CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of February 27,
1997 (this "Agreement") by and between CIGNA Corporation,
a Delaware corporation ("Parent"), and Xx. Xxxxxx Xxxxxx
(the "Consultant").
WHEREAS, Parent, has entered into an Agreement
and Plan of Merger (the "Merger Agreement"), by and among
Parent, CHC Acquisition Corp., a New Hampshire
corporation (the "Purchaser"), and Healthsource, Inc., a
New Hampshire corporation (the "Company"), dated as of
February 27, 1997;
WHEREAS, in connection with the transactions
contemplated by the Merger Agreement and in recognition
of the Consultant's experience and abilities, Parent
desires to assure itself of the services of the
Consultant in accordance with and subject to the terms
and conditions provided herein; and
WHEREAS, the Consultant wishes to perform
services for Parent in accordance with and subject to the
terms and conditions provided herein.
NOW, THEREFORE, in consideration of the
premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
1. Engagement as Consultant. Parent hereby
agrees to engage the Consultant, and the Consultant
hereby agrees to perform services for Parent, on the
terms and conditions set forth herein.
2. Term. This Agreement is for the nine
month period (the "Term") commencing on the date of
consummation of the "Offer" (as such term is defined in
the Merger Agreement) and terminating nine months from
such date; provided, however, that if the Offer is not
consummated or if the Merger Agreement is terminated this
Agreement shall terminate immediately and be of no force
or effect.
3. Duties and Reporting Relationship. From
time to time during the Term, the Consultant shall
perform such services relating to the business of Parent
as the Consultant and the President of CIGNA HealthCare
(or his designee) shall mutually agree. The Consultant
shall in no event be required to provide more than 120
hours per month of consulting services to Parent for the
first 6 months of the Term and no more than 80 hours per
month of consulting services to Parent for the next 3
months of the Term. The scheduling of such time shall be
mutually agreeable to the Consultant and Parent. Subject
to the Consultant's obligations elsewhere herein, Parent
acknowledges that the Consultant is permitted to pursue
other activities, whether of a personal or business
nature, and, accordingly, may not always be immediately
available to Purchaser.
4. Place of Performance. The Consultant
shall perform his duties and conduct his business from
his primary residence and/or at such other locations as
are reasonably acceptable to him; provided, however,
that, as mutually agreed, the Consultant will be
available to travel domestically to meet from time to
time with representatives of Parent.
5. Independent Contractor. During the term
of this Agreement, the Consultant shall be an independent
contractor and not an employee of Parent.
6. Compensation and Related Matters.
(a) Monthly Consulting Fee. During the
Term, Parent shall pay to the Consultant a monthly
consulting fee at a rate of $100,000 per month.
(b) Business Expenses. In addition to
the expenses to be reimbursed pursuant to Annex A hereto,
the Consultant will be reimbursed by Parent for all
ordinary and appropriate business expenses incurred by
him in connection with his performance of consulting
services hereunder upon submission by the Consultant of
receipts and other documentation in accordance with
Parent's normal reimbursement procedures.
(c) Benefits and Perquisites. During the
Term and, where applicable, thereafter, Parent shall
provide the Consultant (and, to the extent applicable,
his covered dependents) with those employee benefits and
perquisites set forth on Annex A hereto.
(d) Options. Notwithstanding anything
to the contrary, including, without limitation, anything
contained in this Agreement, the Merger Agreement or any
stock option or incentive plan of Parent, the Purchaser
or the Company, Parent shall take all action necessary to
cause each Substitute Option (as defined in the Merger
Agreement) held by the Consultant (or, in the event of
his death, held by his estate or designated beneficiary)
to expire no earlier than the tenth anniversary of the
date of grant of the corresponding Company Employee Stock
Option (as defined in the Merger Agreement) that was
converted into a Substitute Option pursuant to Section
2.4 of the Merger Agreement, without regard to any of (i)
the termination or expiration of this Agreement, (ii) the
termination of the Consultant's employment with the
Company, (iii) the death or disability of the Consultant
or (iv) the cessation of the Consultant's services to
Parent; provided, however, that Parent may grant
Substitute Options to the Consultant under a stock option
plan of Parent, so long as such grant does not adversely
affect the rights of the Consultant hereunder and under
the Merger Agreement. In this regard, notwithstanding
anything to the contrary, including, without limitation,
anything contained in this Agreement, the Merger
Agreement or any stock option or incentive plan of
Parent, the Purchaser or the Company, Parent agrees that
each such Substitute Option held by the Consultant shall
be freely exercisable without restriction, at all times
prior to the expiration of such option, by the Consultant
and his successors, for shares of Parent common stock.
