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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
AMENDMENT NO. 4
TO
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
______________________
HEALTHSOURCE, INC.
(Name of Subject Company)
HEALTHSOURCE, INC.
(Name of Person(s) Filing Statement)
Common Stock, par value $0.10 per share
(Title of Class of Securities)
42221E 10 4
(CUSIP Number of Class of Securities)
Jon S. Richardson, Esq.
Special Counsel to the President
Healthsource, Inc
Two College Park Drive
Hooksett, New Hampshire 03106
(603) 268-7000
(Name, address and telephone number of person authorized to receive
notice and communication on behalf of the person(s) filing statement)
With a Copy to:
Paul T. Schnell, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
(212) 735-3000
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This Amendment supplements and amends as Amendment No.4 the
Solicitation/Recommendation Statement on Schedule 14D-9,
originally filed on March 6, 1997 (the Schedule 14D-9"), by
Healthsource, Inc., a New Hampshire corporation (the "Company"),
relating to the tender offer by CHC Acquisition, Corp., a New
Hampshire corporation (the "Purchaser") and an indirect wholly
owned subsidiary of CIGNA Corporation, a Delaware corporation
("Parent"), disclosed in a Tender Offer Statement on Schedule
14D-1, dated March 6, 1997, to purchase all outstanding shares of
common stock, par value $0.10 per share (the "Shares"), of the
Company at a price of $21.75 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated March 6, 1997, and the related
Letter of Transmittal. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Schedule
14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
As contemplated by the Merger Agreement, prior to June 20,
1997, the Company will enter into severance agreements with the
Company's executive officers. Attached hereto as Exhibit 20 is
the form of severance agreement to be entered into by the Company
with Dr. Payson. Attached hereto as Exhibit 21 is the form of
severance agreement to be entered into by the Company with Joseph
M. Zubretsky and Charles M. Schneider. Attached as Exhibit 22 is
the form of severance agreement to be entered into by the Company
and each of Richard B. Salmon, M.D., Francis G. Middleton, M.D.
and Robert Chin.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 20 Form of Severance Agreement to be entered into by
the Company with Dr. Payson.
Exhibit 21 Form of Severance Agreement to be entered into by
the Company with each of Joseph M. Zubretsky and
Charles M. Schneider.
Exhibit 22 Form of Severance Agreement to be entered into by
the Company and each of Richard B. Salmon, M.D.,
Francis G. Middleton, M.D. and Robert Chin.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
Dated: June 18, 1997 Healthsource, Inc.
By: /s/ Joseph M. Zubretsky
Name: Joseph M. Zubretsky
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
Exhibit 20 Form of Severance Agreement to be entered
into by the Company with Dr. Payson.
Exhibit 21 Form of Severance Agreement to be entered
into by the Company with each of Joseph M.
Zubretsky and Charles M. Schneider.
Exhibit 22 Form of Severance Agreement to be entered
into by the Company and each of Richard B.
Salmon, M.D., Francis G. Middleton, M.D. and
Robert Chin.
EXHIBIT 20
FORM OF SEVERANCE AGREEMENT
THIS AGREEMENT, dated June__ , 1997, is made by and between
Healthsource, Inc., a New Hampshire corporation (the "Company"),
and _______________ (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment
of key management personnel; and
WHEREAS, the Company has entered into an Agreement and Plan
of Merger (the "Merger Agreement"), dated as of February 27,
1997, by and among the Company, CIGNA Corporation, a Delaware
corporation and CHC Acquisition Corp., a New Hampshire
corporation; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management,
including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms
used in this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect until
the second anniversary of the consummation of the Offer.
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company, the Company
agrees, under the conditions described herein, to pay the
Executive the Severance Payments and the other payments and
benefits described herein. Except as provided in Section 8.1
hereof, no Severance Payments shall be payable under this
Agreement unless there shall have been a termination of the
Executive's employment with the Company following a Change in
Control and during the Term. This Agreement shall not be
construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. Compensation Other Than Severance Payments.
4.1 If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the Term, the Company shall pay the Executive's full
salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or,
if higher, the rate in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason,
together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of the
Company's compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
4.2 If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the Term, the Company shall pay to the Executive the
Executive's normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with,
the Company's retirement, insurance and other compensation or
benefit plans, programs and arrangements as in effect immediately
prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the occurrence of
the first event or circumstance constituting Good Reason.
5. Severance Payments.
5.1 If the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the
Company for Cause, (B) by reason of death or Disability, or (C)
by the Executive without Good Reason, then in either such case,
the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 5.1 ("Severance
Payments") and Section 5.2, in addition to any payments and
benefits to which the Executive is entitled under Section 4
hereof.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination
(or the consummation of the Offer, as the case may be) and
in lieu of any severance benefit otherwise payable to the
Executive under any severance plan or program maintained by
the Company, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (3) times the
sum of (i) the Executive's base salary as in effect
immediately prior to the Date of Termination (or the
consummation of the Offer, as the case may be) or, if
higher, in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, and
(ii) the maximum amount of annual bonus that could be earned
by the Executive pursuant to any annual bonus or incentive
plan maintained by the Company in respect of the fiscal year
in which occurs the Date of Termination (or the consummation
of the Offer, as the case may be) or, if higher, in respect
of the fiscal year in which occurs the first event or
circumstance constituting Good Reason; provided, however,
that in no event shall the amount paid to the Executive
pursuant to this Section 5.1(A) exceed $_____ million. As
of the date hereof, the Executive's base salary is $_______
and the Executive's maximum annual bonus is _____% of such
base salary.
(B) For the three (3) year period immediately
following the Date of Termination (or the consummation of
the Offer, as the case may be), the Company shall arrange to
provide the Executive and his dependents life, disability,
accident and health insurance benefits substantially similar
to those provided to the Executive and his dependents
immediately prior to the Date of Termination (or the
consummation of the Offer, as the case may be) or, if more
favorable to the Executive, those provided to the Executive
and his dependents immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, at no
greater cost to the Executive than had the Executive
remained employed by the Company during such period.
Benefits otherwise receivable by the Executive pursuant to
this Section 5.1(B) shall be reduced to the extent benefits
of the same type are received by or made available to the
Executive by a subsequent employer during the three (3) year
period following the Executive's termination of employment
(and any such benefits received by or made available to the
Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall
reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over the cost the
Executive would have incurred for such benefits had the
Executive remained employed by the Company during such
period.
