EXHIBIT 10.70
RETENTION AND SEVERANCE AGREEMENT
This Retention and Severance Agreement (the "Agreement") is entered into as
of October 31, 2008, between United American Healthcare Corporation (the
"Company") and Xxxxxxxxx Xxxxxx, an individual (the "Executive"). All payments
under the Agreement are intended to comply with the requirements of Internal
Revenue Code Section 409A, and the regulations thereunder.
RECITALS
WHEREAS, the Company has hired Xxxxxxxxx Xxxxxx as Vice President, and as
CEO of its subsidiary, UAHC Health Plan to Tennessee, Inc. ("UAHC Tenn.");
WHEREAS, the Company is evaluating its strategic alternatives following the
loss of the recent bid by UAHC Tenn to continue to provide managed care services
to the State of Tennessee Bureau of Tenncare's West Grand Region; and
WHEREAS, the Company, acting through the Compensation Committee of the
Company's Board of Directors, has determined that it is in the best interests of
the Company to retain the Executive.
NOW, THEREFORE, in consideration of the mutual covenants and consideration
set forth below, the sufficiency of which is hereby acknowledged, the parties
agree as follows:
RETENTION
1. Retention Payment. Should the Executive remain employed by the Company
at least through January 1, 2009 (the "Retention Period"), and, assuming
continued satisfactory performance during the Retention Period, the Company
shall pay the Executive a one-time lump sum cash payment equal to 50% of her
current base salary of One Hundred and Eighty Four Thousand Dollars
($184,000.00) (the "Retention Payment"). Except as provided in Section 5, should
the Executive Separate from Service with the Company prior to the end of the
Retention Period, she will not be entitled to any Retention Payment. This cash
payment is to be made on or before the 30th day immediately following the last
day of the Retention Period, if that day is a business day, and if not, the
first business day immediately following.
2. Additional Retention Payment. Notwithstanding the foregoing, the Company
retains the option of retaining the Executive, in its sole discretion, for an
extended period beyond January 1, 2009 (the "Extended Retention Period"), in
which case the Company will award the Executive a lump sum cash payment in
addition to the cash payment to which the Executive would be entitled under
Section 1. This "Additional Retention Payment" would be an amount that is equal
to a percentage of her current annual base salary, with such percentage to be
determined by the Company's CEO or the Compensation Committee based on the
length of the Extended Retention Period and other factors, as they may
determine, but such determination must be made prior to the end of the Retention
Period. Except as provided in Section 5, should the Executive separate from
service with the Company prior to the end of the Extended
Retention Period, she will not be entitled to any Additional Retention Payment.
This Additional Retention Payment will be made on or before the 30th day
immediately following the last day of the Extended Retention Period, if that day
is a business day, and if not, the first business day immediately following.
3. Status of Payments. The Retention Payment is in addition to any payments
due the Executive under her current pay arrangement, and the Additional
Retention Payment, if any, would be in addition to any payments due the
Executive under her current pay arrangement and any Retention Payment to which
she may become entitled.
"Cause" shall mean (i) a material breach by the Executive of his
obligations under his employment agreement with the Company, (ii) a breach of
his fiduciary duties to the Company, (iii) conviction of a felony or any offense
involving moral turpitude or misappropriation of Company funds, or (iv) willful
breach or material neglect of the Executive's duties.
4. Forfeiture of Payments. If the Executive is terminated for cause, or if
she voluntarily resigns from the Company, before the completion of the Retention
Period or the Extended Retention Period, if applicable, her right to the
Retention Payment or the Additional Retention Payment, as applicable, will be
forfeited.
5. Separation From Service on Account of Death, Disability or Involuntary
Termination for Other Than Cause. If the Executive Separates From Service with
the Company on account of death, disability, or Involuntarily Separates From
Service (as defined in Section 6.E) with the Company for reasons other than
Cause before the end of the Retention Period or the Extended Retention Period,
as applicable, the Executive, or her Designated Beneficiary, as applicable, is
entitled to a Retention or Extended Retention Payment on a pro-rata basis.
