EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of September 13, 2000, by and
between HUMANA INC. (hereinafter "Company"), a Delaware corporation
having its principal place of business in Louisville, Kentucky, and
Xxxxxxx X. XxXxxxxxxxx (hereinafter "Employee"):
WITNESSETH:
WHEREAS, Employee desires to render faithful and efficient
service to the Company; and
WHEREAS, the Company desires to receive the benefit of
Employee's service; and
WHEREAS, both Company and Employee desire to formalize the
conditions of Employee's employment by written agreement;
NOW, THEREFORE, in consideration of the premises the mutual
covenants hereinafter set forth, the parties agree as follows:
0.Xxxxxx. The Company hereby employs Employee as President and
Chief Executive Officer and Employee hereby agrees to serve
the Company in such capacity.
2. Term of Employment. Employee's employment shall be for the
"Employment Period" with the initial term commencing on the date
hereof, and extending through December 31, 2000. The initial term
shall be automatically renewed and extended upon the expiration
thereof for successive periods of one (1) year until such time as
the Employment Period shall terminate pursuant to the terms of this
Agreement, or until the Company on the one hand, or Employee on the
other hand, shall terminate the Employment Period by giving written
notice to the other party on or before sixty (60) days prior to the
expiration date of the initial or any renewal term. The renewal and
extension of this Agreement shall also be referred to as the
"Employment Period." The effective date of Employee's termination
of employment for whatever reason under this Agreement shall be the
"Termination Date."
3. Responsibilities. During the Employment Period,
Employee shall devote his entire business time and attention,
except during reasonable vacation periods, to, and exert his
best efforts to promote, the affairs of the Company, and
shall render such services to the Company as may be required
by the Board of Directors of the Company ("Board") consistent
with his employment as Chief Executive Officer. Nothing
herein contained shall preclude service by Employee on a
reasonable number of boards of directors or trustees of other
entities not engaged in any business competitive with the
business of the Company, provided that Employee shall receive
approval for any such board service in advance from the
Company's Board.
4. Incapacity. If, during the Employment Period, Employee
should be prevented from performing his duties or fulfilling
his responsibilities by reason of any incapacity or
disability for a continuous period of six (6) months, then
the Company's Board, in its sole and absolute discretion,
may, based on the opinion of a qualified physician, consider
such incapacity or disability to be total and may on ninety
(90) days written notice to Employee terminate the Employment
Period. Benefits and payments shall be made under this
Agreement following incapacity in accordance with Section
8(a).
5.Death. The Employment Period shall automatically terminate
upon the death of Employee, and payments will be made to the
Employee's estate in accordance with Section 8(a).
6.Compensation. During the Employment Period, Employee shall
(i) receive a base salary (hereinafter "Annual Base Salary")
that shall be an annual amount of not less than Six Hundred
Fifty Thousand Dollars ($650,000) payable in accordance with
the payroll practices of the Company, and shall (ii)
participate in an incentive plan providing for a target
incentive compensation amount of not less than one hundred
percent twenty-five (125%) of his Annual Base Salary.
7.Benefit Plans and Programs. During the Employment Period,
Employee shall be eligible for participation in all benefit
plans and programs, including those for executive employees,
made available by the Company to its respective employees.
8.Severance Payments.
a) In the event that Employee's employment is terminated
by (i) the Company while this Agreement is in effect
without Good Cause as defined in Sections 8(c)(1), (2) or
(3) hereof, (ii) by the Company for Good Cause as defined
in Section 8(c)(4) hereof, (iii) because the Company
terminates the Employment Period pursuant to Section 2 of
this Employment Agreement, (iv) by reason of incapacity or
disability in accordance with Section 4, or (v) by reason
of death in accordance with Section 5:
(1)The Company shall pay to Employee or his estate, no
later than thirty (30) calendar days after such
Termination Date, an amount equal to any unpaid current
Annual Base Salary accrued through the Termination
Date, his bonus, calculated at one hundred percent
(100%) of his Annual Base Salary prorated for the
current fiscal year through the Termination Date, plus
one (1) times the sum of his then current Annual Base
Salary and bonus, calculated at one hundred percent
(100%) of his Annual Base Salary. The Company shall
continue to keep in full force and effect all plans or
policies of medical, accident and life insurance
benefits with respect to Employee and his dependents
with the same level of coverage available to employees
under the terms of those employee benefit plans for a
period of twelve (12) months, upon the same terms,
costs and otherwise to the same extent as such plans
are in effect for employees of the Company who were
similarly situated to Employee as of the Termination
Date.