(C) Notwithstanding any provision of any annual
incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to a pro rata
portion to the Date of Termination (or the consummation of
the Offer, as the case may be) of the aggregate value of the
bonus payment the Executive would have received for the year
including the Date of Termination (or the consummation of
the Offer, as the case may be), calculated by multiplying
the bonus that the Executive would have earned for such
year, assuming the achievement, at the level that would
produce an award equal to % of the Executive's base
salary as in effect immediately prior to the Date of
Termination (or the consummation of the Offer, as the case
may be) or, if higher, in effect immediately prior to the
first occurrence of an event or circumstance constituting
Good Reason, of the individual and corporate performance
goals established with respect to such bonus, by the
fraction obtained by dividing the number of full months and
any fractional portion of a month during such year through
the Date of Termination (or the consummation of the Offer,
as the case may be) by twelve.
(D) The Company shall (i) reimburse the Executive for
outplacement services suitable to the Executive's position
for a period of one year or, if earlier, until the first
acceptance by the Executive of an offer of employment, (ii)
reimburse the Executive for financial planning services for
a period of one year and (iii) provide the Executive with
reasonable office space and secretarial services for a
period of three (3) years. The outplacement services
referred to under clause (i) above shall be no less
favorable to the Executive than the outplacement services
provided under any plan, program or arrangement by CIGNA
Corporation to any of its senior executive officers.
5.2 (A) If the Executive becomes entitled to the
Severance Payments and, if any of the payments or benefits
received or to be received by the Executive in connection
with a Change in Control or the Executive's termination of
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the
Company, CIGNA Corporation or any Person affiliated with the
Company or CIGNA Corporation) (such payments or benefits,
excluding the Gross-Up Payment, being hereinafter referred
to as the "Total Payments") will be subject to the Excise
Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax
on the Total Payments and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-Up
Payment (but not taking into account any federal, state or
local income or employment tax otherwise payable with
respect to the Total Payments), shall be equal to the Total
Payments.
(B) Subject to the provisions of Section 5.2(C),
all determinations required to be made under this Section
5.2, including whether a Gross-Up Payment is required and
the amount of the Gross-Up Payment, shall be made by a
nationally recognized accounting firm designated by the
Company, which is not and was not immediately prior to the
Change in Control serving as accountant or auditor for CIGNA
Corporation or the Company (the "Accounting Firm"). The
Accounting Firm shall provide detailed supporting
calculations both to the Company and to the Executive within
thirty (30) days of the Date of Termination or such earlier
date as may be requested by the Company; provided, however
that if, pursuant to Section 5.3, the payment of amounts due
under Sections 5.1(A) and/or (C) is delayed due to the
inability to finally determine such amounts within the
specified period, the time for the Accounting Firm to
provide such supporting calculations may be similarly
extended. Any Gross-Up Payment, as determined pursuant to
this Section 5.2, shall be paid to the Executive within ten
(10) business days of the Accounting Firm's determination.
The Accounting Firm shall furnish the Executive with its
opinion that the filing by the Executive of the Executive's
federal income tax return in accordance with the Accounting
Firm's determination (or redetermination in accordance with
Section 5.2(C) below) will not result in the imposition of a
negligence or similar penalty on the Executive; provided,
however, that if the opinion of the Accounting Firm cannot
be obtained using reasonable efforts and at a reasonable
cost the Company shall provide the Executive such other
written advice of the Accounting Firm as shall be reasonably
obtainable. Any determination by the Accounting Firm shall
be binding on the Executive and the Company. For purposes
of determining the amount of the Gross-Up Payment, unless
the facts clearly indicate otherwise, the Executive shall be
deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date
of Termination (or if there is no Date of Termination, then
the date on which the Gross-Up Payment is calculated for
purposes of this Section 5.2), net of the maximum reduction
in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is Finally
Determined (as defined below) to be less than the amount
taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within
ten (10) business days following the time that the amount of
such reduction in the Excise Tax is Finally Determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable
income and wages for purposes of federal, state and local
income and employment taxes), plus interest on the amount of
such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax
is Finally Determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect
to such excess) within ten (10) business days following the
time that the amount of such excess is Finally Determined.
The Executive and the Company shall each reasonably
cooperate with the other in connection with any
administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect
to the Total Payments. The Executive shall provide the
Company with prompt notice of any claims by the Internal
Revenue Service (the "Service") that, if successful, would
require payment of an additional Gross-Up Payment, shall
permit the Company to determine whether to contest such
claims (at the Company's own expense, holding the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses), shall permit the Company to
participate in any proceedings relating to such claims, and
shall take such actions and provide such information in
connection with such claims as the Company shall reasonably
direct and request. For purposes of this Section 5.2(C),
"Finally Determined" means, with respect to any change in
the amount of the Excise Tax taken into account in
calculating the Gross-Up Payment, (i) when the change
originates with a claim by the Service, a determination by
the final administrative or judicial tribunal to which the
matter is appealed; or (ii) in all other cases, when
circumstances so require, a redetermination of the amount of
the Excise Tax by the Accounting Firm.
5.3 The payments provided in subsections (A) and (C) of
Section 5.1 hereof shall be made on the date upon which the Offer
is consummated; provided, however, that if the amounts of such
payments cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate of the
minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together
with interest on the unpaid remainder (or on all such payments to
the extent the Company fails to make such payments when due) at
120% of the rate provided in section 1274(b)(2)(B) of the Code)
as soon as the amount thereof can be determined but in no event
later than the sixtieth (60th) day after the Date of Termination
(or the consummation of the Offer, as the case may be). In the
event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess
shall constitute a loan by the Company to the Executive, payable
on the tenth (10th) business day after demand by the Company
(together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At or within a reasonable time after
the time that payments are made under this Agreement, the Company
shall provide the Executive with a written statement setting
forth the manner in which such payments were calculated and the
basis for such calculations including, without limitation, any
opinions or other advice the Company has received from the
Accounting Firm or other advisors or consultants (and any such
opinions or advice which are in writing, to the extent not
subject to a valid claim of privilege by the Company, shall be
attached to the statement).
5.4 The Company also shall pay to the Executive all
legal and accounting fees and expenses incurred by the Executive
in seeking to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such
payments shall be made within ten (10) business days after
receipt by the Company of the Executive's written requests for
payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
6. Termination Procedures and Compensation During
Dispute.
6.1 Notice of Termination. The Executive's employment
shall terminate upon the consummation of the Offer, without any
notice from either the Executive or the Company to the other
party. For all purposes under this Agreement, such termination
shall be treated as a termination by the Executive for Good
Reason.
6.2 Date of Termination. "Date of Termination" shall
mean the date of consummation of the Offer.
7. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the
Term, the Executive is not required to seek other employment or
to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 5 hereof. Further,
the amount of any payment or benefit provided for in this
Agreement (except as specifically provided in Section 5.1(B)
hereof) shall not be reduced by any compensation earned by the
Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
8. Successors; Binding Agreement.
8.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
8.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any
amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's
estate.