"Disability" shall mean either (i) that the Executive is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or be
expected to last for a continuous period of not less than 12 months, or (ii) is
receiving income replacement benefits for a period of not less than three months
under the Company's long term disability plan.
SEVERANCE
6. Severance Benefit. The Company will provide the Executive with a
"Severance Benefit," described below, payable in the same manner as her current
monthly compensation for the number of months set forth below (the "Severance
Period"), beginning on the first day of the seventh month immediately following
her Separation From Service date. Payment of the Severance Benefit shall not be
considered "compensation" for purposes of determining any benefits provided
under any pension, savings, or other benefit plan maintained by the Company.
X. Xxxxxxxxx Not On Account of a Change-in-Control ("CIC") Event. In
the event of an Involuntary Separation From Service, other than for Cause,
that is not on account of a CIC Event, the Executive is entitled to cash
severance benefit equal to six months' of base salary. This Severance
Benefit will be payable every other Friday on the same schedule and in the
same manner as his monthly compensation was paid while the Executive was
employed by the Company. This Severance Benefit will be paid for the
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number of months set forth in this Section 6.A (the "Severance Period"),
beginning on the first payroll date of the seventh month immediately
following the Executive's Separation From Service date.
X. Xxxxxxxxx On Account of a CIC Event. In the event of a Separation
From Service on account of a CIC Event, the Executive is entitled to
receive the amount due the Executive under the Company's Supplemental
Executive Retirement Plan to be paid in a lump sum on the first day of the
seventh month immediately following his Separation From Service date..
Nothing in this Agreement is intended to, nor does, modify the Executive's
entitlement to benefits under the Company's Supplemental Executive
Retirement Plan.
C. CIC Event Defined. For purposes of this Agreement a CIC Event
occurs when one person, or more than one person acting as a group (i)
acquires control of stock which, when combined with stock already held by
such person or group, constitutes more than 50% of the total fair market or
total voting power of the Company's stock ("Majority Control"), (ii)
acquires, or has acquired during the 12-month period ending on the date of
the most recent acquisition of stock by such person or group, ownership of
the stock in the Company possessing 30% or more of the total voting power
of the Company's stock ("Effective Control"), or (iii) acquires, or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or group, Company assets having a gross market
value equal to or greater than 40% of the total gross fair market value of
the assets of the Company immediately before such acquisition or
acquisitions.
D. Separation From Service Defined. Separation From Service means the
Executive's termination of employment with the Company on account of a
voluntary quit, resignation, death or Disability (as defined in Section 5).
E. Involuntary Separation From Service Defined. An Involuntary
Separation From Service means a Separation From Service due to the
independent exercise of the Company's unilateral authority to terminate the
Executive's service. The Executive's voluntary Separation From Service will
be treated as an Involuntary Separation From Service if the separation
occurs within two years from the date the Company imposed a material
negative change in (i) the Executive's base compensation, (ii) his
authority, duties or responsibilities, (iii) the authority, duties or
responsibilities of the supervisor to whom the Executive is to report, (iv)
the budget over which the Executive has authority, (v) the geographic
location at which the Executive must perform services, and (vi) any
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other action or inaction that constitutes a material breach by the
Company of the agreement under which the Executive provides his
services.
7. Treatment of Current Year Annual Incentive. In the event of a
CIC-related, or a non-CIC-related, Involuntary Separation From Service
other than for cause, the Executive is to receive a pro-rata payment of
whatever annual incentive compensation she would be due under the Company's
then existing incentive compensation program, based on actual achievement.
8. Treatment Of Long-Term Incentive Plan ("LTIP") Awards. The
Executive will be entitled to receive any outstanding LTIP awards, subject
to the existing applicable terms of the LTIP, whether the Separation From
Service is on account of a CIC Event, or is not CIC-related.
