Employment Agreement-

Change in Control Agreement

Severance Agreement

 

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT amended and restated as of May 16, 2008 (this “Agreement”), by and between Humana Inc. (hereinafter the “Company”), a Delaware corporation having its principal place of business in Louisville, Kentucky, and Michael B. McCallister (hereinafter “Employee”):

WITNESSETH:

WHEREAS, the Company and Employee are parties to an employment agreement dated as of September 13, 2000 (the “Prior Employment Agreement”); and

WHEREAS, the Company and Employee desire to amend and restate the Prior Employment Agreement to comply with Section 409A of the Internal Revenue Code and the regulations and interpretative guidance thereunder (“Section 409A”) and to make certain other changes.

NOW, THEREFORE, in consideration of the premises the mutual covenants hereinafter set forth, the parties agree as follows:

1. Office. 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 pursuant to this Agreement shall be for the initial term commencing on the date hereof, and extending through December 31, 2010. 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.

5. Death. The Employment Period shall automatically terminate upon the death of Employee.

6. Base Salary. During the Employment Period, Employee shall receive a base salary (hereinafter “Annual Base Salary”) that shall be an annual amount of not less than One Million Twenty Five Thousand Dollars ($1,025,000) payable in accordance with the payroll practices of the Company. Annual Base Salary shall be reviewed and adjusted (upward but not downward) by action of the Compensation Committee of the Board from time to time; providedhowever, that Annual Base Salary may be adjusted downward in connection with an across the board reduction in base salary for all members of senior management.

7. Incentive and 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 and including participation in bonus and incentive compensation plans and programs on terms determined by the Compensation Committee of the Board.

8. Legal Fees and Expenses. The Company agrees to reimburse Employee for reasonable legal fees and expenses incurred in connection with the negotiation of this Agreement not to exceed $25,000.

9. Severance Payments.

 

 

(a)

In the event that Employee’s employment is terminated (i) by the Company during the Employment Period without Good Cause as defined in Section 9(c) hereof, (ii) because the Company terminates the Employment Period pursuant to Section 2 of this Employment Agreement, (iii) by Employee during the Employment Period for Good Reason as defined in Section 9(d) hereof, (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 (except for the payment described in Section 9(a)(1)(B) which shall be paid as provided therein)

(A) An amount equal to any unpaid current Annual Base Salary accrued through the Termination Date;

 

2


(B) His annual bonus for the fiscal year in which the Termination Date occurs calculated (i) at the target percentage of his Annual Base Salary in the case of a termination by reason of death or disability or (ii) at the percentage earned under the applicable plan based on actual performance for such fiscal year in the case of any other termination, in any case, prorated for the portion of the fiscal year of the Company that has elapsed prior to the Termination Date and paid at the same time as bonuses are paid to other participants in the plan for such fiscal year; and

(C) 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.

 

 

(2)

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 to Employee 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.

 

 

(3)

Any of the restricted shares or other equity-based awards granted to Employee that may be outstanding which have not yet vested or been forfeited shall become vested and non-forfeitable as of the Termination Date; providedhowever, that performance-based awards shall vest (i) at the target percentage in the case of a termination by reason of death or disability or (ii) at the percentage earned under the applicable plan or award based on actual performance for the applicable performance period, in any case, prorated for the portion of the performance period that has elapsed prior to the Termination Date in the case of any other termination.

 

 

(4)

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; provided that if they are performance vested stock options, they will vest only to the extent they would have vested if the target level of performance had been achieved, and all vested stock options granted after the date of this Agreement shall be exercisable until the earlier of (i) two (2) years following the Termination Date, or (ii) the original term of the option grant.

 

3


 

(5)

If Employee’s employment is terminated by the Company without Good Cause or by Employee for Good Reason prior to the date of a Change in Control and Employee reasonably demonstrates that such termination or action with respect of any such events of Good Reason was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control, and which Change in Control in each case actually occurs during the term of this Agreement, then, in addition to the payments and benefits provided for in this Section 9(a) (which shall be paid or provided at the time specified in this Section 9(a), Employee will be entitled to receive the payments and benefits provided for in Section 10(b), reduced by the amounts provided for in this Section 9(a) (the “Additional Benefits”), such Additional Benefits to be paid following the Change in Control and at the time or times specified in Section 10(b).

 

 

(b)

In the event that Employee’s employment is terminated (i) by the Company during the Employment Period for Good Cause as defined in Section 9(c), (ii) because Employee terminates the Employment Period pursuant to Section 2 of this Agreement, or (iii) by Employee during the Employment Period without Good Reason.

