1
EXHIBIT 10.1(a)
CHANGE IN CONTROL
SEVERANCE PROTECTION AGREEMENT
FOR CERTAIN EMPLOYEES OF:
CERULEAN COMPANIES, INC.
BLUE CROSS AND BLUE SHIELD OF GEORGIA, INC.
HMO GEORGIA, INC.
GREATER GEORGIA LIFE INSURANCE COMPANY, INC.
GROUP BENEFITS OF GEORGIA, INC.:
2
CONTENTS
-------------------------------------------------------------------------------
PAGE
Section 1. Term of Agreement 1
Section 2. Change in Control Benefits 2
Section 3. Excise Tax 8
Section 4. Successors and Assignments 9
Section 5. Confidentiality of Company Information 10
Section 6. Miscellaneous 10
Section 7. Contractual Rights and Legal Remedies 11
i
3
CHANGE IN CONTROL SEVERANCE AGREEMENT
This CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement") is made,
entered into, and is effective as of this 1st day of January 1998 (the
"Effective Date"), by and between Cerulean Companies, Inc., for itself and each
of its wholly owned subsidiaries ( Blue Cross and Blue Shield of Georgia, Inc.,
HMO Georgia, Inc., Group Benefits of Georgia, Inc. ) and Greater Georgia Life
Insurance Company, Inc., a wholly owned subsidiary of Blue Cross and Blue Shield
of Georgia, Inc. (hereinafter altogether referred to as the "Company"), which
shall be jointly and severally responsible for the performance required of
Company, hereunder, and (hereinafter referred to as "Executive"), who may be an
employee, officer or director of one or more of the entities making up the
Company, or whose compensation may be allocated among one or more of said
entities.
WHEREAS, Executive is presently employed by the Company in a key
management capacity; and
WHEREAS, Executive possesses considerable industry experience and knowledge
of the business and affairs of the Company concerning its policies, methods,
personnel, and operations; and
WHEREAS, the Company is desirous of assuring the continued employment of
Executive in a key management capacity, and Executive is desirous of having such
assurance;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration including, but not limited to, Executive's
continuing employment with the Company, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1. TERM OF AGREEMENT
This Agreement will commence on the Effective Date and shall continue in
effect until December 31, 2001, (the "Initial Term").
This Agreement shall automatically be extended for one additional year at
the end of the Initial Term, and then for successive one-year periods (each such
one-year extension following the Initial Term a "Successive Period"). However,
either party may terminate this Agreement at the end of the Initial Term, or at
the end of any Successive Period, by giving the other party written notice of
intent not to renew, delivered at least ninety (90) calendar days prior to the
end of the Initial Term or Successive Period; provided, however, that any such
termination of this Agreement by the Company, which shall become effective
within ninety (90) days prior to the public announcement of an intended Change
in Control (as such term is defined in Section 2.5 hereof), shall be ineffective
and shall be deemed to be a Qualifying Termination as provided in Section 2.2
hereof. Except as otherwise provided, if such notice is properly
1
4
delivered by either party, this Agreement, along with all corresponding rights,
duties, and covenants, shall then terminate at the end of the Initial Term or
Successive Period then in progress.
In the event that a public announcement of an intended "Change in Control"
of the Company occurs during the Initial Term or any Successive Period, then
upon such announcement, the term of this Agreement shall automatically and
irrevocably become a term ending twenty-four (24) full calendar months from the
effective date of such Change in Control. This Agreement shall then terminate
following such twenty-four (24) month period. Further, this Agreement shall be
assigned to, and shall be assumed by, the Company's successor in such Change in
Control, as further provided in Section 4 hereof.