9. Notices. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's
signature on the final page hereof and, if to the Company, to the
address set forth below, or to such other address as either party
may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
Healthsource, Inc.
Two College Park Drive
Hooksett, New Hampshire 03106
Attention: President
10. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or of any lack of
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have
been made by either party; provided, however, that this Agreement
shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in
the event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company
other than for Cause or by the Executive for Good Reason; and
provided further, that this Agreement shall not supersede any
confidentiality, noncompete or nonsolicitation agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New
Hampshire without giving effect to the principles of conflicts of
law thereof. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company
and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration
of the Term (including, without limitation, those under Sections
5 and 6 hereof) shall survive such expiration.
11. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but both of which together will constitute one and the
same instrument.
13. Settlement of Disputes; Arbitration.
13.1 All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the
Committee and shall be in writing. Any denial by the Committee
of a claim for benefits under this Agreement shall be delivered
to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable
opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Executive's claim
has been denied.
13.2 Any further dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Manchester, New Hampshire in accordance with
the rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth in
this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary,
the Executive shall be entitled to seek specific performance from
a court of competent jurisdiction of the Executive's right to be
paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
13.3 This Agreement shall be subject to Chapter 542 of
New Hampshire Revised Statutes Annotated.
14. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Accounting Firm" shall have the meaning set forth
in Section 5.2(B) hereof.
(B) "Board" shall mean the Board of Directors of the
Company.
(C) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the Executive's
commission of any fraud or embezzlement against the Company,
(ii) the willful and continued refusal by the Executive to
perform the Executive's duties with the Company or the
willful and continued refusal by the Executive to comply
with the directives of superiors (other than any such
refusal resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination for
Good Reason by the Executive pursuant to Section 6.1 hereof)
in each case after (A) a written demand for performance is
delivered to the Executive by the Company, which demand
specifically identifies the manner in which the Company
believes that the Executive has not complied with the
directives of superiors or has not performed the Executive's
duties and (B) the failure by the Executive to cure such
conduct within 10 days after the Executive's receipt of such
written demand, (iii) the Executive's conviction of a felony
or (iv) the execution of an order by, or an agreement by the
Executive with, an appropriate governmental health care
regulatory agency removing or otherwise disqualifying the
Executive from employment with the Company or any of its
affiliates. For purposes of clause (ii) of this definition,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best
interest of the Company. In the event of a dispute
concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless
the Company establishes to the Committee by clear and
convincing evidence that Cause exists.
(D) A "Change in Control" shall mean the consummation
of the Offer.
(E) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(F) "Committee" shall mean three individuals selected
by the President of CIGNA Corporation's Healthcare Division
with the concurrence of CIGNA Corporation's senior human
resources officer.
(G) "Company" shall mean Healthsource, Inc. and shall
include (i) any successor to its business and/or assets
which assumes and agrees to perform this Agreement by
operation of law, or otherwise and (ii) where applicable,
any subsidiary of Healthsource, Inc. by which the Executive
is employed.
(H) "Date of Termination" shall have the meaning set
forth in Section 6.2 hereof.
(I) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment,
if, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's
duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice
of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive's duties.
(J) "Excise Tax" shall mean any excise tax imposed
under section 4999 of the Code.
(K) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(L) "Existing Agreement" shall have the meaning set
forth in Section 5.1(A) hereof.
(M) "Finally Determined" shall have the meaning set
forth in Section 5.2(C) hereof.
(N) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence of a
Change in Control.
(O) "Gross-Up Payment" shall have the meaning set forth
in Section 5.2 hereof.
(P) "Merger Agreement" shall have the meaning set forth
in the second WHEREAS clause of this Agreement.
(Q) "Offer" shall have the meaning set forth in the
Merger Agreement.
(R) "Service" shall have the meaning set forth in
Section 5.2(C) hereof.
(S) "Severance Payments" shall have the meaning set
forth in Section 5.1 hereof.
(T) "Term" shall mean the period of time described in
Section 2 hereof.
(U) "Total Payments" shall mean those payments so
described in Section 5.2(A) hereof.
Healthsource, Inc.
By:______________________
Name:
Title:
________________________
Executive
Address:
________________________
________________________
________________________
EXHIBIT 21
FORM OF SEVERANCE AGREEMENT
THIS AGREEMENT, dated June__ , 1997, is made by and
between Healthsource, Inc., a New Hampshire corporation (the
"Company"), and _________________ (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment
of key management personnel; and
WHEREAS, the Company has entered into an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of February 27,
1997, by and among the Company, CIGNA Corporation, a Delaware
corporation and CHC Acquisition Corp., a New Hampshire
corporation; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management,
including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms
used in this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect until
the second anniversary of the consummation of the Offer.
3. Company's Covenants Summarized. In order to induce
the Executive to remain in the employ of the Company, the Company
agrees, under the conditions described herein, to pay the
Executive the Severance Payments and the other payments and
benefits described herein. Except as provided in Section 8.1
hereof, no Severance Payments shall be payable under this
Agreement unless there shall have been a termination of the
Executive's employment with the Company following a Change in
Control and during the Term. This Agreement shall not be
construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. Compensation Other Than Severance Payments.
4.1 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term,
the Company shall pay the Executive's full salary to the
Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the
Date of Termination under the terms of the Company's compensation
and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
first occurrence of an event or circumstance constituting Good
Reason.
4.2 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term,
the Company shall pay to the Executive the Executive's normal
post-termination compensation and benefits as such payments
become due. Such post-termination compensation and benefits
shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior
to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the occurrence of
the first event or circumstance constituting Good Reason.
5. Severance Payments.
5.1 If the Executive's employment is terminated
following a Change in Control and during the Term, other than (A)
by the Company for Cause, (B) by reason of death or Disability,
or (C) by the Executive without Good Reason, then in either such
case, the Company shall pay the Executive the amounts, and
provide the Executive the benefits, described in this Section 5.1
("Severance Payments") and Section 5.2, in addition to any
payments and benefits to which the Executive is entitled under
Section 4 hereof.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination
and in lieu of any severance benefit otherwise payable to
the Executive under any severance plan or program maintained
by the Company (including, without limitation, any severance
benefit payable under that certain agreement (the "Existing
Agreement"), dated as of __________, by and between the
Executive and the Company), the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to
three (3) times the sum of (i) the Executive's base salary
as in effect immediately prior to the Date of Termination
or, if higher, in effect immediately prior to the first
occurrence of an event or circumstance constituting Good
Reason, and (ii) the maximum amount of annual bonus that
could be earned by the Executive pursuant to any annual
bonus or incentive plan maintained by the Company in respect
of the fiscal year in which occurs the Date of Termination
or, if higher, in respect of the fiscal year in which occurs
the first event or circumstance constituting Good Reason.