(2)Any of the restricted shares awarded to Employee on
September 9, 1998 but which have not yet vested or been
forfeited shall become vested and non-forfeitable as of
the Termination Date.
(3)To the extent stock options granted to Employee have
not become fully vested and exercisable as of the
Termination Date, such options shall become fully
vested and all vested stock options shall be
exercisable until the earlier of (i) two (2) years
commencing on the Termination Date, or (ii) the
original term of the option grant.
b)In the event that Employee's employment is terminated by
the Company for Good Cause as defined in Sections 8(c)(1),
(2), (3):
(1) The Company shall pay to Employee, no later than
thirty (30) calendar days after the Termination Date,
an amount equal to his then current Annual Base Salary
accrued but unpaid through the Termination Date; and
Employee shall have a period of ninety (90) days after
such Termination Date in which to exercise any
exercisable vested stock options, subject to the
provisions of any applicable stock option agreement.
(2) Any restricted shares or stock options previously
granted but still subject to restriction or unvested
at the Termination Date shall be forfeited.
c)Good Cause shall mean the Company's Board has determined in
good faith, without being bound by the Company's
progressive discipline policy for employees:
(1) that Employee has engaged in acts or omissions against
the Company or any of its subsidiaries constituting
dishonesty, intentional breach of fiduciary obligation
or intentional wrongdoing or misfeasance; or
(2) that Employee has been arrested or indicted in a
possible criminal violation involving fraud or
dishonesty; or
(3) that Employee has intentionally and in bad faith acted in a
manner which results in a material detriment to the assets,
business or prospects of the Company or any of its subsidiaries;
or
(4)that Employee has failed to perform on a prolonged
basis, where such failure is considered to be
substantial and where corporate performance
expectations have been previously agreed upon with the
Employee on an annual basis. Further, the failure to
perform must be because of things considered to be
within the reasonable control of the Employee,
generally of an operating or strategic nature, and
excluding performance primarily resulting from things
clearly beyond the reasonable control of Employee, such
as the following:
(A) drop in the Company's stock share price as a result of an
overall market correction,
(B) severe national economic conditions, or
(C) adverse problems intrinsic to the Company's industry.
d) In the event that Employee's employment is terminated (i)
because the Employee terminates the Employment Period pursuant to
Section 2 of this Employment Agreement or (ii) because Employee
voluntarily leaves the employ of the Company during the Employment
Period:
(1) The Company shall pay to Employee, no later than thirty (30)
calendar days after such Termination Date, an amount equal to any
unpaid current Annual Base Salary accrued through the Termination
Date, plus one (1) times his then current Annual Base Salary.
Any bonus finally determined to be payable at the end of the
fiscal year in which the Termination Date is included shall be
prorated for the period up to and including the Termination Date
and shall be promptly paid to Employee at the same time any other
similar bonuses are paid to any other employee of the Company for
such fiscal year. The Company shall continue to keep in full force
and effect all plans or policies of medical, accident and life
insurance benefits with respect to Employee and his dependents with
the same level of coverage available to employees under the terms
of those employee benefit plans for a period of twelve (12) months,
upon the same terms, costs and otherwise to the same extent as such
plans are in effect for employees of the Company who were similarly
situated to Employee as of the Termination Date.
(2) Any restricted shares or stock options previously granted but
still subject to restriction or unvested at the Termination Date
shall be forfeited. Any vested but unexercisable options shall be
exercisable until the earlier of (i) two (2) years commencing on
the Termination Date or, (ii) the original term of the option
grant.
e)Following the Employment Period, Employee shall be
eligible for continuation of health and dental insurance
coverage pursuant to the Consolidated Omnibus Budget
Reconciliation Act (COBRA) for eighteen (18) months. For
the first twelve (12) months, Employee's cost will be an
amount equal to the normal employee contribution.