9. Continuation of Health And Welfare Benefits. In the event of
Separation From Service on account of a CIC Event, or a non-CIC related
Separation From Service, other than for cause, the medical, dental, vision
and prescription drug benefits to which the Executive was entitled
immediately before her Separation From Service will be available under
COBRA continuation coverage, with the COBRA premiums, or required
contributions, to be paid by the Company for the 6-month period immediately
following the Executive's Separation From Service date and the immediately
following Severance Period. Other welfare benefits, including but not
limited to life insurance, to which the Executive is entitled on the day
immediately preceding her Separation From Service date will be paid for by
the Company for the duration of 6-month period immediately following the
Executive's Separation From Service date and the immediately following the
Severance Period.
10. Retirement Benefits. Following the date of her Separation From
Service, the Executive will not be entitled to any additional accruals
under any of the Company's retirement plans, nor will any contributions be
made to any of the Company's retirement plans on behalf of the Executive.
11. Outplacement Services. The Company will provide, at its cost,
outplacement services to the Executive through a designated outplacement
firm, for the 6-month period immediately following the Executive's
Separation From Service date, with the cost of such outplacement services
to be capped at Three Thousand Dollars ($3,000).
12. Release. Prior to or immediately following her Separation From
Service, and as a condition of receiving the Severance Benefit described in
Sections 6-11, the Executive will sign the release attached here as Exhibit
A.
13. Time Period to Accept Agreement. With respect to the Severance
Benefit provisions of this Agreement (Sections 6-11), the Executive has had
at least 21 days to review the terms of this Agreement and has been advised
in writing to consult with the attorney of the Executive's attorney of
choice regarding the terms of the Agreement. The Executive may revoke this
Agreement up to seven days after signing it (the "Revocation Period"). To
be effective, the revocation must be in writing and delivered to the person
who executed this Agreement on the Company's behalf. If the Agreement is
not revoked within the Revocation Period, it shall be
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fully enforceable without any further affirmative action by either party.
This Agreement does not become effective until the Revocation Period has
expired (the "Effective Date").
OTHER IMPORTANT PROVISIONS
14. Covenant Not To Compete. The Executive acknowledges and agrees
that, during her employment, she formed certain business relationships that
are part of the goodwill of the Company, and that she had access to and
knowledge of the Company's Proprietary/Confidential Information, which is
information that gives the Company a competitive advantage over its
competitors. The Executive acknowledges and agrees that the Company is
entitled to protect its investment in the foregoing and to keep the results
of its efforts, its goodwill, and its Proprietary/Confidential Information
for its sole and exclusive use. Accordingly, the Executive agrees and
covenants that for a period equal to the Severance Period, she shall not,
unless with the Company's prior written consent, directly or indirectly
(whether on her own behalf or on behalf of any other person, business or
entity):
A. own, maintain, operate, or engage in any business in the same
or similar Line of Business as the Company or in any business or
activity that competes with the Company in Tennessee.
B. serve, advise, manage, work for, or be employed, retained or
engaged in any capacity (including, but not limited to, as an
employee, consultant, contractor or agent) by any individual, firm,
agency, partnership, business, or corporation which engages in the
same or similar Line of Business as the Company or which competes with
the Company in Tennessee.
C. undertake any efforts or activities toward pre-incorporating,
incorporating, financing, or commencing any competing business or
activity which engages in the same or similar Line of Business as the
Company in Tennessee.
D. advise, serve or consult with any person, business or entity
which is or will be undertaking efforts toward incorporating,
financing, or commencing any competing business or activity which
engages in the same or similar Line of Business as the Company in
Tennessee.
E The activities prohibited in this section also include:
businesses/activities that have a physical presence outside of the
specified geographic area that solicit customers, employees or
business in Tennessee.
(i) For purposes of this Agreement, "Line of Business" shall
mean any entity that provides managed care or HMO services
intended to provide coverage to Medicare or Medicaid recipients
and their dependents through insurance or otherwise.