SECTION 2. CHANGE IN CONTROL BENEFITS
2.1. RIGHT TO BENEFITS.
(a) SEVERANCE BENEFITS. Executive shall receive from the Company Severance
Benefits as described in Section 2.3 hereof, if during the term of
this Agreement there has been a public announcement of an intended
Change in Control of the Company (as defined in Section 2.5 hereof)
and if, subsequently during this Agreement's term, Executive's
employment with the Company shall end for any reason specified in
Section 2.2 hereof as being a Qualifying Termination. The Severance
Benefits described in Sections 2.3(a) through 2.3(d) hereof shall be
paid in cash to Executive in a single lump sum as soon as practicable
following a Qualifying Termination, but in no event later than thirty
(30) calendar days from such date. Notwithstanding the foregoing,
Severance Benefits which become due pursuant to the circumstances
described in Sections 2.6(d) and 4.1 shall be paid immediately.
(b) OTHER CHANGE IN CONTROL BENEFITS. Executive shall be entitled to
receive the payments described in Sections 2.4 and 3 if a Change in
Control occurs during the term of this Agreement, or if an intended
Change in Control is publicly announced within ninety (90) days
thereafter. These benefits shall be paid without regard to whether
Executive's employment with the Company ends following such Change in
Control. These benefits shall be paid in cash to Executive, in a
single lump sum, as soon as practicable following the Change in
Control, but in no event later than thirty (30) calendar days from
such date.
2.2. QUALIFYING TERMINATION. The occurrence of any one or more of the
following events, during the term of this Agreement following a public
announcement of an intended Change in Control of the Company shall be deemed a
Qualifying Termination, and shall require the payment of Severance Benefits , as
such benefits are described in Section 2.3 hereof, to Executive:
2
5
(a) the Company's or its successor's termination of Executive's
employment without Cause (as Cause is defined in Section 2.7 hereof);
(b) Executive's termination of employment for Good Reason (as Good Reason
is defined in Section 2.6 herein);
(c) the termination of Executive's employment due to disability.
Additionally, it shall be deemed a Qualifying Termination of Executive,
hereunder, if the Company shall fail to renew this Agreement within 90 days
prior to the public announcement of an intended Change in Control.
A Qualifying Termination shall not include a termination of Executive's
employment by reason of death, the Executive's voluntary termination without
Good Reason, or the Company's termination of the Executive's employment for
Cause.
2.3. DESCRIPTION OF SEVERANCE BENEFITS. In the event that Executive
becomes entitled to receive Severance Benefits, as provided in Sections 2.1(a)
and 2.2 hereof, the Company shall, within the time limits stated in Section
2.1(a), pay to Executive and provide Executive each of the following:
(a) a lump-sum cash amount equal to Executive's earned but unpaid Base
Salary (as such term is defined in Section 2.8(b) hereof), earned and
accrued vacation pay, universal leave pay, unreimbursed business
expenses, and all other amounts earned by and owed to Executive
through and including the date of the Qualifying Termination. Such
payment shall constitute full satisfaction for these amounts owed to
Executive.
(b) a lump-sum cash amount equal to two (2) multiplied by the sum of (i)
and (ii), where (i) is the greater of the Executive's annual rate of
Base Salary in effect upon the date of the Qualifying Termination, or
the Executive's annual rate of Base Salary in effect immediately prior
to the announcement of the Change in Control, and (ii) is the average
of the amounts received by the Executive as incentive compensation
under the Annual Incentive Plan (or any successor plan thereto) during
the period of two (2) years that ended immediately before the year
which includes the date of the announcement of the intended Change in
Control (except that the average payment received shall be calculated
only for years in which Executive actually participated in each plan).
