as defined in subsection
7.2
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below), the overall value of the annual incentive under
the Annual Incentive Plan, as may be reasonably
determined by the Employer's boards of directors (taking
into account the possibility of meeting the goals which
are used under such plan to determine if Employee is
entitled to the incentive as well as the potential
amount of the incentive), shall not be reduced for the
contract year in which the change in control occurs or
any subsequent contract year below the overall value of
the annual incentive under such plan which has been
established by the Employer prior to the change in
control for the contract year in which the change in
control occurs (or, if no annual incentive has been
established for such contract year by the time of the
change in control, for the next preceding contract
year);
(b) Award an incentive to Employee pursuant to the
provisions of the Long-Term Plan, as amended from time
to time by the boards of directors of Employer. The
amount of any incentive under the Long-Term Plan shall
be determined by Employer's boards of directors in a
manner consistent with the terms and practices of the
Long-Term Plan. However, in the event of a change in
control (as defined in subsection 7.2 below), in no
event shall the overall value of the incentive under the
Long-Term Plan which has been established by the
Employer prior to the change in control with respect to
the contract year which begins January 1, 1997, as may
be reasonably determined by the Employer's boards of
directors, be reduced; and
(c) Cause awards to be granted to Employee pursuant to the
provisions of Employer's 1996 Long Term Stock Incentive
Plan (the "Stock Incentive Plan"), as amended from time
to time by the boards of directors of Employer. The
awards granted under the Stock Incentive Plan shall
constitute or be otherwise based on shares of common
stock of the ChoiceCare Parent ("Common Shares") in
accordance with the terms and practices of such plan.
Specifically, in addition to any stock options granted
to Employee under the Stock Incentive Plan prior to
January 1, 1997, Employee shall, under the Stock
Incentive Plan and subject to its terms, be granted: (i)
in the contract year which begins on January 1, 1997,
stock options which are not incentive stock options
("nonincentive stock options") and which give Employee
the ability to purchase no less than 200,000 Common
Shares; and (ii) in the contract year which begins on
January 1, 1998, nonincentive stock options which give
Employee the ability to purchase no less than a number
of Common Shares which is
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equal to the difference between 342,697 Common Shares
and the number of Common Shares which are granted under
the Stock Incentive Plan to Employee during the contract
year which begins on January 1, 1997. Any nonincentive
stock option required to be granted under the
immediately preceding sentence shall provide that all of
the Common Shares which are subject to such option shall
be vested, and shall be able to be purchased through the
exercise of such option, until the date which is ten
years from the date such option is granted, if and once
either (i) Employee's employment with Employer as an
employee does not end before the last day of the initial
term of this Agreement or (ii) Employee's employment
with Employer terminates prior to the last day of the
initial term of this Agreement for any reason other than
Cause or Employee's voluntary resignation (other than a
voluntary resignation which still results in an amount
being payable under subsection 6.5(b) or 6.9 below).
Notwithstanding the foregoing, the grant of any
nonincentive stock option under this paragraph (c) shall
be conditioned on Employee being an employee of
Employer, and still performing his duties under this
Agreement in a satisfactory manner, on the date such
option is otherwise to be granted. In addition, and also
notwithstanding the foregoing, the number and class of
shares subject to the nonincentive stock options
required under the preceding provisions of this
paragraph (c) shall be proportionately adjusted, and the
terms of such options as to option price and other
material provisions shall be appropriately adjusted, in
the event of changes in the Common Shares by reason of
stock dividends, stock splits, recapitalizations,
mergers, consolidations, combinations or exchanges of
shares, split-ups, split-offs, spin-offs, liquidations
or other similar changes in capitalization, or any
distribution to common shareholders other than cash
dividends. Further, Employer and Employee agree that no
awards other than those described in this paragraph (c)
are required to be made to Employee under the Stock
Incentive Plan during the term of this Agreement.
Finally, Employer and Employee also agree that,
notwithstanding the foregoing, any awards which may be
otherwise required to be granted to Employee under the
Stock Incentive Plan during the contract year beginning
on January 1, 1997 and the contract year beginning on
January 1, 1998 by reason of the foregoing provisions of
this paragraph (c) shall not be granted prior to the
closing of the transactions contemplated by the
Definitive Agreement.
5.3 Employee shall be entitled during the term of this Agreement to:
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(a) Six weeks paid vacation per year. Vacation use and
carryover rules will be in accordance with the rules
established for other executives of Employer. However,
in the event of a change in control (as defined in
subsection 7.2 below), the overall value of such
vacation benefits, as may reasonably be determined by
the Employer's boards of directors, shall not be less at
any time on or after the change in control and while
this Agreement is in effect than the value of the
vacation benefits provided Employee under this Agreement
immediately prior to the change in control.
(b) Disability insurance as is afforded generally from time
to time to other members of the executive management
group of Employer. However, in the event of a change in
control (as defined in subsection 7.2 below), the value
of the coverage provided by such disability insurance,
as may be reasonably determined by the Employer's boards
of directors, shall not be less at any time on or after
the change in control and while this Agreement is in
effect than the value of the disability insurance
provided Employee under this Agreement immediately prior
to the change in control.