As of the date hereof, the Executive's base salary is
$_______ and the Executive's maximum annual bonus is ____%
of such base salary.
(B) For the three (3) year period immediately following the
Date of Termination, the Company shall arrange to provide
the Executive and his dependents life, disability, accident
and health insurance benefits substantially similar to those
provided to the Executive and his dependents immediately
prior to the Date of Termination or, if more favorable to
the Executive, those provided to the Executive and his
dependents immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, at no
greater cost to the Executive than had the Executive
remained employed by the Company during such period.
Benefits otherwise receivable by the Executive pursuant to
this Section 5.1(B) shall be reduced to the extent benefits
of the same type are received by or made available to the
Executive by a subsequent employer during the three year
period following the Executive's termination of employment
(and any such benefits received by or made available to the
Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall
reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over the cost the
Executive would have incurred for such benefits had the
Executive remained employed by the Company during such
period.
(C) Notwithstanding any provision of any annual
incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to a pro rata
portion to the Date of Termination of the aggregate value of
the bonus payment the Executive would have received for the
year including the Date of Termination, calculated by
multiplying the bonus that the Executive would have earned
for such year, assuming the achievement, at the level that
would produce an award equal to _____% of the Executive's
base salary as in effect immediately prior to the Date of
Termination or, if higher, in effect immediately prior to
the first occurrence of an event or circumstance
constituting Good Reason, of the individual and corporate
performance goals established with respect to such bonus, by
the fraction obtained by dividing the number of full months
and any fractional portion of a month during such year
through the Date of Termination by twelve.
(D) The Company shall (i) reimburse the Executive for
outplacement services suitable to the Executive's position
for a period of one year or, if earlier, until the first
acceptance by the Executive of an offer of employment, (ii)
reimburse the Executive for financial planning services for
a period of one year and (iii) provide the Executive with
reasonable office space and secretarial services for a
period of three (3) years. The outplacement services
referred to under clause (i) above shall be no less
favorable to the Executive than the outplacement services
provided under any plan, program or arrangement by CIGNA
Corporation to any of its senior executive officers.
5.2 (A) If the Executive becomes entitled to the
Severance Payments and, if any of the payments or benefits
received or to be received by the Executive in connection
with a Change in Control or the Executive's termination of
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the
Company, CIGNA Corporation or any Person affiliated with the
Company or CIGNA Corporation) (such payments or benefits,
excluding the Gross-Up Payment, being hereinafter referred
to as the "Total Payments") will be subject to the Excise
Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax
on the Total Payments and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-Up
Payment (but not taking into account any federal, state or
local income or employment tax otherwise payable with
respect to the Total Payments), shall be equal to the Total
Payments.
(B) Subject to the provisions of Section 5.2(C), all
determinations required to be made under this Section 5.2,
including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by a
nationally recognized accounting firm designated by the
Company, which is not and was not immediately prior to the
Change in Control serving as accountant or auditor for CIGNA
Corporation or the Company (the "Accounting Firm"). The
Accounting Firm shall provide detailed supporting
calculations both to the Company and to the Executive within
thirty (30) days of the Date of Termination or such earlier
date as may be requested by the Company; provided, however
that if, pursuant to Section 5.3, the payment of amounts due
under Sections 5.1(A) and/or (C) is delayed due to the
inability to finally determine such amounts within the
specified period, the time for the Accounting Firm to
provide such supporting calculations may be similarly
extended. Any Gross-Up Payment, as determined pursuant to
this Section 5.2, shall be paid to the Executive within ten
(10) business days of the Accounting Firm's determination.
The Accounting Firm shall furnish the Executive with its
opinion that the filing by the Executive of the Executive's
federal income tax return in accordance with the Accounting
Firm's determination (or redetermination in accordance with
Section 5.2(C) below) will not result in the imposition of a
negligence or similar penalty on the Executive; provided,
however, that if the opinion of the Accounting Firm cannot
be obtained using reasonable efforts and at a reasonable
cost the Company shall provide the Executive such other
written advice of the Accounting Firm as shall be reasonably
obtainable. Any determination by the Accounting Firm shall
be binding on the Executive and the Company. For purposes
of determining the amount of the Gross-Up Payment, unless
the facts clearly indicate otherwise, the Executive shall be
deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date
of Termination (or if there is no Date of Termination, then
the date on which the Gross-Up Payment is calculated for
purposes of this Section 5.2), net of the maximum reduction
in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is Finally
Determined (as defined below) to be less than the amount
taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within
ten (10) business days following the time that the amount of
such reduction in the Excise Tax is Finally Determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable
income and wages for purposes of federal, state and local
income and employment taxes), plus interest on the amount of
such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax
is Finally Determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect
to such excess) within ten (10) business days following the
time that the amount of such excess is Finally Determined.
The Executive and the Company shall each reasonably
cooperate with the other in connection with any
administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect
to the Total Payments. The Executive shall provide the
Company with prompt notice of any claims by the Internal
Revenue Service (the "Service") that, if successful, would
require payment of an additional Gross-Up Payment, shall
permit the Company to determine whether to contest such
claims (at the Company's own expense, holding the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses), shall permit the Company to
participate in any proceedings relating to such claims, and
shall take such actions and provide such information in
connection with such claims as the Company shall reasonably
direct and request. For purposes of this Section 5.2(C),
"Finally Determined" means, with respect to any change in
the amount of the Excise Tax taken into account in
calculating the Gross-Up Payment, (i) when the change
originates with a claim by the Service, a determination by
the final administrative or judicial tribunal to which the
matter is appealed; or (ii) in all other cases, when
circumstances so require, a redetermination of the amount of
the Excise Tax by the Accounting Firm.
5.3 The payments provided in subsections (A) and (C) of
Section 5.1 hereof shall be made not later than the fifteenth day
following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or
before such day, the Company shall pay to the Executive on such
day an estimate of the minimum amount of such payments to which
the Executive is clearly entitled and shall pay the remainder of
such payments (together with interest on the unpaid remainder (or
on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the sixtieth (60th) day
after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the tenth (10th) business
day after demand by the Company (together with interest at 120%
of the rate provided in section 1274(b)(2)(B) of the Code). At
or within a reasonable time after the time that payments are made
under this Agreement, the Company shall provide the Executive
with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the
Company has received from the Accounting Firm or other advisors
or consultants (and any such opinions or advice which are in
writing, to the extent not subject to a valid claim of privilege
by the Company, shall be attached to the statement).
