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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 3, 1997
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CHOICECARE CORPORATION
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(Exact name of registrant as specified in its charter)
OHIO 0-22295 31-1446609
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
655 EDEN PARK DRIVE, SUITE 400
CINCINNATI, OHIO 45202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (513) 784-5200
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
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As of June 3, 1997, ChoiceCare Corporation ("ChoiceCare") entered into a
definitive Agreement and Plan of Merger ("Merger Agreement") with Louisville,
Kentucky-based Humana Inc. ("Humana"), under which Humana will pay total
consideration of $250 million in cash for ChoiceCare's outstanding common
shares and vested stock options, or $16.38 per outstanding share. Closing of
the transaction is subject to the approval of ChoiceCare's shareholders and the
satisfaction of certain conditions, including regulatory approval. In addition,
the transaction is subject to termination, under certain conditions, including
if the transaction has not closed on or before January 31, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits
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Exhibit No. S-K Item 601 Reference Description
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1 (99) Press Release dated June 5, 1997.
2 (10) Amended and Restated Employment
Agreement between ChoiceCare and
Thomas D. Anthony, Esq.,
effective January 1, 1997.
3 (10) Amended and Restated Employment
Agreement between ChoiceCare and
Michael J. Barber, M.D.,
effective January 1, 1997.
4 (10) Amended and Restated Employment
Agreement between ChoiceCare and
Daniel A. Gregorie, M.D.,
effective January 1, 1997.
5 (10) Amended and Restated Employment
Agreement between ChoiceCare and
Jane E. Rollinson, effective
January 1, 1997.
6 (10) Amended and Restated Supplemental
Executive Retirement Agreement
between ChoiceCare and Daniel A.
Gregorie, M.D., effective January
1, 1997.
7 (10) Seventh Amendment to Lease
Agreement between ChoiceCare and
CPX-Commercial Properties, Inc.,
effective June 4, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHOICECARE CORPORATION
Date: June 16, 1997 By: /s/ JUAN M. FRAIZ
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Juan M. Fraiz
Vice President and Chief Financial
Officer (Principal Financial Officer)
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EXHIBIT 1
FOR IMMEDIATE RELEASE
Contact: ChoiceCare Media Relations Jose Marques (513) 684-7432
Humana Public Affairs Greg Donaldson (502) 580-3683
CHOICECARE TO JOIN HUMANA FAMILY OF HEALTH PLANS
Cincinnati, June 5--ChoiceCare, Cincinnati's largest health maintenance
organization (HMO), announced today that it will become a member of the Humana
family of health plans.
Daniel A. Gregorie, M.D., CEO and chairman of the board, said the
decision was made to strengthen ChoiceCare's ability to improve health care
quality and choice for the communities it serves.
"This new association will give us the additional capabilities and
economies of scale that will enable ChoiceCare to bring more products and
services to more people in the Greater Cincinnati and Greater Dayton areas,"
Gregorie said. "At the same time, we will be able to maintain the high levels of
quality and service we have established for our members."
Gregorie said the primary reason for the decision is to position
ChoiceCare for long-term success. "We have successfully penetrated the large
employer segments of the market. In order to grow, we must be able to better
serve customers in other market segments. We will now have the resources to
offer more products and services more efficiently."
Gregory H. Wolf, Humana's president and chief operating officer, added,
"ChoiceCare is a very successful company with an extraordinary franchise in the
Cincinnati market. As such, it fits perfectly into our overall corporate
strategy of targeting key local markets where we can have the critical mass,
purchasing power and brand-name
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ChoiceCare o Humana
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recognition that are crucial to leadership. By combining with ChoiceCare, the
plan of choice for members, providers and employers, we will move to a
leadership position in Cincinnati and--just as important--establish a very
significant platform for growth across Ohio, where we see significant
potential."
Humana is paying a total of $250 million in cash for ChoiceCare's
outstanding shares and vested stock options. This equates to $16.38 per share
outstanding. ChoiceCare's major shareholder, The ChoiceCare Foundation, which
owns nearly 91 percent of the company's outstanding shares, will receive
proceeds of approximately $220 million in the transaction. The foundation is a
not-for-profit social welfare organization that serves as a catalyst in the
development and support of health and medical care delivery improvement in
Greater Cincinnati and Dayton. The remaining $30 million will be paid to
individual shareholders, including physicians, other health care professionals
and employees.
The transaction will be structured as a merger with ChoiceCare becoming
a wholly-owned subsidiary of Humana. The transaction is expected to close in the
fall of 1997 after approvals are received from shareholders and certain
regulatory authorities. The approval of ChoiceCare shareholders will be sought
at a special meeting of shareholders; the foundation has agreed to vote its
shares in favor of the transaction. The transaction is subject to termination,
under certain conditions, including if it has not occurred on or before January
31, 1998.
ChoiceCare is the largest HMO in Greater Cincinnati and the third
largest in the state of Ohio. It offers managed care products, including a
point-of-service option and a Medicare Risk product, to more than 245,000
members. ChoiceCare also participates in
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ChoiceCare o Humana
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Ohio's Health Partnership Program Workers' Compensation product, offering
medical management services to approximately 43,000 workers.
In addition to being the first HMO in Cincinnati to receive three-year
full accreditation from the National Committee for Quality Assurance, ChoiceCare
has been recognized nationally for the quality of care and service it provides
to its members. In 1996, ChoiceCare was named a 1996 Quality Leader by the
National Research Corporation, and in 1996 and 1997, ChoiceCare was named to
Sachs HMO Honor Roll. The Honor Roll recognizes an elite group of health plans
rated superior in their markets by their members.
Humana, headquartered in Louisville, Ky., is one of the nation's
largest publicly traded managed health care companies with more than 4.7 million
health plan members primarily located in 17 states. Humana already serves 65,000
members in the Greater Cincinnati area.
Humana offers coordinated health care through a variety of delivery
systems--health maintenance organizations, preferred provider organizations,
point-of-service plans, administrative services products and medical savings
accounts--to employer groups, government-sponsored plans and individuals. More
information about Humana is available at http://www.humana.com.
Certain information contained in this release is "forward-looking" as
defined in the Private Securities Litigation Reform Act of 1995. Investors are
specifically referred to the CAUTIONARY STATEMENT filed by ChoiceCare on
November 12, 1996, as part of its Form 10-Q for the period ended September 30,
1996, for a discussion of factors which could affect ChoiceCare's operations and
"forward-looking" statements contained herein.
###
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EXHIBIT 2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
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EXECUTIVE VICE PRESIDENT
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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 THOMAS D. ANTHONY, ESQ. ("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 September 22,
1995 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 an executive vice president of both the
ChoiceCare Parent and the ChoiceCare Operating Company. In such position,
Employee shall be responsible for the management and supervision of Employer's
operations within his area of responsibility and perform such other duties and
responsibilities as shall be requested by the Chief Executive Officers or the
boards of directors of Employer, including serving as a senior executive and/or
board member 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 Chief Executive Officer of the
ChoiceCare Parent and the Chairman of the board of directors of the ChoiceCare
Parent shall determine, in their 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 three additional years, unless Employer gives Employee, or
unless Employee gives Employer, written notice by July 1 of the last contract
year of the initial term of this Agreement (or by July 1 of the last 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.