(c) Medical benefits (not including dental or other benefits
to the extent they are provided under a plan or
arrangement which is not part of Employer's
comprehensive program of hospital, physician, and
similar types of medical benefits) for Employee and his
family as are afforded from time to time to the rest of
Employer's executive group. However, in the event of a
change in control (as defined in subsection 7.2 below),
the value of the coverage provided by such medical
benefits, as may be reasonably determined by the
Employer's boards of directors, shall not be less at any
time on or after the change in control and while this
Agreement is in effect (or thereafter to the extent
medical benefits must be provided under the following
provisions of this paragraph (c)) than the value of the
medical benefits provided Employee under this Agreement
immediately prior to the change in control. Except as
may otherwise be specifically provided in the other
provisions of this Agreement, such medical benefits
shall be provided to Employee after the termination of
his employment with Employer for any reason except Cause
(as defined in subsection 6.1 below) or his voluntary
resignation from his employment with Employer (other
than a voluntary resignation which occurs at the end of
a contract term or a voluntary resignation which still
results in an amount being payable under subsection
6.5(b) or 6.9 below), as if Employee
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had remained employed by Employer, until such time as is
indicated below. After his termination of employment
with Employer, subject to the provisions of the second
sentence of this paragraph (c), such benefits shall be
comparable to those provided to active executive
employees and shall be provided through insurance,
health maintenance organization products or other
arrangements, at Employer's discretion, so long as the
result is to provide such benefits in the immediate
vicinity of Employee's residence at any time following
his termination of employment. Such benefits shall
continue until either (i) Employee is eligible to
receive benefits under Medicare or a successor
government-sponsored program or (ii) Employee obtains
employment with another employer and is eligible to
receive comparable medical benefits under any plan
maintained by such other employer, at which time
Employee shall not be entitled under this Agreement to
any additional medical benefits from Employer (unless
Employee is actively employed full-time or part-time by
Employer). In the event of the death of Employee while
Employee and his family are receiving the medical
benefits provided hereunder, Employee's family shall
continue to receive medical benefits hereunder, to the
same extent as if Employee had left the employ of
Employer and was entitled to medical benefits hereunder,
until such time as Employee's spouse either (i) becomes
eligible to receive benefits under Medicare or a
successor government-sponsored program or (ii) obtains
employment or remarries when such spouse, as a result of
her employment or remarriage, is otherwise eligible to
receive comparable medical benefits under a plan
maintained by her employer or her spouse's employer.
(d) Tax-qualified retirement plan benefits, dental benefits
and such other similar employment privileges,
perquisites and benefits (not including the benefits
described in paragraphs (b) and (c) immediately above)
as are afforded generally from time to time to other
members of the executive management group of Employer.
However, in the event of a change in control (as defined
in subsection 7.2 below), the overall value of such
benefits, considered in the aggregate and as may be
reasonably determined by the Employer's boards of
directors, shall not be less at any time on or after the
change in control and while this Agreement is in effect
than the value of the tax-qualified retirement plan
benefits, dental benefits and such other similar
employment privileges, perquisites and benefits (not
including the benefits described in paragraphs (b) and
(c) immediately above)
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provided Employee under this Agreement immediately prior
to the change in control.
(e) Life insurance in an amount during each contract year
equal to two times Employee's base salary for such
contract year. Employer may purchase, in its sole
discretion, either whole life or term insurance to meet
Employer's obligation hereunder. Any group life
insurance which is provided Employee by Employer shall
be counted towards the obligation of Employer hereunder.
If Employer is unable to obtain insurance in the amount
required on the life of Employee, Employer shall pay to
the estate of Employee the difference between the amount
of insurance proceeds to be received by Employee's
estate under all life insurance policies paid for by
Employer and the amount of life insurance Employer is
required to provide hereunder.
(f) Business related transportation assistance, including
transportation between Employee's home and office or
other business location, a personal executive assistant
and audio/visual equipment as may be required by
Employee as certified by Employee's treating physician.
(g) Participate in the Supplemental Executive Retirement
Plan ("SERP") attached hereto as Exhibit A, in
accordance with the terms of SERP. However, in event of
a change in control (as defined in subsection 7.2
below), the percent of Employee's compensation allocated
to the SERP shall not be reduced for any contract year
which ends after the change in control below the percent
of his compensation which is allocated to the SERP for
the immediately preceding contract year.
Employee (or, if applicable, any other recipient of any
benefits provided under this subsection 5.3) shall be solely responsible and
liable for payment of any taxes imposed on Employee (or, if applicable, such
recipient) resulting from the provision of any benefits under this subsection
5.3, including but not limited to any medical benefits provided on a
self-insured basis or any life insurance benefits.
5.4 Employer shall reimburse Employee (or provide an expense
allowance) for travel, entertainment, continuing education and other expenses
which are reasonably incurred by Employee in the promotion of Employer's
business, provided Employee provides a proper accounting for such expenses.
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6. TERMINATION; SEVERANCE BENEFITS.
6.1 Employer may terminate this Agreement and Employee's employment
hereunder at any time for Cause. If Employee's employment hereunder is
terminated for Cause, Employee shall not be entitled to any payments or benefits
hereunder except for (i) unpaid salary already earned and (ii) unpaid benefits
which are provided under subsection 5.3 above, have already become vested and
are payable upon such termination of employment under the terms and practices of
the plans or arrangements under which such benefits are provided. For all
purposes of this Agreement, "Cause" means:
(a) Employee's fraud, dishonesty or willful misconduct in
the performance of his duties to Employer; or
(b) Employee's material breach of any material provision of
this Agreement; provided that a material breach shall
not be deemed to have occurred if Employee's breach
relates to the receipt of a payment of money and
Employee cures such breach within thirty (30) days of
receipt by Employee of a written notice of such breach.
6.2 If Employee's employment hereunder terminates because of his
voluntary resignation as an employee of Employer, then, except as may otherwise
be provided under subsection 6.5, 6.6 or 6.9 below or any other provision of
this Agreement, Employee shall not be entitled to any payments or benefits
hereunder except for (i) salary already earned and (ii) unpaid benefits which
are provided under subsection 5.3 above, have already become vested and are
payable upon such termination of employment under the terms and practices of the
plans or arrangements under which such benefits are provided.