5.4 The Company also shall pay to the Executive all
legal and accounting fees and expenses incurred by the Executive
in seeking to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such
payments shall be made within ten (10) business days after
receipt by the Company of the Executive's written requests for
payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
6. Termination Procedures and Compensation During
Dispute.
6.1 Notice of Termination. After a Change in Control
and during the Term, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated
by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 9 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a certification that the evidence in support
of such termination has been reviewed by the Committee and has
been determined to constitute sufficient grounds for such
termination. After receipt of a Notice of Termination for Cause,
the Executive or his counsel may submit a written statement to
the Company before the effective date of the termination
explaining why such a termination for Cause would constitute a
breach of the Severance Agreement. If such a statement is
submitted, the Company shall determine in good faith whether to
proceed with, delay or rescind the Executive's termination for
Cause. Any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of this Section 6.1 shall not be
effective, and the Company shall continue to pay the Executive
his regular compensation (including, but not limited to, salary)
and continue Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was
participating on the date of the purported termination until the
Executive's actual Date of Termination.
6.2 Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's
employment after a Change in Control and during the Term, shall
mean (i) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment
is terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the
case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
6.3 Dispute Concerning Termination. If within fifteen
(15) days after any Notice of Termination by the Company for
Cause or by the Executive for Good Reason is given, or, if later,
prior to the Date of Termination (as determined without regard to
this Section 6.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date
on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or
decree of an arbitrator or a court of competent jurisdiction
(which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such
dispute with reasonable diligence; and provided further, that the
Date of Termination shall not be extended beyond the date that
the arbitrator acting pursuant to the following sentence
determines that the conditions of this Section 6.3 (including,
but not limited to, the preceding proviso) have not been, or are
no longer, satisfied. For purposes of this Section 6.3, the
dispute resolution process under Section 13.1 shall not apply,
and "reasonable diligence" shall not exist unless the party
giving notice institutes an arbitration under Section 13.2 (by
sending the other party a demand for arbitration) within fifteen
(15) business days after sending the other party the notice of
dispute concerning the termination.
6.4 Compensation During Dispute. If a purported
termination of the Executive's employment occurs following a
Change in Control and during the Term and the Date of Termination
is extended in accordance with Section 6.3 hereof, the Company
shall continue to pay the Executive the full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, until the Date of
Termination, as determined in accordance with Section 6.3 hereof.
Amounts paid under this Section 6.4 are in addition to all other
amounts due under this Agreement (other than those due under
Section 4.2 hereof) and shall not be offset against or reduce any
other amounts due under this Agreement.
7. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the
Term, the Executive is not required to seek other employment or
to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 5 hereof or Section
6.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (except as specifically provided
in Section 5.1(B) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the Company, or
otherwise.
8. Successors; Binding Agreement.
8.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
8.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any
amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's
estate.
9. Notices. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's
signature on the final page hereof and, if to the Company, to the
address set forth below, or to such other address as either party
may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
Healthsource, Inc.
Two College Park Drive
Hooksett, New Hampshire 03106
Attention: President
10. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or of any lack of
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have
been made by either party; provided, however, that this Agreement
shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company
(including without limitation the Existing Agreement) only in the
event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company
other than for Cause or by the Executive for Good Reason; and
provided further, that this Agreement shall not supersede any
confidentiality, noncompete or nonsolicitation agreement or any
such provisions contained in the Existing Agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New
Hampshire without giving effect to the principles of conflicts of
law thereof. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company
and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration
of the Term (including, without limitation, those under Sections
5 and 6 hereof) shall survive such expiration.
11. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but both of which together will constitute one and the
same instrument.
13. Settlement of Disputes; Arbitration.
13.1 All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the
Committee and shall be in writing. Any denial by the Committee
of a claim for benefits under this Agreement shall be delivered
to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable
opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Executive's claim
has been denied.
13.2 Any further dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Manchester, New Hampshire in accordance with
the rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth in
this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary,
the Executive shall be entitled to seek specific performance from
a court of competent jurisdiction of the Executive's right to be
paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
13.3 This Agreement shall be subject to Chapter 542 of
New Hampshire Revised Statutes Annotated.
14. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Accounting Firm" shall have the meaning set forth
in Section 5.2(B) hereof.
(B) "Board" shall mean the Board of Directors of the
Company.
(C) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the Executive's
commission of any fraud or embezzlement against the Company,
(ii) the willful and continued refusal by the Executive to
perform the Executive's duties with the Company or the
willful and continued refusal by the Executive to comply
with the directives of superiors (other than any such
refusal resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination for
Good Reason by the Executive pursuant to Section 6.1 hereof)
in each case after (A) a written demand for performance is
delivered to the Executive by the Company, which demand
specifically identifies the manner in which the Company
believes that the Executive has not complied with the
directives of superiors or has not performed the Executive's
duties and (B) the failure by the Executive to cure such
conduct within 10 days after the Executive's receipt of such
written demand, (iii) the Executive's conviction of a felony
or (iv) the execution of an order by, or an agreement by the
Executive with, an appropriate governmental health care
regulatory agency removing or otherwise disqualifying the
Executive from employment with the Company or any of its
affiliates. For purposes of clause (ii) of this definition,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best
interest of the Company. In the event of a dispute
concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless
the Company establishes to the Committee by clear and
convincing evidence that Cause exists.
(D) A "Change in Control" shall mean the consummation
of the Offer.
(E) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(F) "Committee" shall mean three individuals selected
by the President of CIGNA Corporation's Healthcare Division
with the concurrence of CIGNA Corporation's senior human
resources officer.
(G) "Company" shall mean Healthsource, Inc. and shall
include (i) any successor to its business and/or assets
which assumes and agrees to perform this Agreement by
operation of law, or otherwise and (ii) where applicable,
any subsidiary of Healthsource, Inc. by which the Executive
is employed.
(H) "Date of Termination" shall have the meaning set
forth in Section 6.2 hereof.
(I) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment,
if, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's
duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice
of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive's duties.
(J) "Excise Tax" shall mean any excise tax imposed
under section 4999 of the Code.
(K) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(L) "Existing Agreement" shall have the meaning set
forth in Section 5.1(A) hereof.
(M) "Finally Determined" shall have the meaning set
forth in Section 5.2(C) hereof.