7. Termination. The Consultant's engagement
as a consultant hereunder shall terminate without further
action by any party hereto nine months from the date of
consummation of the Offer. Upon any termination of this
Agreement or the Consultant's engagement as a consultant
hereunder, the parties hereto shall have no further
obligation or liability under this Agreement, except that
(a) Parent shall pay the Consultant all fees and
reimburse the Consultant for all expenses incurred prior
to the date of termination, (b) Parent shall continue to
provide the Consultant (and his covered dependents) with
the employee benefits and perquisites set forth on Annex
A hereto for a period of 36 months from such date of
termination (except for use of the aircraft described in
Annex A which Parent will provide for a period of 12
months from such date of termination) and (c) the
provisions of Sections 6(c), 6(d) and 7, 8 and 11 through
15 of this Agreement shall survive any such termination.
8. Releases. (a) In consideration for the
payment and benefits provided in this Agreement, the
Consultant hereby voluntarily, knowingly, willingly,
irrevocably and unconditionally releases Parent and the
Company, together with each of its parents, subsidiaries
and affiliates, and each of their respective officers,
directors, employees, representatives, attorneys and
agents, and each of their respective predecessors,
successors and assigns (collectively, the "Releasees")
from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, causes of
action, rights, costs, losses, debts and expenses of any
nature whatsoever, known or unknown (other than with
respect to any breach by the Releasees of this Agreement
or the Merger Agreement), against them which the
Consultant or his successors or assigns ever had, now
have or hereafter can, shall or may have (either
directly, indirectly, derivatively or in any other
representative capacity) by reason of any matter, fact or
cause whatsoever arising from the beginning of time to
the date of consummation of the Offer, including without
limitation all claims arising under Title VII of the
Civil Rights Act of 1964, the federal Age Discrimination
in Employment Act ("ADEA") and all other federal, state
or local laws, rules, regulations, judicial decisions or
public policies now or hereafter recognized. By signing
this Agreement, the Consultant admits that he has read
this Agreement, understands it is a legally binding
agreement and that he was advised to review it with legal
counsel of his choice, and has reviewed it with legal
counsel of his choice, has had, or had the opportunity to
take, 21 calendar days to discuss it with legal counsel
of his choice before signing and that if he signs prior
to the end of such period, he does so of his own free
will and with full knowledge that he could have taken the
full period. The Consultant realizes and understands
that this release applies to and covers all claims,
demands and causes of action including those under the
ADEA against the Releases whether or not the Consultant
knows or suspects them to exist at the present time. The
Consultant acknowledges that he understands the terms of
this Agreement, that it is not part of an exit incentive
or other employment termination program being offered to
a group or class of employees. The Consultant shall have
a period of 7 calendar days from the date he signs this
Agreement to revoke the Agreement and any revocation and
cancellation must be in writing, signed by the Consultant
and received by Parent before the close of business on
the seventh calendar day following the date hereof.
(b) In consideration for the Consultant's
obligations under this Agreement, Parent hereby
voluntarily, knowingly, willingly, irrevocably and
unconditionally releases the Consultant (and hereby
agrees to cause each of the Purchaser, the Company and
their affiliates to release the Consultant) from any and
all charges, complaints, claims, liabilities,
obligations, promises, agreements, causes of action,
rights, costs, losses, debts and expenses of any nature
whatsoever, known or unknown (other than with respect to
any breach by the Consultant of this Agreement) against
him which Parent, the Purchaser or the Company or their
respective successors or assigns ever had, now have or
hereafter can, shall or may have (either directly,
indirectly, derivatively or in any other representative
capacity) by reason of any matter, fact or cause
whatsoever arising from the beginning of time to the date
of consummation of the Offer.