6.3 If Employee's employment hereunder terminates by reason of his
death, then, in addition to any other payment which may be provided under
subsection 8.2 below or any other provision of this Agreement, Employee's estate
(or, where applicable or the context requires, the surviving members of his
family or his beneficiaries) shall be entitled to (i) his unpaid salary which
has already been earned, (ii) an amount equal to the product obtained by
multiplying his targeted incentives with respect to the contract year in which
his termination occurs under the Annual Incentive Plan and the Long-Term Plan
(if any) by a fraction having a numerator equal to the number of days he was an
employee of Employer in such contract year and a denominator equal to the number
of days in such contract year, (iii) any incentives which have been earned for
prior contract years under the Long-Term Plan but have not yet been paid (since
an incentive earned for a contract year under such plan is not normally payable
until after a further period of continuous future employment), (iv) the
continuing medical benefits described in subsection 5.3(c) above, (v) any
benefits due under any life insurance benefits in effect for him at the time of
his death under subsection 5.3(e) above and (vi) any other unpaid benefits which
are provided under subsection 5.3 above, have already become vested (or vest by
reason of his death) and are payable upon such termination of
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employment under the terms and practices of the plans or arrangements under
which such benefits are provided.
6.4 If Employee's employment hereunder terminates by reason of his
permanent disability, then, in addition to any other payment which may be
provided under subsection 8.2 below or any other provision of this Agreement,
Employee shall be entitled to (i) his unpaid salary which has already been
earned, (ii) an amount equal to the product obtained by multiplying his targeted
incentives with respect to the contract year in which his termination occurs
under the Annual Incentive Plan and the Long-Term Plan (if any) by a fraction
having a numerator equal to the number of days he was an employee of Employer in
such contract year and a denominator equal to the number of days in such
contract year, (iii) any incentives which have been earned for prior contract
years under the Long-Term Plan but have not yet been paid (since an incentive
earned for a contract year under such plan is not normally payable until after a
further period of continuous future employment), (iv) the continuing medical
benefits described in subsection 5.3(c) above, (v) any benefits due him under
any disability insurance applicable to him and in effect at the time he becomes
permanently disabled under subsection 5.3(b) above, (vi) any other unpaid
benefits which are provided under subsection 5.3 above, have already become
vested (or vest by reason of his permanent disability) and are payable upon such
termination of employment under the terms and practices of the plans or
arrangements under which such benefits are provided and (vii) a lump sum payment
which is made within 60 days after Employer reasonably determines Employee is
permanently disabled and which is equal to two times Employee's annual base rate
of salary in effect at the time of his termination of employment. For all
purposes of this Agreement, Employee shall be deemed to be "permanently
disabled" and to have incurred a "permanent disability" if he, by reason of his
physical or mental injury, illness or condition, is determined to be disabled
for a period which is expected will exist until his death under the disability
insurance which is then in effect for him under subsection 5.3(b) above.
6.5 In the event that Employer notifies Employee that his
services as President and Chief Executive Officer of Employer are no longer
desired by Employer during a contract term for any reason other than Cause or
his permanent disability, then, except as may otherwise be provided under
subsection 6.9 below, Section 8 below or any other provision of this Agreement,
(i) upon receipt of such notice Employee shall no longer serve in the offices of
President and Chief Executive Officer of Employer and shall give up all the
authority and accouterments of those offices (except as otherwise agreed by
Employer) and, except as may otherwise be provided in paragraph (b) of this
subsection 6.5 or in subsection 6.6 below, (ii) Employee's employment with
Employer shall terminate at the end of the then-current term (or, if such notice
is not given Employee by the latest October 1 which precedes the end of the
then-current term and no notice was previously given Employee by Employer on or
prior to the latest October 1 which precedes the end of the then-current term
that his employment with Employer would terminate at the end of the then-current
term, his employment with Employer shall terminate at the end of the renewal
term of this Agreement which immediately follows the then-current term). In
addition, in such situation, the following provisions of this
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subsection 6.5 shall apply to Employee's employment with Employer until such
employment terminates:
(a) Except as is otherwise provided in paragraph (b)
immediately below, Employee shall during the then
remaining period of his employment with Employer serve
as a special project advisor to Employer and have and
perform only such specific special project advisor
duties as shall be reasonably requested by Employer;
provided that any such duties shall be limited to those
normally performed by and requiring the skills of a
senior executive. It is understood and agreed that, in
performing his duties as a special project advisor,
Employee shall be an employee of Employer and shall be
entitled to the compensation and benefits, including but
not limited to SERP, perquisite allowance and stock
options, provided him under, and subject to all
provisions contained in, this Agreement; except that, in
determining the amount of any incentive payable under
the Annual Incentive Plan for any contract year which
ends after the date on which Employee no longer serves
in the offices of President and Chief Executive Officer
of Employer, the final percentage which is applied to
Employee's base pay to calculate such incentive shall be
equal to the percentage used to determine the targeted
incentive under the Annual Incentive Plan for or with
respect to the latest contract year which begins prior
to the date on which Employee no longer serves in such
offices and for which a targeted incentive under the
Annual Incentive Plan had been set for Employee by
Employer.