(ii) The Executive agrees that the conditions set forth in
this Section 14: (a) are reasonable and necessary to preserve and
protect the legitimate business interests of the Company, (b) do
not impose an undue hardship on her, (c) are not injurious to the
public, and (d) shall be binding for the time period
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specified. In the event the Executive engages in any activities
in violation of this section at any time during the Severance
Period described in the immediately preceding paragraphs above,
then the Severance Period referred to above shall be tolled and
shall not expire, and the Executive shall be prohibited from
engaging in the activities prohibited by this Section 14 for a
period of one year from the date this Agreement is enforced, in
whole or in part, by a court in which such enforcement action is
sought, provided such enforcement action was commenced within the
initial Severance Period.
(iii) The Executive acknowledges and agrees that her
covenants and obligations set forth in this Agreement shall
continue notwithstanding any prior breach of this Agreement or
any other agreement by the Company.
15. No Contact With or Solicitation of Clients. The Executive
acknowledges and agrees: (i) that the Company expends considerable time,
money and resources to market to current and prospective clients, to
maintain relationships with its clients, to develop and maintain business
relationships with referral sources, and to acquire, compile and develop
confidential and proprietary client and prospect lists and confidential
information regarding clients; (ii) that the Company has a legitimate
business interest in maintaining relationships and goodwill with its
clients, prospects and referral sources and not having those relationships
and goodwill unfairly interfered with; and (iii) that the relationship
between the Company and its past, present, and future clients, prospects
and referral sources, and all rights, title, interest, goodwill and
prospective business opportunities associated with such relationships, are
and shall remain the sole and exclusive property of the Company.
A. The Executive acknowledges and agrees that for a period of two
years after the first day of the Severance Period any reason, she
shall not, directly or indirectly (whether on her own behalf, working
with others, or on behalf of any other person, business or entity):
(i) communicate or attempt to communicate with any client, prospect or
referral sources of the Company with respect to any managed care or
HMO services intended to provide coverage to Medicare or Medicaid
recipients and their dependents through insurance or otherwise; and/or
(ii) conduct any transactions or business with any client, prospective
client or referral source of the Company with respect to any managed
care or HMO services intended to provide coverage to Medicare or
Medicaid recipients and their dependents through insurance or
otherwise.
B. The Executive acknowledges and agrees that any violation of
this section constitutes improper interference with the Company's
legitimate, actual and prospective business expectations and client,
prospect and referral source relationships, misappropriates the
Company's goodwill, and unfairly xxxxx the Company.
C. The Executive acknowledges and agrees that it is her
affirmative obligation to determine whether any person with whom she
(or any person or company/business by whom she is employed) have
contact is a client or prospect of the Company. In any proceeding to
enforce this Agreement, there shall be a legal presumption that the
performance of any managed care or HMO services intended to provide
coverage to Medicare or Medicaid recipients and their dependents
through
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insurance or otherwise for a client or prospect of the Company by him
(or by any other person or company/business by whom he is employed)
was undertaken and performed in violation of this Agreement.
16. Nondisparagement. Except when providing testimony in any legal
proceeding in accordance with this Agreement, the Executive will not
disparage either the Company or its products and services in a negative,
derogatory, or unflattering manner. Under no circumstances may the
Executive disclose to any member of the public, including the media, any
material, negative or detrimental information relating to the Company or
its products or services.
17. Non-Disclosure of Proprietary/Confidential Company Information.
The Executive acknowledges and agrees that during the course of her
employment with the Company she gained access to, used, and compiled
information that is the Company's "Proprietary/Confidential Information,"
as defined below.
A. For purposes of this Agreement, "Proprietary/Confidential
Information" means: (i) non-public information relating to or
regarding the Company's business, personnel, customers, operations or
affairs; (ii) non-public information which the Company labeled or
treated as confidential, proprietary, secret or sensitive business
information, or which Executive reasonably knew or should have known
is or should be treated as confidential and/or proprietary
information; (iii) information that is not generally known to the
public or others in the industry and gives the Company a competitive
advantage; (iv) information that is expensive and/or burdensome to
compile or is compiled through proprietary methods, whether compiled
by the Company or acquired as such; (v) all non-public customer and
prospective customer information; (vi) trade secrets of the Company;
(vii) non-public information pertaining to the Company's "Intellectual
Property;" and (viii) information that was otherwise
Proprietary/Confidential Information of the Company but which was
disclosed or disseminated in violation of this Agreement.