(N) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence
(without the Executive's express written consent) of any one
of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to
act described in paragraph (I) or (IV) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect
thereof:
(I) any adverse change to the Executive's duties,
responsibilities, authority, title or office;
(II) a reduction by the Company in the
Executive's total compensation (including the
Executive's opportunity to earn incentive compensation)
as in effect on the date hereof; or
(III) the relocation of the Executive's principal
place of employment to a location more than 35 miles
from each of the Executive's principal place of
employment as of the date hereof and the Executive's
primary residence as of the date hereof.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder.
(O) "Gross-Up Payment" shall have the meaning set forth
in Section 5.2 hereof.
(P) "Merger Agreement" shall have the meaning set forth
in the second WHEREAS clause of this Agreement.
(Q) "Notice of Termination" shall have the meaning set
forth in Section 6.1 hereof.
(R) "Offer" shall have the meaning set forth in the
Merger Agreement.
(S) "Service" shall have the meaning set forth in
Section 5.2(C) hereof.
(T) "Severance Payments" shall have the meaning set
forth in Section 5.1 hereof.
(U) "Term" shall mean the period of time described in
Section 2 hereof.
(V) "Total Payments" shall mean those payments so
described in Section 5.2(A) hereof.
Healthsource, Inc.
By:_____________________
Name:
Title:
_______________________
Executive
Address:
_______________________
_______________________
_______________________
EXHIBIT 22
FORM OF SEVERANCE AGREEMENT
THIS AGREEMENT, dated June __ , 1997, is made by and
between Healthsource, Inc., a New Hampshire corporation (the
"Company"), and _________________ (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment
of key management personnel; and
WHEREAS, the Company has entered into an Agreement and
Plan of Merger (the "Merger Agreement"), dated as of February 27,
1997, by and among the Company, CIGNA Corporation, a Delaware
corporation and CHC Acquisition Corp., a New Hampshire
corporation; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management,
including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive
hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms
used in this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect until
the second anniversary of the consummation of the Offer.
3. Company's Covenants Summarized. In order to induce
the Executive to remain in
the employ of the Company, the Company agrees, under the
conditions described herein, to pay the Executive the Severance
Payments and the other payments and benefits described herein.
Except as provided in Section 8.1 hereof, no Severance Payments
shall be payable under this Agreement unless there shall have
been a termination of the Executive's employment with the Company
following a Change in Control and during the Term. This
Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise agreed in
writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the
Company.
4. Compensation Other Than Severance Payments.
4.1 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term,
the Company shall pay the Executive's full salary to the
Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the
Date of Termination under the terms of the Company's compensation
and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the
first occurrence of an event or circumstance constituting Good
Reason.
4.2 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term,
the Company shall pay to the Executive the Executive's normal
post-termination compensation and benefits as such payments
become due. Such post-termination compensation and benefits
shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior
to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the occurrence of
the first event or circumstance constituting Good Reason.
5. Severance Payments.
5.1 If the Executive's employment is terminated
following a Change in Control and during the Term, other than (A)
by the Company for Cause, (B) by reason of death or Disability,
or (C) by the Executive without Good Reason, then in either such
case, the Company shall pay the Executive the amounts, and
provide the Executive the benefits, described in this Section 5.1
("Severance Payments") and Section 5.2, in addition to any
payments and benefits to which the Executive is entitled under
Section 4 hereof.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination
and in lieu of any severance benefit otherwise payable to
the Executive under any severance plan or program maintained
by the Company (including, without limitation, any severance
benefit payable under that certain agreement (the "Existing
Agreement"), dated as of ________________, by and between
the Executive and the Company), the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to
two (2) times the sum of (i) the Executive's base salary as
in effect immediately prior to the Date of Termination or,
if higher, in effect immediately prior to the first
occurrence of an event or circumstance constituting Good
Reason, and (ii) the maximum amount of annual bonus that
could be earned by the Executive pursuant to any annual
bonus or incentive plan maintained by the Company in respect
of the fiscal year in which occurs the Date of Termination
or, if higher, in respect of the fiscal year in which occurs
the first event or circumstance constituting Good Reason.
As of the date hereof, the Executive's base salary is
$________ and the Executive's maximum annual bonus is ___%
of such base salary.
(B) For the two (2) year period immediately following
the Date of Termination, the Company shall arrange to
provide the Executive and his dependents life, disability,
accident and health insurance benefits substantially similar
to those provided to the Executive and his dependents
immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive
and his dependents immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, at no
greater cost to the Executive than had the Executive
remained employed by the Company during such period.
Benefits otherwise receivable by the Executive pursuant to
this Section 5.1(B) shall be reduced to the extent benefits
of the same type are received by or made available to the
Executive by a subsequent employer during the two (2) year
period following the Executive's termination of employment
(and any such benefits received by or made available to the
Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall
reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over the cost the
Executive would have incurred for such benefits had the
Executive remained employed by the Company during such
period.
(C) Notwithstanding any provision of any annual
incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to a pro rata
portion to the Date of Termination of the aggregate value of
the bonus payment the Executive would have received for the
year including the Date of Termination, calculated by
multiplying the bonus that the Executive would have earned
for such year, assuming the achievement, at the level that
would produce an award equal to % of the
Executive's base salary as in effect immediately prior to
the Date of Termination or, if higher, in effect immediately
prior to the first occurrence of an event or circumstance
constituting Good Reason, of the individual and corporate
performance goals established with respect to such bonus, by
the fraction obtained by dividing the number of full months
and any fractional portion of a month during such year
through the Date of Termination by twelve.
(D) The Company shall (i) reimburse the Executive for
outplacement services suitable to the Executive's position
for a period of one year or, if earlier, until the first
acceptance by the Executive of an offer of employment, (ii)
reimburse the Executive for financial planning services for
a period of one year and (iii) provide the Executive with
reasonable office space and secretarial services for a
period of two (2) years. The outplacement services referred
to under clause (i) above shall be no less favorable to the
Executive than the outplacement services provided under any
plan, program or arrangement by CIGNA Corporation to any of
its senior executive officers.
5.2 (A) If the Executive becomes entitled to the
Severance Payments and, if any of the payments or benefits
received or to be received by the Executive in connection
with a Change in Control or the Executive's termination of
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the
Company, CIGNA Corporation or any Person affiliated with the
Company or CIGNA Corporation) (such payments or benefits,
excluding the Gross-Up Payment, being hereinafter referred
to as the "Total Payments") will be subject to the Excise
Tax, the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount
retained by the Executive, after deduction of any Excise Tax
on the Total Payments and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-Up
Payment (but not taking into account any federal, state or
local income or employment tax otherwise payable with
respect to the Total Payments), shall be equal to the Total
Payments.