5. COMPENSATION AND BENEFITS: During the term of this Agreement:
5.1 Employee shall receive an initial base salary at the annual rate
of $214,500, 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 reviewed at other times if Employer substantially
changes the responsibilities of Employee, and shall be adjusted on a basis
consistent with the executive compensation philosophy of Employer. 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
7.3 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
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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 Employer's Executive Long-Term
Incentive Plan (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 7.3 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
amount of any award granted under the Stock
Incentive Plan shall be determined by
Employer's boards of directors in a manner
consistent with the terms and practices of the
Stock Incentive Plan.
5.3 Employee shall be entitled during the term of this
Agreement to:
(a) Paid vacation as established under Employer's
paid time off policy. 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 7.3 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) Tax-qualified retirement plan benefits,
disability insurance benefits, group term life
insurance benefits, medical benefits, dental
benefits and such other similar employment
privileges,
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perquisites and benefits 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 7.3 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, disability insurance benefits,
group term life insurance benefits, medical
benefits, dental benefits and such other similar
employment privileges, perquisites and benefits
provided Employee under this Agreement
immediately prior to the change in control.
(c) 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 7.3 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 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.
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:
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(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 6.7 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) any benefits
due under any group term life insurance benefits in effect for him at the time
of his death under subsection 5.3(b) above and (v) 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 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)
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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) 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 and (v) 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. 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 Employer shall have the right to terminate Employee's
employment hereunder without Cause at any time. In the event Employee's
employment with Employer terminates for any reason other than Cause, Employee's
death or permanent disability or his voluntary resignation, then, except as may
otherwise be provided under Sections 7 and 8 below or any other provision of
this Agreement, Employee shall be entitled to (i) his unpaid salary which has
already been earned prior to his termination of employment, (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 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) and (iv) 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. In addition, subject to the immediately following sentence and
provided 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, Employer: (i) shall 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; and (ii) shall make in this situation severance payments to Employee,
payable on a bi-weekly basis, equal to Employee's base rate of salary in effect
at the time of his termination of employment. The severance payments provided
under the immediately preceding sentence shall be made with respect to the
period following Employee's termination of employment until the end of the
twelve month period beginning on the date of Employee's termination of
employment with Employer.
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6.6 At any time that Employee is receiving compensation or
payments pursuant to subsection 6.5 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.
6.7 If Employee's employment with Employer terminates by
reason of his voluntary resignation after at least one year has expired
following a change in control (as defined in subsection 7.3 below) and prior to
the end of the contract term which is in effect one year after the change in
control, then, subject to the immediately following sentence and provided
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, Employer, in addition to any payments otherwise
payable under subsection 6.2 above, shall make in this situation severance
payments to Employee, payable on a bi-weekly basis, equal to Employee's base
rate of salary in effect at the time of his termination of employment. The
severance payments provided under the immediately preceding sentence shall be
made with respect to the period following Employee's termination of employment
until the end of the twelve month period beginning on the date of Employee's
termination of employment with Employer.
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 two and one-half (2.5) 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 amount of any retention incentive payment that Employee has previously
received (or is entitled to receive within 60 days of his termination of
employment) under subsection 8.1 below or subsection 8.2 below but, except as is
otherwise set forth in subsection 7.2 below, shall be in addition to any other
payments or benefits provided under the other provisions of
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this Agreement. Further, and notwithstanding the provisions of subsection 7.2
below, Employee shall also, if he is entitled to the payment described in the
foregoing sentences of this subsection 7.1, be paid 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, plus 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).
7.2 If a change in control payment described in subsection 7.1
above is made, then, notwithstanding any other provision of this Agreement to
the contrary, Employee shall not be entitled to any payments under Section 6
above that relate to any period which ends after his termination of employment
and that are based upon or calculated with respect to Employee's base salary,
then-current or otherwise, or the Annual Incentive Plan or Long-Term Plan.
7.3 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 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 6.7 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
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<PAGE> 10
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); (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 6.7 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 7.3 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 one and one-quarter
(1.25) 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) $375,000.
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.
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<PAGE> 11
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 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 still results in an
amount being payable under subsection 6.7 above). For
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<PAGE> 12
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 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.
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.
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<PAGE> 13
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 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
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<PAGE> 14
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 Chief Executive Officer of the ChoiceCare Operating
Company, the Chief Executive Officer of the ChoiceCare Parent or the Chief
Executive Officer 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 an employment status which, if held in comparable health care
organizations in the U.S., would provide a level of salary and benefits which is
at least 90% of the level of total compensation and benefits provided Employee
under this Agreement (as determined under reasonable employment surveys
typically used by Employer in determining salary and benefit levels for its
executive group); 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
subsection 7.1 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.
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
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<PAGE> 15
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 4th day of June, 1997.
EMPLOYER:
ChoiceCare Corporation
By: /s/ Daniel A. Gregorie
-----------------------
ChoiceCare Health Plans, Inc.
By: /s/ Daniel A. Gregorie
-----------------------
EMPLOYEE:
/s/ Thomas D. Anthony
---------------------
Thomas D. Anthony, Esq.
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<PAGE> 1
EXHIBIT 3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
EXECUTIVE VICE PRESIDENT
------------------------
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 MICHAEL J. BARBER, 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 September 22,
1995 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 an executive vice president of both the
ChoiceCare Parent and the ChoiceCare Operating Company. In such position,
Employee shall be responsible for the management and supervision of Employer's
operations within his area of responsibility and perform such other duties and
responsibilities as shall be requested by the Chief Executive Officers or the
boards of directors of Employer, including serving as a senior executive and/or
board member 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.
<PAGE> 2
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 Chief Executive Officer of the
ChoiceCare Parent and the Chairman of the board of directors of the ChoiceCare
Parent shall determine, in their 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 three additional years, unless Employer gives Employee, or
unless Employee gives Employer, written notice by July 1 of the last contract
year of the initial term of this Agreement (or by July 1 of the last 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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<PAGE> 3
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.
5. COMPENSATION AND BENEFITS: During the term of this Agreement:
5.1 Employee shall receive an initial base salary at the annual rate
of $234,000, 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 reviewed at other times if Employer substantially
changes the responsibilities of Employee, and shall be adjusted on a basis
consistent with the executive compensation philosophy of Employer. 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
7.3 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
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<PAGE> 4
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 Employer's Executive Long-Term Incentive
Plan (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 7.3 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
amount of any award granted under the Stock Incentive
Plan shall be determined by Employer's boards of
directors in a manner consistent with the terms and
practices of the Stock Incentive Plan.
5.3 Employee shall be entitled during the term of this Agreement to:
(a) Paid vacation as established under Employer's paid time
off policy. 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 7.3 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) Tax-qualified retirement plan benefits, disability
insurance benefits, group term life insurance benefits,
medical benefits, dental benefits and such other similar
employment privileges,
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<PAGE> 5
perquisites and benefits 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 7.3 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, disability
insurance benefits, group term life insurance benefits,
medical benefits, dental benefits and such other similar
employment privileges, perquisites and benefits provided
Employee under this Agreement immediately prior to the
change in control.