Thereafter, the cost will be an amount equal to the COBRA
cost of such coverage. During the first eighteen (18)
months, Employee may elect any of the coverages available
to Humana employees. Thereafter, Humana agrees that
Employee may elect coverage under any of the insured
products offered by Humana's health insurance or HMO
subsidiaries for Employee, his spouse as of the date
hereof ("Spouse"), and any eligible dependent until the
later of Employee's age sixty-five (65) or eligibility for
Medicare coverage (hereinafter "Extended Coverage"). At
the earlier of Employee attaining Medicare eligibility or
death, Employee's Spouse and any now current eligible
dependent of Employee and Spouse will be eligible for
Extended Coverage until the later of Spouse's age
sixty-five (65) or Medicare coverage eligibility. If at
any time during which the Extended Coverage is in effect
Employee or his Spouse obtains Medicare or becomes
eligible for other employee group health insurance
coverage which does not exclude a pre-existing condition
of Employee, Spouse or dependent, Humana's obligation will
cease as to the one who has obtained Medicare or, in the
case of other employee group health coverage, as to that
person and their eligible dependents. Employee's premium
for the Extended Coverage and Spouse's premium, if she
retains Extended Coverage, will be amount equal to the
COBRA cost of such coverage. If Humana hereafter adopts a
retiree health insurance program and Humana still has
obligations under this provision, Employee will be offered
the option of participating in that program in lieu of the
Extended Coverage described herein. The health and dental
insurance benefits hereunder shall be administered in
conjunction with any other similar benefits which the
Employee has from the Company but in no case shall be
duplicative.
9.Termination After A Change in Control. In the event of a
"Change in Control" of the Company (as defined as of the date
hereof in the Company's 1996 Stock Incentive Plan for
Employees), if, within twenty-four (24) months following the
closing of such a Change in Control (or at any time prior
thereto but in contemplation thereof):
(i) There is a material reduction in the Employee's title,
authority or responsibilities, including reporting
responsibilities;
(ii) The Employee's Annual Base Salary is reduced;
(iii)The Employee's office at which he is to perform his
duties is relocated to a location more than thirty (30) miles
from the location at which the Employee performed his duties
prior to the Change in Control;
(iv)The Company fails to continue in effect any incentive,
bonus or other compensation plan in which the Employee
participates, unless the Company substitutes a substantially
equivalent benefit;
(v) The Company fails to continue in effect any employee
benefit plan (including any medical, hospitalization, life
insurance, dental or disability benefit plan in which the
Employee participated) or any material fringe benefit or
perquisite enjoyed by the Employee at the time of the Change
in Control, unless the Company substitutes benefits which, in
the aggregate, are substantially equivalent;
(vi) The Company breaches any material provision of this
Employment Agreement; or
(vii) The Company fails to obtain a satisfactory agreement
from any successor or assign of the Company to assume and
agree to perform this Employment Agreement;
Then the Employee shall have the option to voluntarily
terminate his employment and the Company shall:
a)Pay the Employee his full base salary earned but not yet
paid through the Termination Date at the greater of the
rate in effect at the time of the Change in Control or the
Termination Date ("Higher Annual Base Salary"), plus a
bonus calculated at one hundred twenty-five percent (125%)
of his Annual Base Salary prorated for the current fiscal
year through the Termination Date.
b)Pay the Employee a lump sum in an amount equal to two and
one-half (2 1/2) times the amount equal to the sum of (1)
the Employee's Higher Annual Base Salary plus (2) the
maximum target bonus or incentive compensation which could
have been earned by the Employee calculated as if all
relevant goals had been met during the then current fiscal
year of the Company pursuant to the terms of the incentive
compensation plan in which he participates. If there is no
incentive compensation plan in effect as of the Termination
Date, then for purposes of this Agreement it shall be
assumed that the amount of incentive compensation to be
paid to the Employee shall be the maximum target amount
under any incentive compensation plan in which he
participated at the date of the Change in Control or the
most recent plan participated in, whichever would be
greater.