(c) this Section 2.3(c) shall apply only if Executive is at least age 50
or has completed at least 10 "Years of Employer Service" (as defined
in the Non-Contributory Retirement Program for Certain Employees of
Blue Cross and Blue Shield of Georgia, Inc.) as of the date of
Executive's Qualifying Termination. If this Section 2.3(c) applies,
the benefits to which
3
6
Executive is entitled under the Non-Contributory Retirement Program
for Certain Employees of Blue Cross and Blue Shield of Georgia, Inc.,
the Blue Cross and Blue Shield of Georgia, Inc. Supplemental
Executive Retirement Plan, and the Blue Cross and Blue Shield of
Georgia, Inc. Executive Benefit Restoration Plan, or any other
tax-qualified or nonqualified defined benefit pension plan maintained
by the Company or an Affiliate, shall be calculated:
(i) as if the Executive is fully vested in benefits accrued to date
thereunder; and
(ii) as if either (A) the number of "Years of Employer Service" (as
defined in the Non-Contributory Retirement Program for Certain
Employees of Blue Cross and Blue Shield of Georgia, Inc.) was
increased by three (3) years; or (B) the Executive's age was
equal to his actual age plus three (3) years for purposes of
determining early retirement reductions under any of the Plans,
whichever option produces the largest benefit to Executive.
The amount due Executive under this Section 2.3(c) shall be the
amount calculated in accordance with (i) and (ii), above, reduced by
amounts paid or payable from the Non-Contributory Retirement Program
for Certain Employees of Blue Cross and Blue Shield of Georgia, Inc.,
and amounts paid or payable upon employment termination in accordance
with the provisions of any rabbi trust agreement established to fund
benefits under either the Blue Cross and Blue Shield of Georgia, Inc.
Supplemental Executive Retirement Plan or the Blue Cross and Blue
Shield of Georgia, Inc. Executive Benefit Restoration Plan.
The amount due Executive hereunder, including amounts previously
accrued under both the Blue Cross and Blue Shield of Georgia, Inc.
Supplemental Executive Retirement Plan and the Blue Cross and Blue
Shield of Georgia, Inc. Executive Benefit Restoration Plan shall be
paid in a cash lump sum.
The three (3) Years of Plan and Association Service granted under
this Paragraph 2.3(c) shall not be eligible for the service doubling
provision described in the Blue Cross and Blue Shield of Georgia,
Inc. Supplemental Executive Retirement Plan.
For purposes of calculating a lump sum benefit under this Section
2.3(c) for benefit payments under the Blue Cross and Blue Shield of
Georgia, Inc. Supplemental Executive Retirement Plan and the Blue
Cross and Blue Shield of Georgia, Inc. Executive Benefit Restoration
Plan, the lump sum payment shall be equal to the "actuarial
equivalent" of the Executive's accrued benefit under the respective
plan. The actuarial equivalent shall be determined using accepted
actuarial principles and based on (i) the interest rate provided by
the Pension Benefit Guaranty Corporation for purposes of determining
the value of benefits which are to be paid in a lump sum upon
termination of an
4
7
insufficient trusteed single-employer plan, as set forth in Table II
of appendix B of PBGC Reg. Section 4044.52(b), and (ii) the mortality
rates set forth in the UP-1984 Mortality Table.
(d) a lump-sum cash amount sufficient for Executive to purchase health
and dental insurance, life insurance, and long-term disability
insurance coverage for Executive and Executive's eligible dependents
for twenty-four (24) months from the date of the Qualifying
Termination, at the exact same cost to Executive, and at the same
coverage level in effect as of Executive's date of Qualifying
Termination. The applicable COBRA health insurance benefit
continuation period shall begin on the date of Executive's
Qualifying Termination.
(e) Executive shall be entitled, at the expense of the Company, to
receive up to $20,000 of outplacement services from a nationally
recognized outplacement firm of Executive's selection.
2.4 OTHER CHANGE IN CONTROL BENEFITS. In the event Executive becomes
entitled to receive other Change in Control benefits, as provided in Section
2.1(b), the Company shall, within the time limits stated in Section 2.1(b), pay
to Executive the following:
(a) a lump sum cash amount equal to the bonus which would be earned, if
the then-current level of goal achievement, as of the date of a
Change in Control, under the Company's Annual Incentive Plan (or any
successor plan thereto) were annualized, then adjusted based on the
number of days Executive was actually employed during the bonus plan
year in which the Change in Control occurs. Such payment shall
constitute full satisfaction for these amounts owed to Executive.