(c) 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 7.3
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 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.
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:
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<PAGE> 6
(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 6.7 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) any benefits
due under any group term life insurance benefits in effect for him at the time
of his death under subsection 5.3(b) above and (v) 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 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)
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<PAGE> 7
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) 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 and (v) 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. 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 Employer shall have the right to terminate Employee's employment
hereunder without Cause at any time. In the event Employee's employment with
Employer terminates for any reason other than Cause, Employee's death or
permanent disability or his voluntary resignation, then, except as may otherwise
be provided under Sections 7 and 8 below or any other provision of this
Agreement, Employee shall be entitled to (i) his unpaid salary which has already
been earned prior to his termination of employment, (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 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) and (iv) 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. In addition, subject to the immediately following sentence and
provided 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, Employer: (i) shall 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; and (ii) shall make in this situation severance payments to Employee,
payable on a bi-weekly basis, equal to Employee's base rate of salary in effect
at the time of his termination of employment. The severance payments provided
under the immediately preceding sentence shall be made with respect to the
period following Employee's termination of employment until the end of the
twelve month period beginning on the date of Employee's termination of
employment with Employer.
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<PAGE> 8
6.6 At any time that Employee is receiving compensation or payments
pursuant to subsection 6.5 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.
6.7 If Employee's employment with Employer terminates by reason of
his voluntary resignation after at least one year has expired following a change
in control (as defined in subsection 7.3 below) and prior to the end of the
contract term which is in effect one year after the change in control, then,
subject to the immediately following sentence and provided 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,
Employer, in addition to any payments otherwise payable under subsection 6.2
above, shall make in this situation severance payments to Employee, payable on a
bi-weekly basis, equal to Employee's base rate of salary in effect at the time
of his termination of employment. The severance payments provided under the
immediately preceding sentence shall be made with respect to the period
following Employee's termination of employment until the end of the twelve month
period beginning on the date of Employee's termination of employment with
Employer.
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 two and one-half (2.5) 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 amount of any retention
incentive payment that Employee has previously received (or is entitled to
receive within 60 days of his termination of employment) under subsection 8.1
below or subsection 8.2 below but, except as is otherwise set forth in
subsection 7.2 below, shall be in addition to any other payments or benefits
provided under the other provisions of
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<PAGE> 9
this Agreement. Further, and notwithstanding the provisions of subsection 7.2
below, Employee shall also, if he is entitled to the payment described in the
foregoing sentences of this subsection 7.1, be paid 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, plus 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).
7.2 If a change in control payment described in subsection 7.1 above
is made, then, notwithstanding any other provision of this Agreement to the
contrary, Employee shall not be entitled to any payments under Section 6 above
that relate to any period which ends after his termination of employment and
that are based upon or calculated with respect to Employee's base salary,
then-current or otherwise, or the Annual Incentive Plan or Long-Term Plan.
7.3 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 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 6.7 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
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<PAGE> 10
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); (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 6.7 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 7.3 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 one and one-quarter
(1.25) 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) $375,000.
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.
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<PAGE> 11
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 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 still results in an
amount being payable under subsection 6.7 above). For
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<PAGE> 12
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 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.
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.
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<PAGE> 13
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 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
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<PAGE> 14
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 Chief Executive Officer of the ChoiceCare Operating
Company, the Chief Executive Officer of the ChoiceCare Parent or the Chief
Executive Officer 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 an employment status which, if held in comparable health care
organizations in the U.S., would provide a level of salary and benefits which is
at least 90% of the level of total compensation and benefits provided Employee
under this Agreement (as determined under reasonable employment surveys
typically used by Employer in determining salary and benefit levels for its
executive group); 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
subsection 7.1 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.
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
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<PAGE> 15
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 4th day of June, 1997.
EMPLOYER:
ChoiceCare Corporation
By: /s/ Daniel A. Gregorie
----------------------
ChoiceCare Health Plans, Inc.
By: /s/ Daniel A. Gregorie
----------------------
EMPLOYEE:
/s/ Michael Barber M.D.
--------------------------
Michael J. Barber, M.D.
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<PAGE> 1
EXHIBIT 4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
CHIEF EXECUTIVE OFFICER
-----------------------
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 DANIEL A. GREGORIE, 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.
<PAGE> 2
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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<PAGE> 3
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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<PAGE> 4
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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<PAGE> 5
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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<PAGE> 6
(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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<PAGE> 7
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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<PAGE> 8
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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<PAGE> 9
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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<PAGE> 10
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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<PAGE> 11
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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<PAGE> 12
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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<PAGE> 13
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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<PAGE> 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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<PAGE> 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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<PAGE> 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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<PAGE> 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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<PAGE> 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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<PAGE> 19
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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<PAGE> 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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<PAGE> 21
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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<PAGE> 22
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/ Donald E. Hoffman
---------------------
ChoiceCare Health Plans, Inc.
By: /s/ Thomas D. Anthony
-------------------------
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<PAGE> 23
EMPLOYEE:
/s/ Daniel A. Gregorie, M.D.
----------------------------
Daniel A. Gregorie, M.D.
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<PAGE> 1
EXHIBIT 5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
--------------------
CHIEF OPERATING OFFICER
-----------------------
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 JANE E. ROLLINSON ("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 June 27, 1995
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 Chief Operating Officer of the
ChoiceCare Parent and as the President of the ChoiceCare Operating Company. In
such positions, Employee shall be responsible for the management and supervision
of Employer's operations within her area of responsibility and perform such
other duties and responsibilities as shall be requested by the Chief Executive
Officers or the boards of directors of Employer, including serving as a senior
executive and/or board member 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.
<PAGE> 2
3.2 Employee shall devote her full time and best efforts to her
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 her, provided that, if the honoraria to be paid for any one
appearance or presentation exceeds $2,000, the Chief Executive Officer of the
ChoiceCare Parent and the Chairman of the board of directors of the ChoiceCare
Parent shall determine, in their 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 three additional years, unless Employer gives Employee, or
unless Employee gives Employer, written notice by July 1 of the last contract
year of the initial term of this Agreement (or by July 1 of the last 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 her
employment with Employer for purposes of the other provisions of this Agreement.
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<PAGE> 3
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.
5. COMPENSATION AND BENEFITS: During the term of this Agreement:
5.1 Employee shall receive an initial base salary at the annual rate
of $280,000, 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 reviewed at other times if Employer substantially
changes the responsibilities of Employee, and shall be adjusted on a basis
consistent with the executive compensation philosophy of Employer. 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 her 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 her
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
7.3 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
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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 Employer's Executive Long-Term Incentive
Plan (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 7.3 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
amount of any award granted under the Stock Incentive
Plan shall be determined by Employer's boards of
directors in a manner consistent with the terms and
practices of the Stock Incentive Plan.