c)Maintain in full force and effect for the benefit of the
Employee and the Employee's dependents and beneficiaries,
at the Company's expense, all life insurance, health
insurance, dental insurance, accidental death and
dismemberment insurance and disability insurance under
plans and programs in which the Employee and/or the
Employee's dependents and beneficiaries participated
immediately prior to the Termination Date, provided that
continued participation is possible under the general terms
and provisions of such plans and programs ("Extended
Benefits"). The Extended Benefits shall be continued until
the earlier of (A) the second (2nd) anniversary of the
Termination Date, (B) the effective date of the Employee's
coverage under equivalent benefits from a new employer
(provided that no such equivalent benefits shall be
considered effective unless and until all pre-existing
condition limitations and waiting period restrictions have
been waived or have otherwise lapsed), or (C) the death of
the Employee. If participation in any such plan or program
is barred, the Company shall arrange at its own expense to
provide the Employee with benefits substantially similar to
those which he was entitled to receive under such plans and
programs. At the end of the period of coverage, the
Employee shall have the right to have assigned to him, at
no cost and with no apportionment of prepaid premiums, any
assignable insurance policy relating specifically to him.
Employee shall be entitled to continuation coverage as
provided in Section 8(d) at the conclusion of the coverage
provided under this Section.
The amount of any payment provided for in this Section 9
shall be offset by any lump sum cash payments due the
Employee upon termination under any other provisions of
this Employment Agreement.
d) To the extent that any amounts or payments in the
nature of compensation [within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder ("Section 280G")] to or
for the benefit of the Employee under this Employment
Agreement or otherwise (or any part of such amount or other
payment) constitutes an "excess parachute payment" within
the meaning of Section 280G and Section 4999 of the
Internal Revenue Code, then the Company shall pay to
Employee an additional sum such that, after all taxes
applicable to the receipt of such amount have been
subtracted therefrom, the remaining amount will equal the
sum of the amount of tax imposed with respect to the
"excess parachute payment," plus any interest and penalties
thereon (other than those caused solely by Employee's
action or inaction). Therefore, the effect shall be to
maintain the Employee in the same financial position that
he would have been in had no tax under Section 280G been
imposed.
10.Confidential Information and Trade Secrets.
a)Employee recognizes that Employee's position with the
Company requires considerable responsibility and trust,
and, in reliance on Employee's loyalty, the Company may
entrust Employee with highly sensitive confidential,
restricted and proprietary information involving Trade
Secrets and Confidential Information.
b)For purposes of this Agreement, a "Trade Secret" is any
scientific or technical information, design, process,
procedure, formula or improvement that is valuable and not
generally known to competitors of the Company.
"Confidential Information" is any data or information,
other than Trade Secrets, that is important, competitively
sensitive, and not generally known by the public,
including, but not limited to, the Company's business
plans, business prospects, training manuals, product
development plans, bidding and pricing procedures, market
strategies, internal performance statistics, financial
data, confidential personnel information concerning
employees of the Company, supplier data, operational or
administrative plans, policy manuals, and terms and
conditions of contracts and agreements. The terms "Trade
Secrets" and "Confidential Information" shall not apply to
information which is (i) already in Employee's possession
(unless such information was used in connection with
formulating the Company's business plans, obtained by
Employee from the Company or was obtained by Employee in
the course of Employee's employment by the Company), (ii)
required to be disclosed by any applicable law.
c)Except as required to perform Employee's duties hereunder,
Employee will not use or disclose any Trade Secrets or
Confidential Information of the Company during employment,
at any time after termination of employment and prior to
such time as they cease to be Trade Secrets or Confidential
Information through no act of Employee in violation of this
Section 11.
d) Upon the request of the Company and, in any event, upon the
termination of employment hereunder, Employee will surrender to the
Company all memoranda, notes, records, plans, manuals or other
documents pertaining to the Company's business or Employee's
employment (including all copies thereof). Employee will also leave
with the Company all materials involving Trade Secrets or
Confidential Information of the Company. All such information and
materials, whether or not made or developed by Employee, shall be
the sole and exclusive property of the Company, and Employee hereby
assigns to the Company all of Employee's right, title and interest
in and to any and all of such information and materials.