(b) a lump sum cash amount equal to the award payable under the Cerulean
Companies, Inc. Performance Unit Plan (or any successor plan thereto)
as of the date of the Change in Control. Such payment shall
constitute full satisfaction for these amounts owed to the Executive.
In addition, stock options, restricted stock, or performance shares granted
to Executive during the term of this Agreement, if any, shall become fully
vested upon a Change in Control.
2.5. DEFINITION OF "CHANGE IN CONTROL." Change in Control of the Company
means, and shall be deemed to have occurred upon, the first to occur of any of
the following events:
(a) an acquisition by any Person or Persons (as used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934) of Beneficial
Ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of the securities of the Company that are then outstanding
and entitled to vote generally in the
5
8
election of directors ("Voting Securities Outstanding"); provided,
however, that such acquisition of Beneficial Ownership would result
in the Person of Persons Beneficially Owning fifty percent (50%) or
more of the combined voting power of Voting Securities Outstanding;
and provided further, that immediately prior to such acquisition such
Person or Persons were not the direct or indirect Beneficial Owners
of fifty percent (50%) or more of the combined voting power of Voting
Securities Outstanding; or
(b) the termination of service as directors, for any reason other than
death, disability, or retirement from the Board, during any period of
two consecutive years or less, of individuals who at the beginning of
such period constituted a majority of the Board, unless (i) the
election of or nomination for election of each new director during
such period was approved by a vote of at least two-thirds of the
directors still in office who were directors at the beginning of the
period and (ii) at least one-third of the directors in office at the
beginning of any such period are still in office at the end of such
period; or
(c) the approval by the shareholders of the Company of any merger or
consolidation or statutory share exchange as a result of which the
Voting Securities Outstanding shall be changed, converted, or
exchanged (other than a merger or share exchange with a wholly owned
subsidiary of the Company) or liquidation of the Company or any sale
or disposition of fifty percent (50%) or more of the assets or
earning power of the Company; or
(d) the approval by the shareholders of the Company of any merger or
consolidation or statutory share exchange to which the Company is a
party, as a result of which the persons who were shareholders of the
Company immediately before the effective date of the merger,
consolidation, or statutory share exchange shall have Beneficial
Ownership (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of less than fifty percent (50%) of the Voting Securities
Outstanding of the surviving corporation following the effective date
of such merger, consolidation, or statutory share exchange.
No Change in Control shall occur as a result of any acquisition of
Voting Securities Outstanding by any wholly-owned subsidiary of the
Company or an employee benefit plan (or related trust) sponsored by
the Company .
2.6. DEFINITION OF "GOOD REASON." "Good Reason" shall be determined by
Executive, in the exercise of good faith and reasonable judgment, and
shall mean, without Executive's express written consent, the
occurrence of any one or more of the following, during a period which
commences upon the Company's public announcement of an intended
Change in Control and ends on the second annual anniversary of the
effective date of the Change in Control.
(a) the Company's requiring Executive to be based at a location that
is more
6
9
than 50 miles farther from Executive's principal residence than
Executive's job location immediately prior to the Change in Control;
except for required travel on the Company's business to an extent
consistent with Executive's business travel obligations prior to the
Change in Control;
(b) a reduction of the greater of Executive's Base Salary in effect on
the Effective Date or on the date of a Change in Control, as the same
shall be increased from time to time;
(c) a significant reduction in Executive's responsibilities as defined
immediately preceding the announcement of an intended Change in
Control;
(d) the failure of the Company or its successor to keep in effect any of
the Company's compensation, incentive, health and welfare benefits,
or perquisite programs under which Executive receives value, as such
programs exist immediately prior to the announcement of an intended
Change in Control, or the failure of the Company to meet the funding
requirements, if any, of any of the programs. However, the
replacement of an existing program with a new program will be
permissible (and not grounds for a Good Reason termination) if the
value to be delivered to Executive under the new program is at least
as great as the value delivered to Executive under the program being
replaced, and, with respect to programs that require qualifying
service or vesting periods, the qualifying or vesting period of the
new program credits Executive's service up to the date of replacement
and does not impose new or greater qualifying or vesting periods ; or
(e) any breach by the Company or its successor of any of the provisions
of this Agreement including, but not limited to, the Company failing
to obtain the assumption of, or the successor Company refusing to
assume the obligations of, this Agreement pursuant to Section 4.1.