5.3 Employee shall be entitled during the term of this Agreement to:
(a) Paid vacation as established under Employer's paid time
off policy. 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 7.3 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) Tax-qualified retirement plan benefits, disability
insurance benefits, group term life insurance benefits,
medical benefits, dental benefits and such other similar
employment privileges,
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perquisites and benefits 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 7.3 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, disability
insurance benefits, group term life insurance benefits,
medical benefits, dental benefits and such other similar
employment privileges, perquisites and benefits provided
Employee under this Agreement immediately prior to the
change in control.
(c) 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 7.3
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 her 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 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.
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:
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(a) Employee's fraud, dishonesty or willful misconduct in
the performance of her 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 her
voluntary resignation as an employee of Employer, then, except as may otherwise
be provided under subsection 6.7 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 her
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 her
family or her beneficiaries) shall be entitled to (i) her unpaid salary which
has already been earned, (ii) an amount equal to the product obtained by
multiplying her targeted incentives with respect to the contract year in which
her 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 she 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) any benefits
due under any group term life insurance benefits in effect for her at the time
of her death under subsection 5.3(b) above and (v) any other unpaid benefits
which are provided under subsection 5.3 above, have already become vested (or
vest by reason of her death) and are payable upon such termination of employment
under the terms and practices of the plans or arrangements under which such
benefits are provided.
6.4 If Employee's employment hereunder terminates by reason of her
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) her unpaid salary which has already been
earned, (ii) an amount equal to the product obtained by multiplying her targeted
incentives with respect to the contract year in which her 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 she was an employee of Employer
in such contract year and a denominator equal to the number of days in such
contract year, (iii)
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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) any benefits due her under any
disability insurance applicable to her and in effect at the time she becomes
permanently disabled under subsection 5.3(b) above and (v) any other unpaid
benefits which are provided under subsection 5.3 above, have already become
vested (or vest by reason of her 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. For all purposes of this
Agreement, Employee shall be deemed to be "permanently disabled" and to have
incurred a "permanent disability" if she, by reason of her physical or mental
injury, illness or condition, is determined to be disabled for a period which is
expected will exist until her death under the disability insurance which is then
in effect for her under subsection 5.3(b) above.
6.5 Employer shall have the right to terminate Employee's employment
hereunder without Cause at any time. In the event Employee's employment with
Employer terminates for any reason other than Cause, Employee's death or
permanent disability or her voluntary resignation, then, except as may otherwise
be provided under Sections 7 and 8 below or any other provision of this
Agreement, Employee shall be entitled to (i) her unpaid salary which has already
been earned prior to her termination of employment, (ii) an amount equal to the
product obtained by multiplying her targeted incentives with respect to the
contract year in which her 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 she 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 prior to her 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) and (iv) 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. In addition, subject to the immediately following sentence and
provided Employee agrees not to file any administrative charge or lawsuit
relating to her 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, Employer: (i) shall 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; and (ii) shall make in this situation severance payments to Employee,
payable on a bi-weekly basis, equal to Employee's base rate of salary in effect
at the time of her termination of employment. The severance payments provided
under the immediately preceding sentence shall be made with respect to the
period following Employee's termination of employment until the end of the
twelve month period beginning on the date of Employee's termination of
employment with Employer.
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<PAGE> 8
6.6 At any time that Employee is receiving compensation or payments
pursuant to subsection 6.5 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.
6.7 If Employee's employment with Employer terminates by reason of
her voluntary resignation after at least one year has expired following a change
in control (as defined in subsection 7.3 below) and prior to the end of the
contract term which is in effect one year after the change in control, then,
subject to the immediately following sentence and provided Employee agrees not
to file any administrative charge or lawsuit relating to her 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,
Employer, in addition to any payments otherwise payable under subsection 6.2
above, shall make in this situation severance payments to Employee, payable on a
bi-weekly basis, equal to Employee's base rate of salary in effect at the time
of her termination of employment. The severance payments provided under the
immediately preceding sentence shall be made with respect to the period
following Employee's termination of employment until the end of the twelve month
period beginning on the date of Employee's termination of employment with
Employer.
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 her
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 two and one-half (2.5) 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 her 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 her 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 amount of any retention
incentive payment that Employee has previously received (or is entitled to
receive within 60 days of her termination of employment) under subsection 8.1
below or subsection 8.2 below but, except as is otherwise set forth in
subsection 7.2 below, shall be in addition to any other payments or benefits
provided under the other provisions of
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<PAGE> 9
this Agreement. Further, and notwithstanding the provisions of subsection 7.2
below, Employee shall also, if she is entitled to the payment described in the
foregoing sentences of this subsection 7.1, be paid an amount equal to the
product obtained by multiplying her targeted incentives with respect to the
contract year in which her 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 she was an employee of Employer in such contract year and a
denominator equal to the number of days in such contract year, plus 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).
7.2 If a change in control payment described in subsection 7.1 above
is made, then, notwithstanding any other provision of this Agreement to the
contrary, Employee shall not be entitled to any payments under Section 6 above
that relate to any period which ends after her termination of employment and
that are based upon or calculated with respect to Employee's base salary,
then-current or otherwise, or the Annual Incentive Plan or Long-Term Plan.
7.3 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 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 6.7 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
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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); (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 6.7 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 7.3 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 one and three-quarters
(1.75) times her 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) $500,000.
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 her 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.
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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 her 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 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 her employment
with Employer other than by a voluntary resignation which still results in an
amount being payable under subsection 6.7 above). For
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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 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.
9.4 Employee has carefully considered the nature and extent of the
restrictions upon her 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.
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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 her home address 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 her or it
under the circumstances.
14. MISCELLANEOUS.
14.1 For all purposes of this Agreement, Employee's resignation from
her employment with Employer shall be deemed not to constitute a voluntary
resignation, and
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instead to be treated as a termination of her 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 Chief Executive Officer of the ChoiceCare Operating
Company, the Chief Executive Officer of the ChoiceCare Parent or the Chief
Executive Officer 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 an employment status which, if held in comparable health care
organizations in the U.S., would provide a level of salary and benefits which is
at least 90% of the level of total compensation and benefits provided Employee
under this Agreement (as determined under reasonable employment surveys
typically used by Employer in determining salary and benefit levels for its
executive group); or (ii) such resignation occurs after Employer requires
Employee to change her principal work location by at least 50 miles and Employee
refuses to make such move. In the event Employee's resignation from her
employment with Employer is treated as a termination of her 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
subsection 7.1 above or any retention incentive payment under Section 8 above,
Employee shall be deemed to have had her 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.
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.
- 14 -
<PAGE> 15
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 4th day of June, 1997.
EMPLOYER:
ChoiceCare Corporation
By: /s/ Daniel A. Gregorie
----------------------
ChoiceCare Health Plans, Inc.