9. Covenant Not to Compete. (a) The
Consultant hereby agrees that, for a period of nine
months following the date of consummation of the Offer,
the Consultant shall not, whether acting individually or
as an officer, director, employee, agent, stockholder or
consultant of any person, firm, corporation, business or
other entity, engage in a business that competes,
directly or indirectly, in any material respect with the
business conducted as of the date hereof by Parent, the
Company and their respective subsidiaries; provided,
however, that the Consultant may own publicly-traded
stock of any such person, firm, corporation, business or
other entity constituting not more than 5% of the
outstanding shares of such class of stock so long as his
involvement with any such entity is limited to the
ownership of such stock.
(b) The Consultant and Parent acknowledge that
the non-competition provision contained in Section 9(a)
above is reasonable and necessary, in view of the nature
of Parent and the Company, their businesses and his
knowledge thereof, in order to protect the legitimate
interests of Parent and the Company.
(c) The Consultant agrees that during the Term
and for a period of one year following the termination of
this Agreement, he shall not (i) induce any employee of
Parent, the Company or any of their affiliates to leave
the employ of Parent, the Company or any of their
affiliates or to accept any other employment or position,
or (ii) assist any other person in hiring any such
employee, provided, however, that nothing contained
herein shall prevent the Consultant from responding to or
addressing inquiries initiating from employees of Parent,
the Company and its affiliates or from hiring any such
employees who make initial contact with the Consultant.
(d) The Consultant hereby agrees that he shall
not following the termination of this Agreement retain in
his possession any written, documentary, tape, recorded
or computerized proprietary information relating to the
Company and its clients and customers.
(e) Parent hereby agrees that in the event of
any alleged breach of this Section 9 by the Consultant,
Parent shall deliver to the Consultant a written notice,
which notice shall specifically identify the manner in
which the Consultant has allegedly breached this Section
9. Upon receipt of such notice, Consultant shall have a
period of 10 calendar days during which period he may
attempt to cure any such specified breach. Parent hereby
agrees that it shall not seek any judicial remedy or
relief in respect of any such alleged breach until after
the expiration of such 10 calendar day period, and may
only seek such judicial remedy or relief in the event any
such breach has not been reasonably cured during such 10
calendar day period.
10. No Disparagement. Parent and the
Consultant hereby agree that each shall not (and Parent
further agrees (i) to cause the Company and the Purchaser
and its and their respective directors and officers and
(ii) if notified in writing by the Consultant of a
material breach of this paragraph, Parent agrees to use
reasonable efforts to cause its and their respective
subsidiaries, employees, affiliates, advisors,
representatives and agents to not) make, or cause to be
made, any statement, observation or opinion, or
communicate any information (whether oral or written),
that materially disparages the reputation or business of
the other party hereto. The Consultant agrees that in
the event of any alleged breach of this Section 10 by
Parent, the Consultant shall deliver to Parent written
notice specifically identifying the manner in which
Parent has allegedly breach this Section 10. Upon
receipt of such notice, Parent shall have a period of 10
calendar days during which period it may attempt to cure
any such specified breach. The Consultant hereby agrees
that he will not seek any judicial remedy or relief in
respect of such breach (including the remedy described in
this paragraph) until after the expiration of such 10
calendar day period, and may only seek such judicial
remedy or relief in the event any such breach has not
been reasonably cured during such 10 calendar day period.
11. Indemnification. Parent shall indemnify
and hold harmless the Consultant to the full extent
permitted by law and the by-laws of Parent for all
expenses, costs, liabilities and legal fees that the
Consultant may incur in the discharge of his duties
hereunder, including the mandatory advancement of and
reimbursement for any legal fees and expenses incurred by
the Consultant in enforcing any right or benefit under
this Agreement. Such payments shall be made within 5
days after the Consultant's request for payment. Any
termination or expiration of the Consultant's engagement
as a consultant hereunder or of this Agreement shall have
no effect on the continuing operation of this Section 11.
