HEAL THP ARTNERS, INC. CEO SEVERANCE AGREEMENT

Transcription

1 HEAL THP ARTNERS, INC. CEO SEVERANCE AGREEMENT TIllS AGREEMENT is made this 1st day of February, HEALTfWARTNERS, INC. (the "Company"), and GEORGE Executive Officer of the Company (the "CEO"). 1994, by and between C. HALVORSON, Chief INTRODUCfION The Company desires to retain the CEO as its President and Chief Executive Officer and as a member of its Board of Directors, and as President and Chief Executive Officer of its subsidiary companies, Group Health, Inc. and MedCenters Health Plan, and of such other subsidiary companies as agreed to by Halvorson, and to encourage the CEO to use best business judgment in managing the Company's affairs. Therefore, the Company is willing to provide the severance benefits described below to protect the CEO. The severance benefits under this Agreement replace any other severance benefits otherwise provided by the Company. AGREEMENT In consideration of CEO's continued employment with the Company, the CEO and the Company agree as follows: Article 1 Definitions Whenever used in this Agreement, the following words and phrases shall have the meanings set forth below unless the context plainly requires a different meaning. When the defined meaning is intended, the first letter of the term is capitalized: 1.1 "Base Salary" means the total annual base salary payable to the CEO at the salary rate in effect on the date of the CEO's Termination of Employment. Base Salary shall not be reduced for any salary reduction contributions (i) to cash or deferred arrangements under Section 401(k) of the Code, (ii) to a Tax Sheltered Annuity under Section 403(b) of the Code, (iii) to a cafeteria plan under Section 125 of the Code, or (iv) to a nonqualified deferred compensation plan. Base Salary sh~l not take into account any bonuses, reimbursed expenses, credits or benefits under any 4f13194 CONADENT1AL P012055

2 plan of deferred compensation to which the Company contributes, compensation or compensation payable in a fonn other than cash. or any additional cash 1.2 "Reasonable Cause" means the CEO: Committing any material breach of the provisions of this Agreement; Being convicted of a felony or a misdemeanor involving moral turpitude; or Doing or knowingly permiting any act which is determined by a court of competent jurisdiction to constitute a breach of trust or a violation of the duties of office herein assumed by him. 1.3 "Termination of Employment" means ceasing to be employed by the Company for any reason whatsoever, voluntary or involuntary, including by reason of death or disability. 1.4 "Year of Service" means a consecutive twelve-month period of employment with the Company. An approved leave of absence shall be included in. the period of consecutive employment if the CEO returns to full-time service with the Company following such leave. Entitlement Article 2 to Benefits The Company shall pay to the CEO the benefits described in Article 3 following his Termination of Employment for any reason other than death or Reasonable Cause. If the Company terminates the CEO's employment involuntarily and without Reasonable Cause, the Company shall provide to the CEO the severance benefits described in Article 3 and Article 4. No severance benefits shall be payable under this Agreement for the CEO's Termination of Employment for death. Article 3 Basic Severance Benefits Within thirty days following the CEO's Termination of Employment for any reason other than his death, the Company shall deposit to the life insurance policy under the CEO Designated Survivor Plan an amount sufficient to increase the cash value of the policy to the level required to continue the policy in force for the CEO's life expectancy with a death benefit equal to its face 2 CONRDENTlAL P

3 amount, after which the Company shall release all interests in the policy to the CEO. The Company shall also pay to the CEO an amount equal to the state and federal income taxes due on the cash value of the policy using the highest marginal income tax rates, including any tax surcharges applicablegenerally based on income level. Article 4 Supplemental Severance Benefits 4.1 Term of Benefits. If the Company terminates the CEO's employment involuntarily and without Reasonable Cause, the Company shall provide to the CEO the severance benefits described in Section 4.2 commencing on the CEO's Termination of Employment and continuing for one month for each complete Year of Service between February 1, 1994, and the date of Termination of Employment, inclusive of such dates. 4.2 Amount of Benefits. Severance benefits shall consist of the following: Base Salary. Continuation of the CEO's Base Salary Benefits. Continuation of all benefits,' basic and supplemental, as specified in the CEO's employment agreement and as such benefits may have been increased prior to the CEO's Termination of Employment. 4.3 Le~al Continuation Restrictions. The Company shall pay to the CEO, in cash at the beginning of each month in the severance period described in Section 4.1, the cash equivalent value of any benefit described in Section 4.2 that, due to insurance or other contract language or any other legal restrictions, cannot be continued "in kind" for the CEO following the Termination of Employment. In the case of an insured benefit, the cash equivalent value shall be the premium that the Company otherwise would have paid for the CEO. 4.4 COBRA Continuation. The COBRA continuation period for any benefits which are provided by the Company during the severance period commences when' benefits under this Plan commence. 4.5 No Death Benefits. If the CEO dies during the severance benefit period, the benefits.underthis Plan shall cease. 3 CONRDENTlAl P

4 Article 5 Employment Status 5.1 Right to Terminate Employment. This Agreement shall not be deemed to be an employment contract between the Company and the CEO. Nothing contained herein shall give the CEO the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge the CEO at any time, nor shall it give the Company the right to require the CEO to remain in its employ or to interfere with the CEO's right to terminate employment at any time Status Durin~ Benefit Period. Commencing upon the CEO's Termination of Employment, the CEO shall cease to be an CEO of the Company for any purpose. The payment of severance benefits under this Agreement shall be payments to a former CEO. Article 6 Dispute Resolution Any dispute under this Agreement shall be resolved by binding arbitration the American Arbitration Association. under the rules of Amendments Article 7 and Termination This Agreement may be amended or terminated only by a written agreement signed by the Company and the CEO. Article 8 Miscellaneous 8.1 Nonalienation. No benefit payable at any time under this Agreement shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or encumbrance of any kind. 8.2 Tax Withholding. The Company shall withhold any applicable income or employment taxes that are required to be withheld from the severance benefits provided under this Agreement. 4 CONRDENTIAL P012058

5 8.3 Applicable Law. The Agreement and all rights hereunder shall be governed by and cqnstrued according to the laws of Minnesota, except to the extent such laws are preempted by the laws of the United States of America. 8.4 Limitation on Liability. The Company does not guarantee benefits payable under any insurance coverage described or referred to herein, and any benefits thereunder shall be the exclusive responsibility of the insurer that is required to provide such benefits under such policy. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers on the day and year first written above. CEO: GEORGE C. HALVORSON COMPANY: HEAL THP ARTNERS, INe. 5 CONADENTIAL P