By: /s/ Daniel A. Gregorie
----------------------
EMPLOYEE:
/s/ Jane E. Rollinson
---------------------
Jane E. Rollinson
- 15 -
<PAGE> 1
EXHIBIT 6
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
(As amended and restated effective January 1, 1997)
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 DANIEL A. GREGORIE, M.D. (the "Employee") hereby agree as
follows, effective as of the 1st day of January, 1997
SECTION 1
---------
PURPOSE OF AGREEMENT
--------------------
1.1 The Midwest Foundation Independent Physicians Association and
Daniel A. Gregorie, M.D. entered into a Supplemental Executive Retirement
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 such prior Supplemental Executive Retirement
Agreement between the Employer and the Employee in its entirety, and supersedes
any such prior Supplemental Executive Retirement Agreement between the Employer
and the Employee, effective as of January 1, 1997.
1.2 The purpose of this Agreement is to provide deferred compensation
for Daniel A. Gregorie, M.D., the President and Chief Executive Officer of the
ChoiceCare Parent and the ChoiceCare Operating Company. The Agreement is
intended to be an unfunded deferred compensation plan within the meaning of
sections 201, 301, and 401 of the Employee Retirement Income Security Act of
1974, as amended, and shall be construed as such. This Agreement is also
intended to constitute the Supplemental Executive Retirement Plan described in
the Employment Agreement between Daniel A. Gregorie, M.D. and the ChoiceCare
Parent and the ChoiceCare Operating Company
SECTION 2
---------
GENERAL DEFINITIONS
-------------------
GENERAL DEFINITIONS. For purposes of the Agreement, the following terms
shall have the meanings hereinafter set forth unless the context otherwise
requires. Terms not defined herein but defined in the Employment Agreement shall
have the meanings given such terms in the Employment Agreement.
2.1 "Base Salary" means the Employee's base salary payable to him by
the Employer pursuant to subsection 5.1 of the Employment Agreement, prior to
any reduction of such base
<PAGE> 2
salary pursuant to Sections 125, 402(a)(8), or 403(b) of the Code, and excluding
any additional amounts computed with reference to such base salary and payable
under Sections 7 or 8 of the Employment Agreement following a change in control
or a strategic investor purchase (as those terms are defined in the Employment
Agreement).
2.2 "Beneficiary" means the person or entity last designated by the
Employee, on forms furnished and in the manner prescribed by the Committee and
delivered to the Committee before the Employee's death, to receive any benefit
payable under the Agreement after the Employee's death. If the Employee fails to
designate a beneficiary or if, for any reason, such designation is not
effective, his "Beneficiary" shall be his surviving spouse or, if none, his
estate.
2.3 "Code" means the Internal Revenue Code of 1986 as such Code now
exists or is hereafter amended.
2.4 "Committee" means the Human Resources and Compensation Committee of
the Board of Directors of the ChoiceCare Parent.
2.5 "Employee" means Daniel A. Gregorie, M.D.
2.6 "Employer" means, collectively, ChoiceCare Corporation (the
"ChoiceCare Parent") and ChoiceCare Health Plans, Inc. (the "ChoiceCare
Operating Company").
2.7 "Employment Agreement" means the employment agreement between
Daniel A. Gregorie, M.D. and the Employer, as amended and restated effective
January 1, 1997 and as subsequently amended from time to time.
2.8 "Qualified Plans" means all defined contribution retirement plans
maintained by the Employer that are intended to be qualified under Section
401(a) of the Code.
2.9 "Year" or "year" means the calendar year.
SECTION 3
---------
CREDITS
-------
3.1 CREDITS DURING EMPLOYMENT. For the year 1994, and for each
subsequent year through and including the year 1999 in which the Employee
remains an employee of the Employer, the Employer shall credit to the book
Account established under Section , as of the last day of such year, an amount
equal to 19% of the total of: (i) the Employee's actual Base Salary paid to him
by the Employer for such year, and (ii) the Employee's actual award for such
year under the Employer's Executive Annual Incentive Plan (as defined in the
Employment Agreement and excluding any additional amounts computed with
reference to such
- 2 -
<PAGE> 3
Executive Annual Incentive Plan and payable under Sections 7 or 8 of the
Employment Agreement following a change in control or a strategic investor
purchase as those terms are defined in the Employment Agreement). For each year
subsequent to the year 1999 in which the Employee remains an employee of the
Employer, the Employer shall credit to the book Account established under
Section 4.1, as of the last day of such year, an amount equal to 16% of the
total of: (i) the Employee's actual Base Salary paid to him by the Employer for
such year, and (ii) the Employee's actual award for such year under the
Employer's Executive Annual Incentive Plan (excluding any additional amounts
payable under Sections 7 or 8 of the Employment Agreement following a change in
control or a strategic investor purchase as those terms are defined in the
Employment Agreement).
3.2 ADDITIONAL CREDIT. In addition to the amount determined under
Section 3.1, a credit shall be made to the Account established under Section
4.1, as of December 31, 1994, equal to $296,000. The Employee and the Employer
agree that such amount represents the additional balance in the Account that
would have resulted as of December 31, 1994 if this Agreement had been in effect
during the years 1989 through 1993.
3.3 CREDIT FOR YEAR OF TERMINATION. If the Employee's employment with
the Employer terminates for any reason except Cause, the credit for the year of
termination shall be made pursuant to Section 3.1, based solely upon the
Employee's actual Base Salary paid to him by the Employer for such year and the
Employee's actual award for such year under the Employer's Executive Annual
Incentive Plan (as defined in the Employment Agreement), but excluding any lump
sum severance payment which is required under subsections 6.5(b), 6.8, or 6.9 of
the Employment Agreement, any payment following a change in control under
Section 7 of the Employment Agreement, and any retention incentive payment under
Section 8 of the Employment Agreement (regardless of whether based in whole or
in part on Base Salary or an award under the Executive Annual Incentive Plan).
Notwithstanding Section 3.1, if the Employee's employment with the Employer is
terminated for Cause, no credit shall be made to the Employee's Account for the
year in which his employment ends.
3.4 MINIMUM CREDIT. If the total of all credits to be made pursuant to
Sections 3.1, 3.2, and 3.3 to the Account established under Section 4.1,
determined as of the date of the Employee's termination of employment with the
Employer for any reason other than Cause (the "Total Credits"), is less than the
Minimum Amount, an additional credit shall be made to such Account pursuant to
this Section 3.4. Such additional credit shall equal the Minimum Amount, less
the Total Credits, and shall be made as of the date of the termination of the
Employee's employment with the Employer.
(a) For purposes of this Agreement, the "Minimum Amount" shall
equal the total of: (i) the Cumulative Amount, determined from the following
schedule for the year immediately prior to the year in which the termination
occurs, plus (ii) the Annual Increment, determined from the following schedule
for the year in which the termination occurs, multiplied by a fraction, the
numerator of which is the number of months during such year in which the
Employee was actively employed by the Employer, and the denominator of which is
twelve.