(b) Notwithstanding the foregoing or the provisions of
subsection 6.2 above or subsection 6.6 below, Employee
shall have the right at any time during the then
remaining period of his employment with Employer to
elect, by a written signed notice to Employer, to be
paid as a severance payment, in a lump sum which is made
as soon as is administratively practical after such
election, an amount equal to 90% of the dollar amount of
the following compensation items that, but for Employee
exercising his rights under this paragraph (b), would
otherwise be paid, available or provided for him by
Employer under paragraph (a) above with respect to the
period beginning immediately after the lump sum payment
required under this paragraph (b) is made and ending at
the end of the then-current term and under subsection
6.6 below after the end of the then-current term: (i)
base salary, (ii) annual and long-term incentives (not
including any retention incentive described in
subsection 8.1 or 8.2 below), (iii) allocations for his
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account under the SERP (not including allocations that
reflect interest or earnings), (iv) Employer
contributions which are allocable to Employee's accounts
under Employer's tax-qualified retirement plans (not
including contributions that are elective contributions
under Section 402(g) of the Internal Revenue Code of
1986, as amended (the "Code") to the extent such
contributions are otherwise taken into account under
item (i) or (ii) above), (v) any perquisite allowance
and (vi) consulting service payments (assuming for
purposes hereof that, in determining the amount of any
incentive payable under the Annual Incentive Plan for
any contract year which ends after the date on which the
lump sum payment required under this paragraph (b) is
made, the final percentage which is applied to
Employee's base pay to calculate such incentive shall be
equal to the percentage used to determine the targeted
incentive under the Annual Incentive Plan for or with
respect to the latest contract year which begins prior
to the date on which the lump sum payment required under
this paragraph (b) is made and for which a targeted
incentive under the Annual Incentive Plan had been set
for Employee by Employer and that the amount or level of
any other compensation items which are used in whole or
in part to determine the lump sum payment required under
this paragraph (b) and which are in effect for the
contract year in which the lump sum payment provided for
under this paragraph (b) is made would have remained in
effect for any subsequent contract years in the
then-current term). In the event of such election and
upon payment of the lump sum severance payment described
in this subsection 6.5, Employee's employment with
Employer shall terminate, Employee shall not serve as a
consultant under subsection 6.6 below and all of
Employee's further rights to compensation or benefits
under this Agreement shall end; except that Employee
shall still be entitled to (i) his unpaid salary which
has already been earned prior to his termination of
employment, (ii) any incentives which have been earned
prior to his termination of employment for prior
contract years under the Long-Term Plan but have not yet
been paid (since an incentive earned for a contract year
under such plan is not normally payable until after a
further period of continuous future employment), (iii)
the continuing medical benefits described in subsection
5.3(c) above, (iv) the continuation until the end of the
then-current term of such life insurance benefits as are
described in subsection 5.3(e) above and (v) any other
unpaid benefits which are provided under subsection 5.3
above, have already become vested and are payable upon
his termination of
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employment under the terms and practices of the plans or
arrangements under which such benefits are provided.
6.6 In the event that Employee's employment with Employer terminates
at the end of any then-current term for any reason other than Cause or
Employee's death or permanent disability, and Employee agrees not to file any
administrative charge or lawsuit relating to his prior employment with Employer
and agrees to release Employer and all of its then current and former directors,
trustees, officers, employees, agents, members and affiliated companies from any
and all claims, in such form as is determined by Employer and consistent with
Employer's normal practices concerning employee releases, then, except as may
otherwise be provided under subsection 6.5(b) above or any other provision of
this Agreement, Employer agrees to offer to hire Employee as a consultant to
Employer for two years beginning on the day immediately following the last day
of the then-current term. Such consulting services shall consist of such
services as are requested by Employer, which shall be those normally required of
consultants with Employee's level of skill and experience; but Employer shall
not in any event require Employee to perform consulting services in excess of
fifty hours per calendar quarter or direct the manner by which such services
must be accomplished. Further, Employer shall permit Employee to perform such
services at such times and at such locations as Employee reasonably determines
and to communicate the results of his services telephonically or by telecopy.
Employee shall receive, as compensation for his performing such consulting
services, consulting service payments at a rate equal to Employee's annual base
salary for the last contract year of this Agreement for each year, or fraction
thereof, that Employee performs such consulting services, with such payments
being made on a bi-weekly basis. At all times that Employee is performing such
consulting services for Employer, Employee shall be an independent contractor
and not an employee of Employer and shall be responsible for the payment of all
taxes with respect to all amounts paid to him as compensation for performing
such consulting services. In the event Employee's employment ends for any reason
other than Cause, Employee's death or permanent disability or his voluntary
resignation (not including a voluntary resignation which occurs at the end of a
contract term), Employer shall also pay for executive outplacement services for
Employee, up to a maximum cost of $25,000 (adjusted annually in accordance with
the CPI), through a mutually agreeable outplacement consulting firm.
6.7 At any time that Employee is receiving compensation pursuant to
subsection 6.5 or 6.6 above, Employee shall continue to participate in the
health, disability and life insurance plans of Employer applicable to executive
employees of Employer or be provided comparable benefits.