11.Agreement Not To Compete and Agreement Not To Solicit
a)Agreement Not To Compete. Employee hereby covenants and
agrees that for a period commencing on the date hereof and
ending twelve (12) months after Employee's Termination Date,
Employee, directly or indirectly, personally, or as an
employee, officer, director, partner, member, owner,
shareholder, investor or principal of, or consultant or
independent contractor with, another entity, shall not:
(1) Participate in any business which competes with the
Company including, without limitation, health
maintenance organizations, insurance companies or
prepaid health plan businesses in which the Company has
been actively engaged during any part of the two (2)
year period immediately preceding the Employee's
employment Termination Date ("Company Business"), in any
of the markets in which the Company is then currently
doing business.
b)Agreement Not To Solicit. Employee hereby covenants and
agrees that for a period commencing on the date hereof and
ending twelve (12) months after Employee's Termination Date,
Employee, directly or indirectly, personally, or as an
employee, officer, director, partner, member, owner,
shareholder, investor or principal of, or consultant or
independent contractor with, another entity, shall not:
(1)Interfere with the relationship of the Company and any
of its employees, agents, representatives, consultants
or advisors.
(2)Divert, or attempt to cause the diversion from the
Company, any Company Business, nor interfere with
relationships of the Company with its policyholders,
agents, brokers, dealers, distributors, marketers,
sources of supply or customers.
(3)Solicit, recruit or otherwise induce or influence any
employee of the Company to accept employment in any
business which competes with the Company Business, in
any of the markets in which the Company is then
currently doing business.
12.Specific Enforcement. Employee specifically acknowledges and
agrees that the restrictions set forth in Sections 10 and 11
hereof are reasonable and necessary to protect the legitimate
interest of the Company and that the Company would not have
entered into this Agreement in the absence of such
restrictions. Employee further acknowledges and agrees that
any violation of the provisions of Sections 10 or 11 hereof
will result in irreparable injury to the Company, that the
remedy at law for any violation or threatened violation of such
Sections will be inadequate and that in the event of any such
breach, the Company, in addition to any other remedies or
damages available to it at law or in equity, shall be entitled
to temporary injunctive relief before trial from any court of
competent jurisdiction as a matter of course, and to permanent
injunctive relief without the necessity of proving actual
damages.
13.Notice. Any notice required to be given by the Company
hereunder to Employee shall be in proper form and signed by an
officer or Director of the Board of the Company. Until one
party shall advise the other in writing to the contrary,
notices shall be deemed delivered:
a)To the Company if delivered to the Chairman of the Board of
the Company, or if mailed, certified or registered mail
postage prepaid, to Humana Inc., 000 Xxxx Xxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000; Attention: Chairman of the
Board, with a copy to the Company's General Counsel.
b)To Employee if delivered to Xxxxxxx X. XxXxxxxxxxx, or if
mailed to him by certified or registered mail, postage
prepaid, to Xxxxxxx X. XxXxxxxxxxx, 0000 Xxxx Xxxxx Xxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000.
14.Benefit. This Agreement shall bind and inure to the benefit of
the Company and the Employee, their respective heirs,
successors and assigns.
15.Severability. If a judicial determination is made that any of
the provisions of this Employment Agreement constitutes an
unreasonable or otherwise unenforceable restriction against
Employee, such provision shall be rendered void only to the
extent that such judicial determination finds such provision
to be unreasonable or otherwise unenforceable. Moreover,
notwithstanding the fact that any provisions of this
Employment Agreement are determined not to be specifically
enforceable, the Company shall nevertheless be entitled to
recover monetary damages as a result of the breach of such
provision by Employee.
16.Other. This Employment Agreement shall not be construed as
replacing or superceding any other agreements between the
parties, all of which will be deemed to be in full force and
effect unless specifically stated otherwise.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the day and year first above written.
ATTEST: HUMANA INC.
BY: /s/ Xxxx X. Xxxxxxx BY: /s/ Xxxxx X. Xxxxx
Xxxx X. Xxxxxxx
Corporate Secretary Xxxxx X. Xxxxx
Chairman of the Board
of Directors
WITNESS: "EMPLOYEE"
/s/Xxxxxx X. Xxxxxxx /s/ Xxxxxxx X. XxXxxxxxxxx
Xxxxxx X. Hipell Xxxxxxx X. XxXxxxxxxxx
President and Chief
Executive Office