- 3 -
<PAGE> 4
<TABLE>
<CAPTION>
===============================================================================
Year of Termination Annual Increment Cumulative Amount
- -------------------------------------------------------------------------------
<S> <C> <C>
1994 not applicable 390,353
- -------------------------------------------------------------------------------
1995 87,780 478,133
- -------------------------------------------------------------------------------
1996 92,169 570,302
- -------------------------------------------------------------------------------
1997 96,777 667,079
- -------------------------------------------------------------------------------
1998 101,616 768,695
- -------------------------------------------------------------------------------
1999 or later 106,697 875,392
===============================================================================
</TABLE>
(b) Solely as an example to illustrate the intent of this
Section 3.4, if the date of the Employee's termination of employment with the
Employer is July 15, 1996, the Minimum Amount is $531,898, which is the total of
the Cumulative Amount for 1995 ($478,133) plus 7/12 of the Annual Increment for
1996 ($53,765). If the Total Credits as of July 15, 1996 are $500,000, the
additional credit made pursuant to this Section 3.4 is $31,898.
(c) Notwithstanding any other provision of this Agreement, if
his employment with the Employer terminates for Cause, no credit shall be made
to the Employee's Account under this Section 3.4 for the year in which his
employment ends.
3.5 NO CONTRIBUTIONS BY EMPLOYEE. The Employee shall not be required or
permitted to make contributions to his Account under this Agreement.
SECTION 4
---------
MAINTENANCE AND VALUATION OF ACCOUNT
------------------------------------
4.1 ESTABLISHMENT OF ACCOUNT. There shall be established for the
Employee a separate book account (the "Account"), which shall reflect the
amounts credited pursuant to Section 3 and the assumed investment thereof.
Subject to such rules as the Committee may prescribe, any amount credited under
Sections 3.1, 3.2, or 3.3 shall be credited to the Employee's Account as of the
last day of the year for which such credit is made, and shall be assumed to have
been invested as of that date pursuant to Section 4.2 of this Agreement.
4.2 ASSUMED INVESTMENTS. With respect to any period of time, the
credits to the Employee's Account made in accordance with Sections 3.1, 3.2, or
3.3 shall be assumed to have been invested in two or more investment funds
designated by the Committee among which the Employee may designate as the
assumed investment of his Account. Such investment funds may, but need not, be
the same investment funds that are available under the Employer's Qualified
Plans. The assumed investment return or loss for each year shall be credited to
the Employee's Account as of the last day of such year, provided, however, that
the assumed
- 4 -
<PAGE> 5
investment return or loss for the year in which the Account is distributed to
the Employee or his Beneficiary shall be deemed to be credited to the Account as
of the date the distribution from the Account is made.
4.3 VALUATION. As soon as practical following the end of each year, the
Employee, or, in the event of his death, his Beneficiary, shall be furnished a
statement as of December 31 showing the then balance of the Employee's Account,
the total credits to such Account during the preceding calendar year pursuant to
Sections 3.1, 3.2, or 3.3, and the investment return or loss credited to such
Account pursuant to Section 4.2.
4.4 LIMITATION. Notwithstanding any other provision of this Agreement,
all credits to the Employee's Account under any provision of this Agreement
shall be made on the express condition that such credits do not adversely affect
the tax-exempt status of Midwest Foundation Independent Physicians Association
dba ChoiceCare under section 501(c)(4) of the Code. If the Internal Revenue
Service determines that any credit to the Employee's Account made under this
Agreement (by itself or in combination with other compensation paid to the
Employee by the Employer) adversely affects such tax-exempt status, the Employer
may, after providing at least 20 days' written notice of the proposed action to
the Employee, reduce or cancel such credit to the extent necessary to preserve
or restore such tax-exempt status, and in the event of such a cancellation, the
Employee shall have no right or claim to the amount so cancelled or to any other
benefit or compensation in consequence of such cancellation.
SECTION 5
---------
VESTING
-------
5.1 VESTING. The vested percentage of the Employee's Account shall be
100% as of December 31, 1999. At any relevant time prior to December 31, 1999,
the vested percentage of the Employee's Account shall be 0%, except as otherwise
provided in Section 5.2.
5.2 EARLY VESTING. Notwithstanding Section 5.1, the vested percentage
of the Employee's Account shall be 100% as of the earliest of the following:
(a) Termination or nonrenewal of the Employment Agreement
prior to December 31, 1999 by the Employer without Cause, provided, however,
that termination of the Employment Agreement prior to such date by the Employee
shall not affect the vesting of the Employee's Account;
(b) The Employee's death or permanent disability (as defined
in the Employment Agreement) while he remains employed by the Employer;
(c) The occurrence of a change in control (as defined in the
Employment Agreement); or
- 5 -
<PAGE> 6
(d) The election by the Employee of a lump sum severance
payment under subsection 6.5(b) of the Employment Agreement.
5.3 TERMINATION FOR CAUSE. Notwithstanding any other provision of this
Agreement, if the Employee is terminated for Cause (as defined in the Employment
Agreement), the vested percentage of his Account shall be 0% and he shall
forfeit all amounts in his Account.
SECTION 6
---------
DISTRIBUTIONS AND FORFEITURES
-----------------------------
6.1 GENERAL. Except as otherwise provided in this Section 6, no amount
shall be paid with respect to the Employee's Account while he remains employed
by the Employer.
6.2 TERMINATION OF EMPLOYMENT. The Employer will pay or begin to pay to
the Employee the vested percentage of the balance in his Account, determined as
of the date he terminates all employment with the Employer for any reason other
than his death, as soon as administratively practical after the first business
day of the first calendar quarter which begins after the date on which he ceases
to be an employee of the Employer, in the latest form of payment elected by the
Employee under this Agreement. The Employee may elect either a lump sum payment
or any number of annual installment payments, up to ten annual installment
payments.
(a) The Employee is deemed to have elected to receive a lump
sum payment unless he changes this election pursuant to Section 6.2(b).
(b) The Employee may change the election he is deemed to make
under Section 6.2(a) by completing an appropriate form and filing it with the
Committee; except that any change of the form of payment will not be given any
effect under this Agreement unless the date on which the Employee ceases to be
an employee of the Employer occurs one year or more after the date on which the
form changing the election is filed with the Committee.
(c) The amount of each annual installment payable under this
Section 6.2 (if the Employee elects to receive his Account in annual installment
payments) will be a fraction of the amount credited to the Employee's Account as
of the installment payment date, the numerator of which is one and the
denominator of which is equal to the total number of installments remaining to
be paid (including the installment to be paid on that installment payment date).
The first installment payment will be made at the time indicated in the first
sentence of this Section 6.2, and all remaining installment payments will be
made as soon as administratively practical after each annual anniversary of the
initial installment payment until all required installment payments have been
made.
- 6 -
<PAGE> 7
(d) If the Employee receives all amounts credited to his
Account because he has ceased to be an employee of the Employer, and an
additional amount is subsequently credited to his Account under the terms of the
Agreement, that additional amount will be paid to the Employee as soon as
administratively practical after it is credited to his Account.
(e) For purposes of this Section 6.2, if the Employee incurs a
"permanent disability" (as defined in the Employee's Employment Agreement)
before ceasing his employment with the Employer, he will be deemed to cease
employment with the Employer on the date that the Committee determines that he
has incurred such permanent disability.
6.3 FORFEITURES. Any nonvested percentage of the balance in the
Employee's Account, determined as of the date on which he terminates employment
with the Employer for any reason other than his death or total disability (as
defined in the Employment Agreement), shall be forfeited as of such date.
