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