6.8 Notwithstanding any other provision of this Agreement to the
contrary, Employer shall have the right to terminate Employee's employment
hereunder without Cause at any time on or after (but not before) the date on
which all conditions have occurred to result in a change in control (as defined
in subsection 7.2 below). Further, if Employee's employment with Employer
terminates other than for Cause or Employee's death or permanent disability or
his voluntary resignation after all conditions have occurred to result in a
change
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14
in control but other than at the end of a contract term, then, provided that
Employee agrees not to file any administrative charge or lawsuit relating to his
prior employment with Employer and agrees to release Employer and all of its
then current and former directors, trustees, officers, employees, agents,
members and affiliated companies from any and all claims, in such form as is
determined by Employer and consistent with Employer's normal practices
concerning employee releases, Employee shall be entitled to a severance payment
under this subsection 6.8 which is payable in a lump sum as soon as is
administratively practical after Employee's termination and which is equal to
90% of the dollar amount of the following compensation items that, if Employee's
employment with Employer were not terminating prior to the end of the
then-current term, would otherwise be paid, available or provided for him by
Employer under the other provisions of this Agreement with respect to the period
beginning immediately after the lump sum payment required under this subsection
6.8 is made and ending at the end of the then-current term and under subsection
6.6 above after the end of the then-current term: (i) base salary, (ii) annual
and long-term incentives (not including any retention incentive described in
subsection 8.1 or 8.2 below), (iii) allocations for his account under the SERP
(not including allocations that reflect interest or earnings), (iv) Employer
contributions which are allocable to Employee's accounts under Employer's
tax-qualified retirement plans (not including contributions that are elective
contributions under Section 402(g) of Code to the extent such contributions are
otherwise taken into account under item (i) or (ii) above), (v) any perquisite
allowance and (vi) consulting service payments (assuming for purposes hereof
that, in determining the amount of any incentive payable under the Annual
Incentive Plan for any contract year which ends after the date of such
termination, the final percentage which is applied to Employee's base pay to
calculate such incentive shall be equal to the greater of the percentage used to
determine the targeted incentive under the Annual Incentive Plan for or with
respect to the latest contract year which begins prior to the date of such
termination or the percentage used to determine the targeted incentive under the
Annual Incentive Plan for or with respect to the latest contract year which
begins prior to the date of the change in control and that the amount or level
of any other compensation items which are used in whole or in part to determine
the lump sum payment required under this subsection 6.8 and which are in effect
for the contract year in which the lump sum payment provided for under this
subsection 6.8 is made would have remained in effect for any subsequent contract
years in the then-current term). In the event of such termination and upon
payment of the lump sum severance payment described in this subsection 6.8,
Employee's employment with Employer shall terminate and all of Employee's
further rights to compensation or benefits under this Agreement shall end;
except that Employee shall still be entitled to (i) his unpaid salary which has
already been earned prior to his termination of employment, (ii) any incentives
which have been earned prior to his termination of employment for prior contract
years under the Long-Term Plan but have not yet been paid (since an incentive
earned for a contract year under such plan is not normally payable until after a
further period of continuous future employment), (iii) the continuing medical
benefits described in subsection 5.3(c) above, (iv) the continuation until the
end of the then-current term of such life insurance benefits as are described in
subsection 5.3(e) above and (v) any other unpaid benefits which are provided
under subsection 5.3 above, have already become vested and are payable upon such
termination of employment under the terms and practices of the plans or
arrangements under which such benefits are provided.
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15
6.9 Also notwithstanding any other provision of this Agreement to
the contrary, if Employee's employment with Employer terminates by reason of his
voluntary resignation after at least one year has expired after a change in
control (as defined in subsection 7.2 below) and prior to the end of the
contract term which is in effect one year after the change in control, then,
provided that Employee is not otherwise entitled to the benefits of subsection
6.5(b) above upon such termination of employment and also provided that Employee
agrees not to file any administrative charge or lawsuit relating to his prior
employment with Employer and agrees to release Employer and all of its then
current and former directors, trustees, officers, employees, agents, members and
affiliated companies from any and all claims, in such form as is determined by
Employer and consistent with Employer's normal practices concerning employee
releases, Employee shall be entitled to a severance payment under this
subsection 6.9 which is payable in a lump sum as soon as is administratively
practical after Employee's termination and which is equal to 90% of the dollar
amount of the following compensation items that, if Employee's employment with
Employer were not terminating prior to the end of the then-current term, would
otherwise be paid, available or provided for him by Employer under the other
provisions of this Agreement with respect to the period beginning immediately
after the lump sum payment required under this subsection 6.9 is made and ending
at the end of the then-current term and under subsection 6.6 above after the end
of the then-current term: (i) base salary, (ii) annual and long-term incentives
(not including any retention incentive described in subsection 8.1 or 8.2
below), (iii) allocations for his account under the SERP (not including
allocations that reflect interest or earnings), (iv) Employer contributions
which are allocable to Employee's accounts under Employer's tax-qualified
retirement plans (not including contributions that are elective contributions
under Section 402(g) of Code to the extent such contributions are otherwise
taken into account under item (i) or (ii) above), (v) any perquisite allowance
and (vi) consulting service payments (assuming for purposes hereof that, in
determining the amount of any incentive payable under the Annual Incentive Plan
for any contract year which ends after the date of such termination, the final
percentage which is applied to Employee's base pay to calculate such incentive
shall be equal to the greater of the percentage used to determine the targeted
incentive under the Annual Incentive Plan for or with respect to the latest
contract year which begins prior to the date of such termination or the
percentage used to determine the targeted incentive under the Annual Incentive
Plan for or with respect to the latest contract year which begins prior to the
date of the change in control and that the amount or level of any other
compensation items which are used in whole or in part to determine the lump sum
payment required under this subsection 6.9 and which are in effect for the
contract year in which the lump sum payment provided for under this subsection
6.9 is made would have remained in effect for any subsequent contract years in
the then-current term). In the event of such termination and upon payment of the
lump sum severance payment described in this subsection 6.9, Employee's
employment with Employer shall terminate and all of Employee's further rights to
compensation or benefits under this Agreement shall end; except that Employee
shall still be entitled to (i) his unpaid salary which has already been earned
prior to his termination of employment, (ii) any incentives which have been
earned prior to his termination of employment for prior contract years under the
Long-Term Plan but have not yet been paid (since an incentive earned for a
contract year under such plan is not normally payable until
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16
after a further period of continuous future employment), (iii) the continuing
medical benefits described in subsection 5.3(c) above, (iv) the continuation
until the end of the then-current term of such life insurance benefits as are
described in subsection 5.3(e) above and (v) any other unpaid benefits which are
provided under subsection 5.3 above, have already become vested and are payable
upon such termination of employment under the terms and practices of the plans
or arrangements under which such benefits are provided.