Executive's right to terminate employment for Good Reason shall not be
limited by Executive's incapacity due to physical or mental illness. Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to any circumstance constituting Good Reason herein, and if a
circumstance constituting Good Reason shall arise, Executive may terminate
employment based thereon at any time prior to the second annual anniversary of
the effective date of the Change in Control.
2.7. DEFINITION OF "CAUSE." Cause shall be determined by the Chief
Executive Officer of the Company, ( except that in the case of the Chief
Executive Officer, cause shall be determined by the Chairman of the Company's
Board of Directors ) in the exercise of good faith and reasonable judgment, and
shall mean the occurrence of any one or more of the following:
(a) a demonstrably willful and deliberate act or failure to act by
Executive (other than as a result of incapacity due to physical or
mental illness) which is
7
10
committed in bad faith, without reasonable belief that such action or
inaction is in the best interests of the Company, which causes actual
material financial injury to the Company and which act or inaction is
not remedied within fifteen (15) business days of written notice from
the Company; or
(b) Executive's conviction for a felony act of fraud, embezzlement,
theft, or moral turpitude, which acts cause material financial harm
to the Company.
2.8. OTHER DEFINED TERMS. The following terms shall have the meanings set
forth below:
(a) "Affiliate" means:
(i) any corporation while it is a member of the same "controlled
group" of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code (the "Code")) as the Company;
(ii) any other trade or business (whether or not incorporated) while
it is under "common control" (within the meaning of Code
Section 414(c)) with the Company;
(iii) any organization during any period in which it (along with the
Company) is a member of an "affiliated service group" (within
the meaning of Code Section 414(m)); or
(iv) any other entity during any period in which it is required to
be aggregated with the Company under Code Section 414(o).
(b) "Base Salary" means, at any time, the then-regular annual rate of pay
to which Executive is entitled as annual salary, excluding amounts
(i) designated by the Company as payment toward reimbursement of
expenses; or (ii) received under incentive or other bonus plans,
regardless of whether any of the amounts of annual salary or bonus
are deferred.
SECTION 3. EXCISE TAX
3.1. EXCISE TAX PAYMENT. If any portion of the Severance Benefits or any
other payment under this Agreement (including, but not limited to, payments
described in Section 2.4), or under any other agreement with, or plan of the
Company (in the aggregate "Total Payments") constitute a payment, such that an
excise tax is due under Section 280G or other provisions of the Internal Revenue
Code, the Company shall provide to Executive, in cash, an additional payment in
an amount to cover the full excise tax due, and Executive's state and federal
income and employment taxes on this additional payment (cumulatively, the
"Gross-Up Payment"). If Executive experiences a Qualifying Termination, any
amount payable under this Section 3.1 shall be paid as soon as possible
following the date of Executive's Qualifying Termination, but in no event later
than thirty (30) calendar days after such date. If Executive is eligible for an
excise tax payment under this Section 3.1, but Executive remains in active
8
11
employment, such payment shall be made as soon as possible following the date of
the Change in Control, but in no event later than thirty (30) calendar days
after such date.
All determinations required to be made under this Section 3.1, including
whether and when a Gross-Up Payment is required, and the amount of such Gross-Up
Payment and the assumptions to be used in determining such payment, shall be
made by the accounting firm used by the Company at the time of such
determination (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and to Executive within fifteen (15) business
days of the receipt of notice from the Company or Executive that there has been
a Qualifying Termination or that there is an amount payable under Section 2.4,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity,
or group effecting the Change in Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company.