B. The Executive acknowledges and agrees that: (i) she shall hold
and maintain all Proprietary/Confidential Information in the strictest
of confidence and that she shall preserve and protect the
confidentiality, privacy and secrecy of all Proprietary/Confidential
Information; (ii) she shall not disclose, reveal or expose any
Proprietary/Confidential Information to any person, business or entity
(nor forward or disseminate such information to persons outside the
Company or to a personal e-mail account); (iii) she shall not use any
Proprietary/Confidential Information for any purpose except as may be
authorized by the Company in writing; and (iv) she shall take all
necessary precautions to keep Proprietary/Confidential Information
secret, private, concealed and protected from disclosure, and shall
notify the Company immediately of any breach in privacy or disclosure
of Proprietary/Confidential Information.
C. The Executive acknowledges and agrees that: (i) all documents,
records, memos, e-mails, voicemails, faxes, rolodexes, planners,
letters, reports, files, data, information, Proprietary/Confidential
Information, compilations, books, manuals, handbooks, training
materials, presentations, employee lists, client/customer lists,
prospect lists, reports received from, sent to or pertaining to the
Company (or a related
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Company) or containing Company information (together "Company
Records") irrespective of the form or medium in which such information
is stored (including hardcopies and electronic copies; text, audio,
image, and/or video files; and the originals and all copies thereof),
and (ii) all office equipment and supplies (including, but not limited
to, pagers, phones, fax machines, blackberries, PDAs, keys, badges,
credit cards, lists, computers, computer diskettes, CDs, computer
parts, software, disks, tapes, modems, telecommunication equipment,
office furniture, office supplies, security tokens, and the like)
directly or indirectly obtained by the Company for use by the
Executive or furnished to the Executive by the Company (together
"Company Equipment"), are and shall remain the property of the
Company. The Executive agrees to return all Company Equipment in her
possession or under her control immediately.
18. Remedies for Breach of Post-Agreement Obligations. The Executive
acknowledges and agrees that (a) any violation or breach of her
post-agreement obligations set forth above will result in irreparable
injury to the Company for which no adequate remedy at law may be available;
(b) she consents to the issuance of a temporary restraining order and
injunction prohibiting any conduct by her in violation of this Agreement
without the requirement of posting a bond, the same being waived by her.
A. A restraining order or injunctive relief shall not be the
Company's exclusive remedy for violation of these covenants or for
violation of any other terms and conditions contained in this
Agreement. In the event the Company takes action to enforce the
post-agreement obligations set forth herein, the Executive agrees to
reimburse the Company fees and expenses (including reasonable
attorney's fees) incurred in connection with such action.
B. In addition to the remedies set forth above, the Executive
shall return to the Company the full amount of the Severance Benefit
set forth in Section 6 of this Agreement if a court having
jurisdiction in the matter in a final adjudication from which there is
no further right of appeal determines that the Executive has violated
any of Sections 14-17 of this Agreement.
19. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained in this Agreement.
20. Complete Agreement. This Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter of this
Agreement in any way.
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21. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which
taken together constitute one and the same agreement.
22. Successors and Assigns. Except as otherwise provided in this
Agreement, this Agreement shall bind and inure to the benefit of and be
enforceable by the Employee and the Company, and their respective
successors and assigns; provided that rights and obligations of the
Employee under this Agreement shall not be assigned without the Company's
prior written consent.