6.4 DEATH. If the Employee ceases to be employed by the Employer by
reason of his death, or if he dies after ceasing to be an employee but before
the vested percentage of the amount credited to his Account has been paid or has
begun to be paid to him, the Employer shall pay to the Employee's Beneficiary
the vested percentage of the amounts credited to the Employee's Account in the
method elected by the Beneficiary under Section 6.2, applying such Section as if
the Beneficiary were the Employee and disregarding the requirement that the
election must be made at least one year before the Employee terminates
employment with the Employer. If the Employee dies after beginning to receive
the payment of the vested percentage of the amount credited to his Account in
installments under Section 6.2(c), the remaining installments shall be paid to
his Beneficiary under the payment schedule in effect before the Employee's
death.
6.5 DISTRIBUTIONS FOR PAYMENT OF TAXES. Notwithstanding Section 6.1, if
the Internal Revenue Service determines that the Employee is currently subject
to income or other tax on the balance in his Account, the Employer shall pay to
the Employee in one lump sum as of the date determined by the Employer that
portion of the balance then in his Account that is necessary for the payment of
federal, state, and local taxes, and interest and penalties thereon, that
results from such determination, and the balance in the Employee's Account shall
immediately be reduced by the amount of such distribution.
6.6 FORM OF PAYMENT. Payments with respect to the Account shall be made
in cash. As provided in Sections 6.2, 6.3, and 6.4, payments shall be made "as
of" a certain date, which means that payments will be made on or as soon as
practicable after such date, and will be equal to the balance in the Employee's
Account as of that certain date. All payments made to the Employee or his
Beneficiary shall be subject to applicable withholding and to such other
deductions as shall at the time of such payment be required under any income tax
or other law, whether of the United States or any other applicable jurisdiction.
- 7 -
<PAGE> 8
SECTION 7
---------
ADMINISTRATION OF THE AGREEMENT
-------------------------------
7.1 GENERAL. The general administration of the Agreement and the
responsibility for carrying out its provisions shall be placed in the Committee.
7.2 EXPENSES. Expenses of administering the Agreement shall be borne by
the Employer.
7.3 COMPENSATION OF COMMITTEE. The members of the Committee shall not
receive compensation for their services as such, and, except as required by law,
no bond or other security need be required of them in such capacity in any
jurisdiction.
7.4 RULES. Subject to the limitations of the Agreement, the Committee
may, from time to time, establish rules for the administration of the Agreement
and the transaction of its business. The Committee may correct errors, however
arising, and, as far as possible, adjust any benefit payments accordingly. The
Committee shall interpret the Agreement. The Committee's interpretation of the
Agreement shall be subject to de novo review in arbitration that occurs pursuant
to Section 11.2 hereof.
7.5 AGENTS AND EMPLOYEES. The Committee may authorize one or more
agents to execute or deliver any instrument. The Committee may appoint or employ
such agents, counsel, auditors, physicians, clerical help, and actuaries as in
the Committee's judgment may seem reasonable or necessary for the proper
administration of the Agreement.
7.6 INDEMNIFICATION. The Employer shall indemnify each member of the
Committee for all expenses and liabilities (including reasonable attorney's
fees) arising out of the administration of the Agreement, other than any
expenses or liabilities resulting from the Committee's own gross negligence or
willful misconduct. The foregoing right of indemnification shall be in addition
to any other rights to which the members of the Committee may be entitled as a
matter of law.
SECTION 8
---------
FUNDING OBLIGATION
------------------
The Employer shall have no obligation to fund, either by the investment
in any account or by any other means, its obligation to the Employee hereunder.
The Employer shall establish a rabbi trust, to which the Employer shall
contribute assets to provide for its obligations under this Agreement. All
assets allocated for such purpose shall be assets of the Employer subject to
claims against the Employer, including claims of the Employer's creditors, to
the same extent
- 8 -
<PAGE> 9
as are other corporate assets, and the Employee shall have no right or claim
against the assets so allocated, other than as a general creditor of the
Employer.
SECTION 9
---------
AMENDMENT AND TERMINATION
-------------------------
The Committee or the Employer may, without the consent of the Employee
or his Beneficiary, amend or terminate the Agreement at any time; provided that,
except as provided in Section 4.4 hereof, no amendment shall be made or act of
termination taken which: (i) divests the Employee or his Beneficiary of the
right to receive payments under the Agreement with respect to amounts
theretofore credited to the Employee's Account, (ii) directly or indirectly
reduces the credits to be made under Section 3 with respect to periods ending on
and before December 31, 1999, or (iii) subsequent to the occurrence of a change
in control (as defined in the Employment Agreement), directly or indirectly
reduces the percentage credited under Section 3 of this Plan with respect to the
Employee's Base Salary and award under the Employer's Executive Annual Incentive
Plan for any year which ends after the change in control occurs below the
percentage allocated under Section 3 for the immediately preceding year, unless,
in each such case, the Employee, or, in the event of his death, his Beneficiary,
consents to such amendment in writing. Subject to the foregoing, the Employer
and the Employee may agree to amend this Agreement to adjust the future credits
provided for hereunder in the event that the Employee becomes eligible to
participate in another deferred compensation arrangement maintained by the
Employer or an affiliate of the Employer.
SECTION 10
----------
NON-ALIENATION OF BENEFITS
--------------------------
Neither the Employee nor his Beneficiary shall alienate, commute,
anticipate, assign, pledge, encumber, or dispose of the right to receive the
payments required to be made by the Employer hereunder, which payments and the
right to receive them are expressly declared to be nonassignable and
nontransferable. In the event of any attempt to assign or transfer any such
payments or the right to receive them, the Employer shall have no further
obligation to make any payments otherwise required of it hereunder.
- 9 -
<PAGE> 10
SECTION 11
----------
MISCELLANEOUS
-------------
11.1 DELEGATION. Any matter or thing to be done by the Employer shall
be done by its Board of Directors, except that, from time to time, the Board by
resolution may delegate to any person or committee certain of its rights and
duties hereunder. Any such delegation shall be valid and binding on all persons
and the person or committee to whom or which authority is delegated shall have
full power to act in all matters so delegated until the authority expires by its
terms or is revoked by the Board, as the case may be.
11.2 ARBITRATION. Any dispute or disagreement between the parties
hereto, including but not limited to a dispute concerning the necessity of a
reduction or cancellation under Section 4.4 hereof, shall be submitted to
mandatory and binding arbitration at the election of either party. The
arbitration shall be pursuant to the Commercial Arbitration Rules of the
American Arbitration Association. The arbitration shall be held in Cincinnati,
Ohio. Each party shall select an 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 and
any judgment thereon may be entered and enforced in any court of competent
jurisdiction. Each party will 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.
11.3 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.
- 10 -
<PAGE> 11
11.4 WAIVER. The failure of either party to enforce any provision or
provisions of the 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 it under the circumstances.
11.5 NO RIGHTS TO CONTINUED EMPLOYMENT. Nothing contained herein shall
be construed as conferring upon the Employee the right to continue in the
employment of the Employer in any capacity.