(B) Subject to the provisions of Section 5.2(C), all
determinations required to be made under this Section 5.2,
including whether a Gross-Up Payment is required and the
amount of the Gross-Up Payment, shall be made by a
nationally recognized accounting firm designated by the
Company, which is not and was not immediately prior to the
Change in Control serving as accountant or auditor for CIGNA
Corporation or the Company (the "Accounting Firm"). The
Accounting Firm shall provide detailed supporting
calculations both to the Company and to the Executive within
thirty (30) days of the Date of Termination or such earlier
date as may be requested by the Company; provided, however
that if, pursuant to Section 5.3, the payment of amounts due
under Sections 5.1(A) and/or (C) is delayed due to the
inability to finally determine such amounts within the
specified period, the time for the Accounting Firm to
provide such supporting calculations may be similarly
extended. Any Gross-Up Payment, as determined pursuant to
this Section 5.2, shall be paid to the Executive within ten
(10) business days of the Accounting Firm's determination.
The Accounting Firm shall furnish the Executive with its
opinion that the filing by the Executive of the Executive's
federal income tax return in accordance with the Accounting
Firm's determination (or redetermination in accordance with
Section 5.2(C) below) will not result in the imposition of a
negligence or similar penalty on the Executive; provided,
however, that if the opinion of the Accounting Firm cannot
be obtained using reasonable efforts and at a reasonable
cost the Company shall provide the Executive such other
written advice of the Accounting Firm as shall be reasonably
obtainable. Any determination by the Accounting Firm shall
be binding on the Executive and the Company. For purposes
of determining the amount of the Gross-Up Payment, unless
the facts clearly indicate otherwise, the Executive shall be
deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date
of Termination (or if there is no Date of Termination, then
the date on which the Gross-Up Payment is calculated for
purposes of this Section 5.2), net of the maximum reduction
in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is Finally
Determined (as defined below) to be less than the amount
taken into account hereunder in calculating the Gross-Up
Payment, the Executive shall repay to the Company, within
ten (10) business days following the time that the amount of
such reduction in the Excise Tax is Finally Determined, the
portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Executive's taxable
income and wages for purposes of federal, state and local
income and employment taxes), plus interest on the amount of
such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax
is Finally Determined to exceed the amount taken into
account hereunder in calculating the Gross-Up Payment
(including by reason of any payment the existence or amount
of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest,
penalties or additions payable by the Executive with respect
to such excess) within ten (10) business days following the
time that the amount of such excess is Finally Determined.
The Executive and the Company shall each reasonably
cooperate with the other in connection with any
administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect
to the Total Payments. The Executive shall provide the
Company with prompt notice of any claims by the Internal
Revenue Service (the "Service") that, if successful, would
require payment of an additional Gross-Up Payment, shall
permit the Company to determine whether to contest such
claims (at the Company's own expense, holding the Executive
harmless, on an after-tax basis, from any Excise Tax or
income tax, including interest and penalties with respect
thereto, imposed as a result of such representation and
payment of costs and expenses), shall permit the Company to
participate in any proceedings relating to such claims, and
shall take such actions and provide such information in
connection with such claims as the Company shall reasonably
direct and request. For purposes of this Section 5.2(C),
"Finally Determined" means, with respect to any change in
the amount of the Excise Tax taken into account in
calculating the Gross-Up Payment, (i) when the change
originates with a claim by the Service, a determination by
the final administrative or judicial tribunal to which the
matter is appealed; or (ii) in all other cases, when
circumstances so require, a redetermination of the amount of
the Excise Tax by the Accounting Firm.
5.3 The payments provided in subsections (A) and (C) of
Section 5.1 hereof shall be made not later than the fifteenth day
following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or
before such day, the Company shall pay to the Executive on such
day an estimate of the minimum amount of such payments to which
the Executive is clearly entitled and shall pay the remainder of
such payments (together with interest on the unpaid remainder (or
on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the sixtieth (60th) day
after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the tenth (10th) business
day after demand by the Company (together with interest at 120%
of the rate provided in section 1274(b)(2)(B) of the Code). At
or within a reasonable time after the time that payments are made
under this Agreement, the Company shall provide the Executive
with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the
Company has received from the Accounting Firm or other advisors
or consultants (and any such opinions or advice which are in
writing, to the extent not subject to a valid claim of privilege
by the Company, shall be attached to the statement).
5.4 The Company also shall pay to the Executive all
legal and accounting fees and expenses incurred by the Executive
in seeking to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding
to the extent attributable to the application of section 4999 of
the Code to any payment or benefit provided hereunder. Such
payments shall be made within ten (10) business days after
receipt by the Company of the Executive's written requests for
payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.
6. Termination Procedures and Compensation During
Dispute.
6.1 Notice of Termination. After a Change in Control
and during the Term, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated
by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 9 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a certification that the evidence in support
of such termination has been reviewed by the Committee and has
been determined to constitute sufficient grounds for such
termination. After receipt of a Notice of Termination for Cause,
the Executive or his counsel may submit a written statement to
the Company before the effective date of the termination
explaining why such a termination for Cause would constitute a
breach of the Severance Agreement. If such a statement is
submitted, the Company shall determine in good faith whether to
proceed with, delay or rescind the Executive's termination for
Cause. Any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements of this Section 6.1 shall not be
effective, and the Company shall continue to pay the Executive
his regular compensation (including, but not limited to, salary)
and continue Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was
participating on the date of the purported termination until the
Executive's actual Date of Termination.
6.2 Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's
employment after a Change in Control and during the Term, shall
mean (i) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment
is terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the
case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
6.3 Dispute Concerning Termination. If within fifteen
(15) days after any Notice of Termination by the Company for
Cause or by the Executive for Good Reason is given, or, if later,
prior to the Date of Termination (as determined without regard to
this Section 6.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date
on which the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or
decree of an arbitrator or a court of competent jurisdiction
(which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such
dispute with reasonable diligence; and provided further, that the
Date of Termination shall not be extended beyond the date that
the arbitrator acting pursuant to the following sentence
determines that the conditions of this Section 6.3 (including,
but not limited to, the preceding proviso) have not been, or are
no longer, satisfied. For purposes of this Section 6.3, the
dispute resolution process under Section 13.1 shall not apply,
and "reasonable diligence" shall not exist unless the party
giving notice institutes an arbitration under Section 13.2 (by
sending the other party a demand for arbitration) within fifteen
(15) business days after sending the other party the notice of
dispute concerning the termination.
6.4 Compensation During Dispute. If a purported
termination of the Executive's employment occurs following a
Change in Control and during the Term and the Date of Termination
is extended in accordance with Section 6.3 hereof, the Company
shall continue to pay the Executive the full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, until the Date of
Termination, as determined in accordance with Section 6.3 hereof.