23. Governing Law; Venue; Waiver of Jury Trial. All questions
concerning the construction, validity and interpretation of this Agreement
and the exhibits to this Agreement will be governed by and construed in
accordance with the domestic laws of the State of Michigan, without giving
effect to any choice of law or conflict of law provision or rule (whether
of the State of Michigan or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Michigan. Any lawsuit arising out of or in any way related to this
Agreement shall be brought only in either any state court located in Xxxxx
County, Michigan, having jurisdiction over the lawsuit or the United States
District Court for the Eastern District of Michigan. AS A SPECIFICALLY
BARGAINED INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT
(EACH PARTY HAVING HAD OPPORTUNITY TO CONSULT COUNSEL), EACH PARTY
EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING RELATING TO
OR ARISING IN ANY WAY FROM THIS AGREEMENT.
24. Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
the Executive.
25. No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties to express their mutual
intent and no rule of strict construction shall be applied against either
party.
26. Headings. The paragraph and section headings in this Agreement are
inserted merely for the convenience of reference only and shall not be used
to construe, affect or modify the terms of any paragraph or provision of
this Agreement.
UNITED AMERICAN HEALTHCARE
CORPORATION
/s/ Xxxxxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------------------- ----------------------------------
Xxxxxxxxx Xxxxxx Xxxxxxx X. Xxxxxx
Date: October 31, 2008 Its: President and Chief Executive
Officer
Date: October 31, 2008
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EXHIBIT A: RELEASE OF CLAIMS
For and in consideration of the above, the Executive releases the Company
and all present and former directors, officers, shareholders, agents,
representatives, employees, successors and assigns of the Company (the "Released
Parties"), from any liability relating to all Claims and Rights as defined in
this Exhibit A of the Agreement. The Executive will not pursue or allege any
Claims or Rights against the Released Parties in violation of this Agreement.
The Executive is surrendering and releasing any and all rights the Executive may
have to xxx the Released Parties related to, in any way, his employment with the
Company or the termination of such employment, to the extent permitted by law.
The Executive's release of all Claims and Rights is an essential and material
term of this Agreement and without such release the Company would not have
agreed to the terms of this Agreement. For purposes of this Agreement, the term
"Claims and Rights" means all manner of action and causes of action, charges,
claims, complaints, demands, liabilities, losses, damages, costs or expenses
(including related attorneys' fees) of any kind whatsoever, known or unknown,
suspected or unsuspected, that the Executive may now have or has ever had
against any of the Released Parties by reason of any act, omission, transaction,
or event occurring up to and including the Effective Date, including any manner
of action or causes of action, charges, claims, complaints, demands,
liabilities, losses, damages, costs or expenses relating to the Employee's
employment with the Company or the termination thereof. To the extent permitted
by law, Claims and Rights include, without limitation, any wrongful discharge
claim, any claim relating to any contract(s) of employment, whether express or
implied, any claim for or relating to compensation, bonus, commissions, any
retirement or 401(k) plan administered by the Company or the management,
thereof, any claim for defamation, invasion or privacy, misrepresentation,
fraud, infliction of emotional distress, any claim of breach of covenant of good
faith and fair dealing, or any other claim relating in any way to the Employee's
employment relationship with the Company or its termination. Claims and Rights
also include, without limitation, any claims based on Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the
Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era
Veterans Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment
and Retraining Notification Act, Executive Order 11246, the Employee Retirement
Income Security Act of 1974 (all of these may have been amended), the Age
Discrimination in Employment Act, the Older Workers Benefit Protection Act,
Michigan's Xxxxxxx-Xxxxxx Civil Rights Act, Michigan's Persons With Disabilities
Civil Rights Act, Michigan's Whistleblowers' Protection Act, and any other
applicable federal, state, or local laws, ordinances and regulations, including
those relating to discrimination to the extent permitted by law. The foregoing
shall not discharge the Company's obligations under this Agreement or with
respect to Executive's vested benefits in any of the Company's retirement or
pension plans, if any.
[The next page is a signature page]
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UNITED AMERICAN HEALTHCARE
CORPORATION
_____________________________________ By: ____________________________________
Xxxxxxxxx Xxxxxx
Date: _______________________________ Its: ___________________________________
Date: __________________________________
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