For purposes of this Agreement, the term "excise tax" shall mean the tax
imposed on certain excess payments pursuant to Sections 280G and 4999 or any
other provision of the Internal Revenue Code, as amended.
3.2. SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service
subsequently adjusts the excise tax computation herein described, the Company
shall reimburse Executive for the full amount necessary to make Executive whole
on an after-tax basis (less any amounts received by Executive that Executive
would not have received had the computations initially been computed as
subsequently adjusted), including the value of any underpaid excise tax, and any
related interest and/or penalties due to the Internal Revenue Service.
SECTION 4. SUCCESSORS AND ASSIGNMENTS
4.1. SUCCESSORS. The Company will require any successor (whether via a
Change in Control, direct or indirect, by purchase, merger, consolidation, or
otherwise) of the Company to expressly assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to the same extent that
the Company would be required to perform them if no such succession had taken
place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall, as of the date immediately preceding
the date of a Change in Control, automatically accelerate and make immediately
payable, the full benefits due Executive hereunder as upon a Qualifying
Termination.
4.2. ASSIGNMENT BY EXECUTIVE. This Agreement shall inure to the benefit of
and be enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If
Executive should die while any amount is payable to Executive hereunder, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this
9
12
Agreement, to Executive's devisee, legatee, or other designee, or if there is no
such designee, to Executive's estate.
Executive's rights hereunder shall not otherwise be assignable.
SECTION 5. CONFIDENTIALITY OF COMPANY INFORMATION
5.1. CONFIDENTIALITY, NON-DISCLOSURE AND LIMITATION UPON RECRUITING.
Without the prior written consent of the Company, during the term of this
Agreement, and if Executive either experiences a Qualifying Termination or
voluntarily terminates employment without Good Reason, for a period of
twenty-four (24) calendar months thereafter, Executive agrees hereby not to
directly or indirectly, disclose or use (except as may be required for the
performance of duties assigned by the Company) any trade secret or other
confidential material pertaining to the conduct of the Company's business. The
Company's business, as that term is used herein, includes but is not limited to,
the Company's training manuals, underwriting and group enrollment manuals,
records, processes, methods, data, reports, information, documents, equipment
and business secrets. Executive further agrees, that during the twenty-four (24)
month period following a Qualifying Termination, Executive shall not initiate
contact with or attempt to recruit other Company employees for opportunities
outside the Company. Nothing herein, however, shall prevent Executive from
responding to contacts initiated by other employees.
SECTION 6. MISCELLANEOUS
6.1. ADMINISTRATION. This Agreement shall be administered by the Board of
Directors of the Company, or by a Committee of the Board consisting of Board
members designated by the Board (the "Compensation Committee"). In fulfilling
its administrative duties hereunder, the Compensation Committee may seek and
rely on advice or assistance of the Company's management, outside counsel,
independent accountants, or other consultants.
6.2. NOTICES. Any notice required to be delivered to the Company or the
Compensation Committee by Executive hereunder shall be properly delivered to the
Company when personally delivered to, or actually received through the U.S.
mail, postage prepaid, by:
Blue Cross and Blue Shield of Georgia, Inc./Cerulean Companies, Inc.
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, XX 00000
Attn: General Counsel
Any notice required to be delivered to Executive by the Company or the
Compensation Committee hereunder shall be properly delivered to Executive when
personally delivered to, or actually received through the U.S. mail, postage
prepaid, by Executive.
10
13
SECTION 7. CONTRACTUAL RIGHTS AND LEGAL REMEDIES
7.1. CONTRACTUAL RIGHTS TO BENEFITS. This Agreement establishes in
Executive a right to the benefits to which Executive is entitled hereunder.
However, except as expressly stated herein, nothing herein contained shall
require or be deemed to require, or prohibit or be deemed to prohibit, the
Company to segregate, earmark, or otherwise set aside any funds or other assets,
in trust or otherwise, to provide for any payments to be made or required
hereunder.