7. PAYMENT FOLLOWING A CHANGE IN CONTROL AND INVOLUNTARY TERMINATION.
7.1 Subject to the following provisions but notwithstanding any
other provision of this Agreement to the contrary, if a change in control (as is
defined below) occurs and Employee's employment with Employer terminates for any
reason, other than for Cause, Employee's death or permanent disability or his
voluntary resignation, during the period which begins six months prior to the
date of the change in control and ends two years after the date of the change in
control, Employee shall be entitled to a lump sum payment, which shall be made
within 60 days after the later of Employee's termination of employment or the
date on which all conditions have occurred to result in a change in control, in
an amount equal to three times the sum of: (i) Employee's then-current annual
base rate of salary; (ii) the amount set forth by Employer as the target for
Employee's incentive for the then-current contract year under the Annual
Incentive Plan; and (iii) the total dollar amount of the allocations for his
account under the SERP (not including allocations that reflect interest or
earnings) and any perquisite allowance that, but for Employee's termination of
employment, would otherwise be paid, available or provided for him by the
Employer for the then-current contract year. Notwithstanding the foregoing, the
amount of any payment otherwise required by the immediately preceding sentence
shall be reduced (but not below zero dollars) by the total amount of any lump
sum severance or retention incentive payments that Employee has previously
received (or is entitled to receive either within 60 days of or as soon as
practical after his termination of employment) under subsection 6.8 above,
subsection 8.1 below or subsection 8.2 below but shall be in addition to any
other payments or benefits provided under the other provisions of this
Agreement.
7.2 For all purposes of this Agreement, a "change in control" means
and occurs on the date of: (i) the election of persons constituting at least 50%
of the whole number of directors of the ChoiceCare Parent, if such persons were
not nominated by the nominating committee of the ChoiceCare Parent or, if so
nominated, were not recommended by a majority of the directors in office prior
to being nominated by such nominating committee unless the person nominated is
nominated to take the place of an individual previously so recommended by the
directors who has died, become disabled or chose not to serve, in which event
that nominee shall be deemed to be recommended by the majority of the directors
in office if such majority recommends that nominee at the meeting of directors
next following the nomination of such person; (ii) any consolidation or merger
of the ChoiceCare Parent (subject to the condition that, within two years after
such consolidation or merger, individuals who were directors of the ChoiceCare
Parent immediately prior to such consolidation or merger cease to
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17
constitute at least 66-2/3% of the board of directors of the ChoiceCare Parent
or its successor by consolidation or merger); (iii) any sale, lease, exchange or
other transfer, in one transaction or a series of related transactions (and
other than to a directly or indirectly majority-owned subsidiary of the
ChoiceCare Parent) of all, or substantially all, of the assets of the ChoiceCare
Parent; (iv) the sale, whether by outright purchase, merger, consolidation,
reorganization or other form of transaction (but not including a reorganization
solely involving affiliated companies), or the execution of a definitive
agreement (subject only to regulatory approvals or other similar conditions) for
the sale, of at least 33-1/3% of the ownership and/or voting interests in any
direct or indirect subsidiary or subsidiaries of the ChoiceCare Parent if such
subsidiary or subsidiaries before such sale held assets that constituted all or
substantially all of the assets of the ChoiceCare Parent and its direct and
indirect subsidiaries on a consolidated basis (subject to the condition that,
other than for purposes of subsection 6.9 above and Section 8 below, the
execution of a definitive agreement for such a sale as opposed to the closing of
the sale contemplated by such executed definitive agreement shall not be
considered a change in control unless there is a closing of the sale
contemplated by such executed definitive agreement within one year of the
execution of such definitive agreement); (v) the sale, whether by outright
purchase, merger, consolidation, reorganization or other form of transaction
(but not including a reorganization solely involving affiliated companies), or
the execution of a definitive agreement (subject only to regulatory approvals or
other similar conditions) for the sale, of at least 33-1/3% of the ownership
and/or voting interests in the ChoiceCare Parent to one purchaser, related
purchasers or several purchasers acting directly or indirectly in concert
(subject to the condition that, other than for purposes of subsection 6.9 above
and Section 8 below, the execution of a definitive agreement for such a sale as
opposed to the closing of the sale contemplated by such executed definitive
agreement shall not be considered a change in control unless there is a closing
of the sale contemplated by such definitive agreement within one year of the
execution of such definitive agreement); or (vi) the approval by the
shareholders of the ChoiceCare Parent of any plan or proposal for the
liquidation of dissolution of the ChoiceCare Parent.
8. RETENTION INCENTIVE. If a change in control (as defined in
subsection 7.2 above) or a strategic investor purchase (as is defined below)
occurs while this Agreement is in effect, then Employee will be eligible for a
retention incentive (in addition to any other payments or benefits provided
under the other provisions of this Agreement, including but not limited to the
provisions of Sections 5, 6 and 7 above) in accordance with the following
provisions:
8.1 If Employee is continuously employed by Employer to the end of
the retention incentive period (as is defined below), then Employee shall be
entitled to a retention incentive under this Section 8 which is payable in a
lump sum within 60 days after the end of such retention incentive period and
which is equal to the lesser of (i) an amount equal to two times his annual base
rate of salary in effect on the date of the change in control or strategic
investor purchase, as applicable and whichever is earlier, or (ii) $800,000.