Amounts paid under this Section 6.4 are in addition to all other
amounts due under this Agreement (other than those due under
Section 4.2 hereof) and shall not be offset against or reduce any
other amounts due under this Agreement.
7. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the
Term, the Executive is not required to seek other employment or
to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 5 hereof or Section
6.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (except as specifically provided
in Section 5.1(B) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the Company, or
otherwise.
8. Successors; Binding Agreement.
8.1 In addition to any obligations imposed by law upon
any successor to the Company, the Company will require any
successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
8.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any
amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of
the Executive) if the Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors,
personal representatives or administrators of the Executive's
estate.
9. Notices. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed, if to the
Executive, to the address inserted below the Executive's
signature on the final page hereof and, if to the Company, to the
address set forth below, or to such other address as either party
may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
Healthsource, Inc.
Two College Park Drive
Hooksett, New Hampshire 03106
Attention: President
10. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by
the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or of any lack of
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have
been made by either party; provided, however, that this Agreement
shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company
(including without limitation the Existing Agreement) only in the
event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company
other than for Cause or by the Executive for Good Reason; and
provided further, that this Agreement shall not supersede any
confidentiality, noncompete or nonsolicitation agreement or any
such provisions contained in the Existing Agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New
Hampshire without giving effect to the principles of conflicts of
law thereof. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company
and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration
of the Term (including, without limitation, those under Sections
5 and 6 hereof) shall survive such expiration.
11. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but both of which together will constitute one and the
same instrument.
13. Settlement of Disputes; Arbitration.
13.1 All claims by the Executive for benefits under
this Agreement shall be directed to and determined by the
Committee and shall be in writing. Any denial by the Committee
of a claim for benefits under this Agreement shall be delivered
to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable
opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days
after notification by the Committee that the Executive's claim
has been denied.
13.2 Any further dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively
by arbitration in Manchester, New Hampshire in accordance with
the rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth in
this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the contrary,
the Executive shall be entitled to seek specific performance from
a court of competent jurisdiction of the Executive's right to be
paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this
Agreement.
13.3 This Agreement shall be subject to Chapter 542 of
New Hampshire Revised Statutes Annotated.
14. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Accounting Firm" shall have the meaning set forth
in Section 5.2(B) hereof.
(B) "Board" shall mean the Board of Directors of the
Company.
(C) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the Executive's
commission of any fraud or embezzlement against the Company,
(ii) the willful and continued refusal by the Executive to
perform the Executive's duties with the Company or the
willful and continued refusal by the Executive to comply
with the directives of superiors (other than any such
refusal resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination for
Good Reason by the Executive pursuant to Section 6.1 hereof)
in each case after (A) a written demand for performance is
delivered to the Executive by the Company, which demand
specifically identifies the manner in which the Company
believes that the Executive has not complied with the
directives of superiors or has not performed the Executive's
duties and (B) the failure by the Executive to cure such
conduct within 10 days after the Executive's receipt of such
written demand, (iii) the Executive's conviction of a felony
or (iv) the execution of an order by, or an agreement by the
Executive with, an appropriate governmental health care
regulatory agency removing or otherwise disqualifying the
Executive from employment with the Company or any of its
affiliates. For purposes of clause (ii) of this definition,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best
interest of the Company. In the event of a dispute
concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless
the Company establishes to the Committee by clear and
convincing evidence that Cause exists.
(D) A "Change in Control" shall mean the consummation
of the Offer.
(E) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(F) "Committee" shall mean three individuals selected
by the President of CIGNA Corporation's Healthcare Division
with the concurrence of CIGNA Corporation's senior human
resources officer.
(G) "Company" shall mean Healthsource, Inc. and shall
include (i) any successor to its business and/or assets
which assumes and agrees to perform this Agreement by
operation of law, or otherwise and (ii) where applicable,
any subsidiary of Healthsource, Inc. by which the Executive
is employed.
(H) "Date of Termination" shall have the meaning set
forth in Section 6.2 hereof.
(I) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment,
if, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's
duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice
of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive's duties.
(J) "Excise Tax" shall mean any excise tax imposed
under section 4999 of the Code.
(K) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(L) "Existing Agreement" shall have the meaning set
forth in Section 5.1(A) hereof.
(M) "Finally Determined" shall have the meaning set
forth in Section 5.2(C) hereof.
(N) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence
(without the Executive's express written consent) of any one
of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to
act described in paragraph (I) or (IV) below, such act or
failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect
thereof:
(I) any material adverse change to the
Executive's title or office or any material diminution
of the Executive's duties, responsibilities or
authority;
(II) a reduction by the Company in the
Executive's total compensation (including the
Executive's opportunity to earn incentive compensation)
as in effect on the date hereof; or
(III) the relocation of the Executive's principal
place of employment to a location more than 35 miles
from each of the Executive's principal place of
employment as of the date hereof and the Executive's
primary residence as of the date hereof.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.For purposes of clause (I) of
this definition, no adverse change or diminution shall be deemed
"material" unless it is of such magnitude that a reasonable
individual in the employee's position would view such change as
"material." In addition, the following is a non-exhaustive list
of changes deemed not to be material adverse changes or
diminutions under clause (I):
(1) the mere consummation or closing of any
transaction by which the Company becomes a
subsidiary of Parent; provided however, that
changes in the Executive's title, office duties,
responsibilities or authority arising out of or
otherwise related to such consummation shall not
be excluded by virtue of this paragraph (1);
(2) any change in duties, responsibilities or
authority in the nature of a promotion with a
commensurate increase in compensation;
(3) the assignment or transfer to a temporary and
part-time position on any group, team or unit with
responsibility for combining or integrating the
business and operations of the Company and
Parent's HealthCare Division provided that the
duties and responsibilities associated with such
position are consistent with the Executive's other
duties and responsibilities.
(O) "Gross-Up Payment" shall have the meaning set forth
in Section 5.2 hereof.
(P) "Merger Agreement" shall have the meaning set forth
in the second WHEREAS clause of this Agreement.
(Q) "Notice of Termination" shall have the meaning set
forth in Section 6.1 hereof.
(R) "Offer" shall have the meaning set forth in the
Merger Agreement.
(S) "Service" shall have the meaning set forth in
Section 5.2(C) hereof.
(T) "Severance Payments" shall have the meaning set
forth in Section 5.1 hereof.
(U) "Term" shall mean the period of time described in
Section 2 hereof.
(V) "Total Payments" shall mean those payments so
described in Section 5.2(A) hereof.
Healthsource, Inc.
By:_____________________
Name:
Title:
_______________________
Executive
Address:
_______________________
_______________________
_______________________