7.2. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees, costs
of litigation, prejudgment interest at an annual rate of 12% compounded monthly,
and other expenses which are incurred in good faith by Executive as a result of
the Company's refusal to provide the Severance Benefits and other Change in
Control benefits to which Executive becomes entitled under this Agreement, or as
a result of the Company's (or any third party's) contesting the validity,
enforceability, or interpretation of this Agreement, or as a result of any
conflict between the parties pertaining to this Agreement.
7.3. ARBITRATION. Executive shall have the right and option to elect (in
lieu of litigation) to have any dispute or controversy arising under or in
connection with this Agreement settled by arbitration, conducted before a panel
of three (3) arbitrators sitting in a location selected by Executive within
fifty (50) miles from the location of Executive's job with the Company, in
accordance with the rules of the American Arbitration Association then in
effect. Executive's election to arbitrate, as herein provided, and the decision
of the arbitrators in that proceeding, shall be binding on the Company and
Executive.
Judgment may be entered on the award of the arbitrator in any court having
jurisdiction. All expenses of such arbitration, including the fees and expenses
of the counsel for Executive, shall be borne by the Company.
7.4. UNFUNDED AGREEMENT. This Agreement is intended to be an unfunded
general asset promise for a select, highly compensated member of the Company's
management and, therefore, is intended to be exempt from the substantive
provisions of the Employee Retirement Income Security Act of 1974 as amended.
7.5. EXCLUSIVITY OF BENEFITS. Unless specifically provided herein, neither
the provisions of this Agreement nor the benefits provided hereunder shall
reduce any amounts otherwise payable, or in any way diminish Executive's rights
as an employee of the Company, whether existing now or hereafter, under any
compensation and/or benefit plans (qualified or nonqualified), programs,
policies, or practices provided by the Company, for which Executive may qualify.
Vested benefits or other amounts which Executive is otherwise entitled to
receive under any plan, policy, practice, or program of the Company (i.e.,
including, but not limited to, vested benefits under the Non-Contributory
Retirement Program for Certain Employees of Cerulean Companies, Inc.), at or
subsequent to Executive's date of Qualifying Termination shall be payable in
accordance with such plan, policy,
11
14
practice, or program except as expressly modified by this Agreement.
7.6. EMPLOYMENT STATUS. Nothing herein contained shall be deemed to create
an employment agreement between the Company and Executive, providing for the
employment of Executive by the Company for any fixed period of time. Executive's
employment with the Company is terminable at will by the Company or Executive
and each shall have the right to terminate Executive's employment with the
Company at any time, with or without Cause, subject to the Company's obligation
to provide Severance Benefits and other Change in Control benefits as required
hereunder.
In no event shall Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to Executive under
any of the provisions of this Agreement, nor shall the amount of any payment
hereunder be reduced by any compensation earned by Executive as a result of
employment by another employer.
7.7. ENTIRE AGREEMENT. This Agreement represents the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior discussions, negotiations, and agreements concerning the subject
matter hereof, including, but not limited to, any prior severance agreement made
between Executive and the Company.
7.8. TAX WITHHOLDING. The Company shall withhold from any amounts payable
under this Agreement all federal, state, city, or other taxes legally required
to be withheld.
7.9. WAIVER OF RIGHTS. Except as otherwise provided herein, Executive's
acceptance of correctly calculated Severance Benefits, other Change in Control
benefits, the Gross-Up Payment (if applicable), and any other payments required
hereunder shall be deemed to be a waiver of all rights and claims of Executive
against the Company pertaining to any matters arising under this Agreement.
7.10. SEVERABILITY. In the event any provision of the Agreement shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Agreement, and the Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included.
[INTENTIONALLY CONTINUED ON SIGNATURE PAGE]
12
15
7.11. APPLICABLE LAW. To the extent not preempted by the laws of the United
States, the law of the State of Georgia shall be the controlling law in all
matters relating to this Agreement.
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement,
to be effective as of the day and year first written above.
Executive: Cerulean Companies, Inc.
------------------------------- By:
------------------------------
Title:
---------------------------
13