11.6 RELATION TO OTHER PLANS. No amounts credited or payable under this
Agreement shall be deemed salary or other compensation to the Employee for the
purpose of computing benefits to which he may be entitled under any retirement
plan or other arrangement of the Employer for the benefit of its employees.
11.7 APPLICABLE LAW. The Agreement shall be governed by applicable
federal law and, to the extent not preempted by applicable federal law, the laws
of the State of Ohio.
11.8 SEPARABILITY OF PROVISIONS. If any provision of the Agreement is
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision hereof, and the Agreement shall be construed and
enforced as if such provision had not been included.
11.9 HEADINGS. Headings used throughout the Agreement are for
convenience only and shall not be given legal significance.
11.10 COUNTERPARTS. The Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. All counterparts shall
constitute one and the same instrument, which shall be sufficiently evidenced by
any one thereof.
- 11 -
<PAGE> 12
Signed at Cincinnati, Ohio on the 4 day of June, 1997.
CHOICECARE CORPORATION:
By: /s/ Donald E. Hoffman
-------------------------------
Title: Chair, H R Committee
----------------------------
CHOICECARE HEALTH PLANS, INC.:
By: /s/ Thomas D. Anthony
-------------------------------
Title: Secretary
----------------------------
EMPLOYEE:
/s/ Daniel A. Gregorie
-------------------------------------
Daniel A. Gregorie, M.D.
- 12 -
<PAGE> 1
EXHIBIT 7
SEVENTH AMENDMENT TO LEASE AGREEMENT
------------------------------------
This Seventh Amendment to Lease Agreement ("Amendment") is made and
entered into effective as of this ____ day of June, 1997, by and between
CPX-Commercial Properties, Inc., a Kentucky Corporation ("Landlord") whose
principal place of business is 655 Eden Park Drive, Suite 250, Cincinnati, Ohio,
45202 and ChoiceCare Health Plans, Inc., an Ohio Corporation ("Tenant") whose
principal place of business is 655 Eden Park Drive, Suite 400, Cincinnati, Ohio,
45202.
RECITALS
--------
A. Key Property Development Corporation (formerly Corporex Properties,
Inc.) ("Key Property") and Midwest Foundation Independent Physician
Association, an Ohio Corporation (MFI), Tenant's predecessor in
interest, entered into a certain lease Agreement dated April 16, 1987,
for certain space located in the Grand Baldwin Building, 655 Eden Park
Drive, Cincinnati, Ohio, 45202, ("Building"), which Lease Agreement was
amended and modified pursuant to an Amendment #1 to Lease Agreement
dated July 2, 1987, an Amendment #2 to Lease Agreement dated March 1,
1988, an Amendment #3 to Lease Agreement dated December 21, 1990, an
Amendment #4 to Lease Agreement dated April 11, 1991, an Amended and
Restated Lease Agreement dated February 27, 1992 and an Amendment #6 to
Lease Agreement Dated May 1, 1994 (hereinafter collectively referred to
as the "Lease").
B. Key Property sold the building to Landlord on May 22, 1992, pursuant to
that certain warranty deed dated May 22, 1992. As part of said sale,
Key Property assigned all of its right, title and interest in and to
the Lease to Landlord.
C. Effective as of October 1, 1995, MFI assigned its interest in the Lease
to Tenant.
D. Tenant desires to extend the term of the Lease for a portion of the
Leased Premises.
E. Landlord and Tenant agree to modify and amend the Lease as set forth
herein.
NOW THEREFORE, in consideration of the Leased Premises, the mutual
convenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree to modify the Lease as set forth herein.
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<PAGE> 2
1) The initial term of the Lease as to the Core Lease Premises (as defined
below), containing approximately 92,866 square feet, is hereby extended
for a period of one (1) year and two (2) months (the extension period),
and such new termination date shall be extended from February 28, 1998
to April 30, 1999 (the "Extension Period"). The Lobby Level South space
shall convert from month-to-month and shall be extended from the date
of this amendment through April 30, 1999. Except as amended by this
Amendment, the terms and conditions of the Lease in effect as of
February 28, 1998 shall continue in effect during the Extension Period.
The Core Lease Premises include the following:
<TABLE>
<S> <C>
Base Lease 84,015 sq. ft
Expansion V Space 3,353 sq. ft.
Lobby Level South 14,254 sq. ft.
---------------
101,622 sq. ft.
Less above Premises 8,756 sq. ft.
---------------
(currently terminating 4/99)
Core Lease Premises 92,866 sq. ft.
<FN>
2) The Annual Base Rent for the Core Lease Premises during the Extension
Period shall be $20.94 per rentable square foot per annum, payable
monthly in equal installments of $162,051.16. The annual Base Rent
shall be adjusted for the partial year of March 1, 1999 to April 30,
1999.
3) Effective July 1, 1997, paragraph 61 of the Lease shall be amended as
the Annual Base Rent for the Lobby Level Space for the period of July
1, 1997 through February 28, 1998 shall be reduced to $20.94 per
rentable square foot per annum, payable monthly in equal installments
of $24,873.23.
</TABLE>
IT IS expressly understood that in all other respects, except as amended above,
the terms and conditions of the Lease shall remain and be in full force and
effect.
THIS Amendment shall be binding upon the successors and assigns of the
respective parties.
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<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year hereinabove first written.
CPX-COMMERCIAL PROPERTIES, INC.,
A KENTUCKY CORPORATION
BY /s/ W. P. Butler
------------------------------
TITLE Pres.
------------------------------
DATE June 4, 1997
------------------------------
CHOICECARE HEALTH PLANS, INC.,
AN OHIO CORPORATION
BY /s/ Larry D. Savage
------------------------------
TITLE Sr. V.P.
------------------------------
DATE 6-4-97
------------------------------
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<PAGE> 4
STATE OF: OHIO
----------------------------------
SS:
----------------------------------
COUNTY OF: HAMILTON
----------------------------------
The foregoing instrument was acknowledged before me this 4th day of June, 1997
by William P. Butler, the President of CPX Commercial Properties Inc., a
Kentucky corporation, Landlord in the foregoing Lease Agreement, on behalf of
the corporation.
/s/ Barbara R. Sammons
-------------------------
NOTARY PUBLIC
My Commission Expires:
-------------------------
[SEAL] BARBARA R. SAMMONS
Notary Public, State of Ohio
My Commission Expires May 17, 1998
STATE OF: OHIO
----------------------------------
SS:
----------------------------------
COUNTY OF: HAMILTON
----------------------------------
The foregoing instrument was acknowledged before me this 4th day of JUNE, 1997
by Larry D. Savage, the SENIOR VICE PRES. of ChoiceCare Health Plans Inc., an
Ohio corporation, Tenant in the foregoing Lease Agreement, on behalf of the
corporation.
/s/ Barbara R Sammons
-------------------------
NOTARY PUBLIC
My Commission Expires:
-------------------------
[SEAL] BARBARA R. SAMMONS
Notary Public, State of Ohio
My Commission Expires May 17, 1998
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