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18
8.2 If, after the earlier of a change in control or a strategic
investor purchase but prior to the end of the retention incentive period,
Employee's employment with Employer is terminated for any reason other than
Cause or his voluntary resignation, then Employee shall be entitled to a
retention incentive under this Section 8 which is payable in a lump sum within
60 days after Employee's termination of employment and which is equal to the
retention incentive that would be paid Employee under subsection 8.1 above by
reason of the change in control or, if applicable, an earlier strategic investor
purchase if Employee had been continuously employed by Employer to the end of
the retention incentive period.
8.3 Notwithstanding any other provision of this Section 8 to the
contrary, no more than one retention incentive may be paid under this Section 8,
and thus the payment of any retention incentive under any subsection of this
Section 8 shall terminate and nullify any right of Employee to any additional
incentive which may otherwise arise under another subsection of this Section 8.
8.4 For purposes of this Agreement, a "strategic investor purchase"
means, and occurs on the date of, the purchase or obtaining by any person,
corporation, partnership or other organization of stock possessing less than
33-1/3% of the total combined voting power of all classes of stock of the
ChoiceCare Parent together with the option or right to purchase in the future
additional stock of the ChoiceCare Parent which would permit such person,
corporation, partnership or other organization to own stock possessing 33-1/3%
or more of the total combined voting power of all classes of stock of the
ChoiceCare Parent. In addition, for purposes of this Agreement, the "retention
incentive period" means the period which begins on the date immediately
following the earlier of a change in control or a strategic investor purchase
(such date referred to herein as the "beginning date") and which ends on the
date which is 21 months after the beginning date.
9. NON-COMPETE COVENANTS AND CONFIDENTIAL INFORMATION.
9.1 Employee agrees that during the term of this Agreement and for a
period of one year after his termination of employment with Employer for any
reason whatsoever (or, if Employee either is entitled to a retention incentive
under Section 8 above after such termination of employment or has been paid a
retention incentive under Section 8 above prior to such termination of
employment, for a period of two years after such termination of employment),
Employee shall not, without the express written consent of Employer, anywhere in
the United States where the Employer was doing business or actively planning to
do business during Employee's term of employment: (i) compete with Employer in
the managed health care business; or (ii) interfere with, disrupt or attempt to
interfere with or disrupt the relationship between Employer and any person or
business that was a customer, supplier, lessor, contractor or employee of
Employer during Employee's term of employment with Employer. Notwithstanding the
above, Employee may, without breaching the provisions of this subsection 9.1,
work for an employer in the managed health care business or an employer that
interferes, disrupts or attempts to interfere with or disrupt the relationship
between Employer
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and any person or business that was a customer, supplier, lessor, contractor or
employee of Employer during Employee's term of employment with Employer,
provided that: (i) no more than ten percent (10%) of such new employer's
business is conducted in areas where Employer is conducting business as of the
date of termination of the employment of Employee with Employer; (ii) such new
employer does not provide either health insurance or managed care services to
ten percent (10%) or more of the population in the areas where Employer is
conducting business as of the termination of employment of Employee with
Employer; or (iii) the markets in which Employer is conducting, or actively
planning to conduct, business as of the date of termination of Employee's
termination with Employer and for which Employee will have certain duties or
responsibilities with the new employer, as measured by revenues or enrollment
within such areas, do not exceed ten percent (10%) of all markets for which
Employee will have certain duties or responsibilities with the new employer, as
measured by revenues or enrollment within all such markets (provided that this
clause (iii) shall not apply if Employee has voluntarily resigned his employment
with Employer other than by a voluntary resignation which occurs at the end of a
contract term or a voluntary resignation which still results in an amount being
payable under subsection 6.5(b) or 6.9 above). For purposes of this subsection
9.1, if Employee, at the time of Employee's termination of employment with
Employer, only has duties and responsibilities with Employer as to certain
specified, and not all, areas or markets in which Employer then does business,
then any reference to "Employer" in this subsection 9.1 shall be deemed to refer
only to the part of the Employer which involves the areas and markets in which
Employee has duties and responsibilities at the time of his/her termination of
employment with Employer.
9.2 Employee agrees that, during the term of this Agreement or at
any time thereafter, Employee will not, directly or indirectly, disclose,
divulge, discuss, copy or otherwise use or suffer to be used in any manner, in
competition with or contrary to the interests of Employer or any affiliated
companies, the customer lists, proprietary organizational methods or other trade
secrets of Employer or any affiliated companies, it being acknowledged by
Employee that all such information regarding the business of Employer and
affiliated companies compiled or obtained by, or furnished to, Employee while
Employee shall have been employed by or associated with Employer is confidential
information and Employer's exclusive property.
9.3 Employee expressly agrees and understands that the remedy at law
for any breach by him of this Section 9 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
Employee's violation of any legally enforceable provision of this Section 9,
Employer shall be entitled to immediate injunctive relief and may obtain a
temporary order and permanent injunction restraining any threatened or further
breach. However, nothing in this Section 9 shall be deemed to limit Employer's
remedies at law or in equity for any breach by Employee of any of the provisions
of this Section 9 which may be pursued or availed of by Employer.
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20
9.4 Employee has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon Employer under
the provisions of this Section 9, and hereby acknowledges and agrees that the
same are reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to Employer, do not stifle the inherent skill
and experience of Employee, would not operate as a bar to Employee's sole means
of support, are fully required to protect the legitimate interests of Employer
and do not confer a benefit upon Employer disproportionate to the detriment to
Employee which is caused by the provisions of this Section 9.
10. SEVERABLE PROVISION. The provisions of this Agreement are
severable, and, if any one or more provisions are determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions of this
Agreement and any partially unenforceable provision of this Agreement, to the
extent enforceable in any jurisdiction, shall nevertheless be binding and
enforceable hereunder.