12. Successors; Binding Agreement.
(a) Parent shall require any successor to
all or substantially all of the business or assets of
Parent, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that
Parent would be required to perform it if no such
succession had taken place.
(b) This Agreement and all rights of the
Consultant hereunder shall inure to the benefit of and be
enforceable by the Consultant's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. This
Agreement is personal to and may not be assigned by the
Consultant.
13. Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, telecopied (which
is confirmed) or sent by an overnight courier service to
the parties at the following addresses (or at such other
addresses for a party as shall be specified by the
notice):
If to Parent:
c/o CIGNA HealthCare (B-216)
000 Xxxxx Xxxxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000-0000
Attention: H. Xxxxxx Xxxxxx
If to the Consultant:
Xx. Xxxxxx Xxxxxx
Healthsource, Inc.
Xxx Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
14. Disputes.
(a) Any dispute, controversy or claim
arising out of or relating to this Agreement, including
any annexes hereto, or the breach, termination or
validity hereof, shall be finally settled by arbitration
by one arbitrator in the city and state of the Company's
headquarters on the date hereof pursuant to the
Commercial Arbitration Rules of the American Arbitration
Association then in effect. Judgment may be entered on
the arbitrator's award in any court of competent
jurisdiction. The arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. SECTIONSECTION 1-16.
(b) In no event shall the Consultant be
liable to Parent on account of any breach or breaches of
this Agreement for an aggregate amount that exceeds the
amount paid to the Consultant during the Term under
Section 6(a) hereof.
15. Miscellaneous. No provisions of this
Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in
writing signed by the parties hereto. No waiver by a
party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision
of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the
subject matter hereof have been made by the parties which
are not set forth expressly in this Agreement. This
Agreement shall be governed and construed in accordance
with the laws of the State in which the Company is
incorporated on the date hereof, without giving effect to
the principles of conflicts of law thereunder or of any
other jurisdiction.
16. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed
to be an original but both of which together will
constitute one and the same instrument.
17. Enforcement. If any court or arbitrator
determines that any covenant contained in this Agreement,
or any part thereof, is unenforceable for any reason, the
duration and/or scope of such provision shall be reduced
so that such provision becomes enforceable and, in its
reduced form, such provision shall then be enforceable
and shall be enforced.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date and year first
above written.
/s/ Xxxxxx Xxxxxx
Xx. Xxxxxx Xxxxxx
CIGNA CORPORATION
By:/s/ Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Vice President
ANNEX A
* Medical, hospitalization, dental, life and
disability insurance benefits at a level no less
favorable than that provided to senior executive
officers of Parent and without any waiting
periods or preexisting condition limitations.
* Full and complete access to the aircraft
currently used by the Consultant as Chief
Executive Officer of the Company (or comparable
aircraft if the current aircraft is unavailable).
To the extent such aircraft use is not in
connection with the business of Parent, the
Consultant shall reimburse Parent for such use at
the rate of $1,000 per hour for the time such
aircraft is airborne. Upon termination or
expiration of the Agreement, the Consultant shall
have the right to purchase such aircraft from
Parent at its then book value.
* An initial cash payment of $25,000, made
immediately following the consummation of the
Offer, the proceeds of which are to be used by
the Consultant solely to purchase computer and
telephone equipment in connection with the
establishment of an office in the Consultant's
home (or other location selected by him). The
Consultant may employ one or more assistants to
administer his office and, if any such assistant
was an employee of the Company immediately prior
to the consummation of the Offer, such assistant
shall be entitled to receive from Parent full
severance benefits as if such assistant was
terminated by Parent without cause. Purchaser
will reimburse the Consultant for the costs
associated with the employment of such assistants
as well as for any other expenses incurred with
the operation of such office on a monthly basis,
up to a total annual cost of $200,000.