11. ASSIGNMENTS AND BINDING AGREEMENT. This Agreement may not be
assigned by one party hereto without the consent of the other, except that this
Agreement may be assigned by Employer to any affiliated company. Notwithstanding
the foregoing general restriction on voluntary assignments, the rights and
obligations of the parties under this Agreement shall inure to the benefit of,
and shall be binding upon, the parties hereto and their respective successors,
assigns, heirs, personal representatives and estates, which successors and
assigns in the case of Employer shall include (i) any affiliated company to
which this Agreement is assigned by Employer, (ii) any successor of the
ChoiceCare Parent or the ChoiceCare Operating Company by merger, combination or
reorganization in any manner, whether such successor is a corporation, limited
liability company, partnership (either general or limited), business trust or
other organization or person, and whether or not such successor is a successor
by operation of law, (iii) any recipient of materially all the assets and/or
business of Employer in liquidation or distribution or by way of contribution of
capital, (iv) any successor to materially all the assets and/or business of
Employer by purchase or exchange, either singly or in combination or (v) any
combination of the foregoing. Employer covenants that it will make no
distribution or contribution of assets and/or business as described in clause
(iii) of the immediately preceding sentence nor enter into any agreement of sale
or exchange of assets and/or business as described in clause (iv) of the
immediately preceding sentence without requiring the recipient(s) of such assets
or business to assume the obligations of Employer in this Agreement as a
co-obligor.
12. NOTICES. Any notice to be given under this Agreement to any party
hereto shall be deemed duly given if it is personally delivered in writing or it
is posted in the United States mails, postage prepaid, registered or certified,
return receipt requested. Further, if mailed to Employer, such a notice shall be
addressed to the ChoiceCare Parent at its principal place of business. If mailed
to Employee, such a notice shall be addressed to him at his home address
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last shown on the records of Employer (or at such other address or addresses as
Employee may hereafter designate in writing to Employer).
13. WAIVER. The failure of any party hereto to this Agreement to
enforce any provision or provisions of this Agreement shall not in any way be
construed as a waiver of such provision or provisions as to any future
violations thereof nor prevent that party thereafter from enforcing each and
every other provision of this Agreement. The rights granted the parties herein
are cumulative and the waiver of any single remedy shall not constitute a waiver
of such party's right to assert all other legal remedies available to him or it
under the circumstances.
14. MISCELLANEOUS.
14.1 For all purposes of this Agreement, Employee's resignation from
his employment with Employer shall be deemed not to constitute a voluntary
resignation, and instead to be treated as a termination of his employment by
Employer, if: (i) such resignation occurs at least 120 days after, and no more
than 180 days after, Employer either (a) changes the principal party to which
Employee reports and which has the responsibility to evaluate Employee's
performance to a party which is not either the board of directors of the
ChoiceCare Parent or a board of directors of any corporation which owns at least
80% of the ChoiceCare Parent or (b) reduces or changes Employee's duties to
those which are not consistent with the usual and customary duties of a chief
executive officer of a managed care company in the U.S. which is comparable or
larger, in terms of revenues, enrollments and geographical area served, than the
Company as in operation at the time Employee's duties are reduced or changed or
(ii) such resignation occurs after Employer requires Employee to change his
principal work location by at least 50 miles and Employee refuses to make such
move. In the event Employee's resignation from his employment with Employer is
treated as a termination of his employment by Employer by reason of the
provisions of clause (i) of the immediately preceding sentence, then, for
purposes of determining Employee's rights to any severance payment described in
Section 6 above, any change in control payment described in Section 7 above or
any retention incentive payment under Section 8 above, Employee shall be deemed
to have had his employment with Employer terminated by Employer on the date that
Employer took the action described in clause (i) of the immediately preceding
sentence which is applicable to Employee's resignation.
14.2 The captions set forth in this Agreement are for convenience
and reference only and shall not be deemed to construe or interpret any term or
provision set forth in this Agreement. This Agreement supersedes all prior
agreements and understandings between the parties and may not be modified or
terminated orally. No modification, termination or attempted waiver of this
Agreement shall be valid unless in writing and signed by the party against whom
the same is sought to be enforced. This Agreement shall be governed by and
construed according to the laws of the State of Ohio.
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14.3 If the firm of independent outside auditors then used by
Employer (the "Auditors") determine 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, would be
subject to tax as an excess parachute payment pursuant to the provisions of
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code), then,
notwithstanding any other provision of this Agreement to the contrary, Employer
shall "gross up" such payment or distribution so that the net amount of such
payment or distribution, after taking into consideration the payment of the tax
imposed on Employee under Section 4999 of the Code, is the same as the amount
that such payment or distribution would be if no such tax applied.
15. ARBITRATION. Any dispute or disagreement among the parties hereto
shall be submitted to mandatory and binding arbitration at the election of any
party hereto. The arbitration shall be pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be held in
Cincinnati, Ohio. The ChoiceCare Parent and the ChoiceCare Operating Company
shall together select one arbitrator, Employee shall select one arbitrator and
the two selected arbitrators shall select a third arbitrator. The decision of
the arbitrators, and any award rendered therein, shall be final, conclusive and
binding upon the parties hereto and any judgment thereon may be entered and
enforced in any court of competent jurisdiction. Employer shall bear 50% of all
fees, costs and expenses of the arbitration, Employee shall bear 50% of all
fees, costs and expenses of the arbitration and each party will bear all the
fees, costs and expenses of his or its own attorneys, experts and witnesses.
Signed at Cincinnati, Ohio on the 4 day of June, 1997.
EMPLOYER:
ChoiceCare Corporation
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
ChoiceCare Health Plans, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
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EMPLOYEE:
/s/ Xxxxxx X. Xxxxxxxx, M.D.
----------------------------
Xxxxxx X. Xxxxxxxx, M.D.
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