 

 

(1)

The Company shall pay to Employee or his estate, 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.

 

 

(2)

Any restricted shares, unvested stock options or other equity-based awards previously granted but still outstanding at the Termination Date, shall be forfeited.

 

 

(c)

Good Cause” shall mean (i) the commission by Employee of an act of fraud, misappropriation, embezzlement, gross negligence, or willful misconduct or unethical conduct in connection with Employee’s employment hereunder resulting in material economic or financial injury to the Company, (ii) Employee’s intentional failure or refusal to perform reasonably assigned duties after written notice of such willful failure or refusal and the failure or refusal is not corrected within ten (10) business days or (iii) the indictment for, conviction of or entering a plea of guilty or nolo contendere to a crime constituting a felony (other than a traffic violation or other offense or violation outside of the course of employment which does not adversely affect the Company and its affiliates or their reputation or the ability of the Employee to perform his employment-related duties or to represent the Company); providedhowever, that if Employee is terminated for Good Cause by reason of his indictment pursuant to clause (iii) and the indictment is subsequently dismissed or withdrawn or Employee is found to be not guilty in a court of law in connection with such indictment, then Employee’s termination shall be

 

4


 

treated for purposes of this Agreement as a termination by the Company without Good Cause, and Employee will be entitled to receive (without duplication of benefits and to the extent permitted by law and the terms of the then-applicable medical benefit plans) the payments and benefits set forth in Section 9(a) or Section 10(b) as applicable following such dismissal, withdrawal or finding, payable in the manner and subject to the conditions set forth in such Section. For purposes of this Section 9(c), no act, or failure to act, on Employee’s part shall be deemed “willful” unless done, or omitted to be done, by Employee not in good faith.

 

 

(d)

Good Reason” shall mean a (i) material reduction in Employee’s title, authority or responsibilities, including reporting responsibilities, (ii) reduction in Employee’s Annual Base Salary, (iii) relocation of Employee’s office to a location more than thirty (30) miles from the location at which the Employee performs his duties prior to such relocation, (iv) failure by the Company to continue in effect any incentive, bonus or other material compensation plan in which Employee participates, unless the Company substitutes a substantially equivalent benefit or (v) breach by the Company of any material provision of this Agreement; provided that Employee must give notice of termination for Good Reason within sixty (60) days of the occurrence of the first event giving rise to Good Reason.

 

 

(e)

Following Employee’s Termination Date for any reason, Employee shall be eligible for continuation of health and dental insurance coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA) to the extent provided pursuant to COBRA and the terms of the applicable health and dental plans. 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 period during which coverage is provided pursuant to COBRA, Employee may elect any of the coverages available to Humana employees. After the end of the period during which coverage is provided pursuant to COBRA, the Company 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 then 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.

 

5


 

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.

10. Termination After A Change in Control.

 

 

(a)

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), Employee shall be entitled to the benefits set forth in Section 10(b) of this Agreement, if,

 

 

(1)

Within twenty-four (24) months following Change in Control Employee’s employment with the Company is terminated either by the Company without Good Cause or by Employee after one of the following events occurs:

(A) There is a material reduction in the Employee’s title, authority or responsibilities, including reporting responsibilities;

(B) The Employee’s Annual Base Salary is reduced;

(C) 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 such relocation;

(D) 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;

(E) 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;

 

6


(F) The Company breaches any material provision of this Employment Agreement; or

(G) 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.

 

 

(b)

In the event that a termination of Employee’s employment with the Company occurs pursuant to Section 10(a) of this Agreement, the Company shall

 

 

(1)

Pay Employee no later than thirty (30) calendar days after such Termination Date 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”).

 

 

(2)

Pay Employee his annual bonus for the fiscal year in which the Termination Date occurs calculated at the percentage earned under the applicable plan based on actual performance for such fiscal year, prorated for the portion of the fiscal year of the Company that has elapsed prior to the Termination Date and paid at the same time as bonuses are paid to other participants in the plan for such fiscal year; provided that if the Termination Date occurs in the same calendar year in which the Change in Control occurs, the amount to which Employee is entitled pursuant to this Section 10(b)(2) shall not be less than Employee’s annual bonus for the fiscal year calculated at the target percentage of his Annual Base Salary prorated through the date of the Change in Control.

 

 

(3)

Pay Employee no later than thirty (30) calendar days after such Termination Date 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 target annual bonus which could have been earned by the Employee for the fiscal year of the Company in which the Termination Date occurs calculated as if all relevant goals had been met during that fiscal year 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.

 

7


 

(4)

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 (i) the second (2nd) anniversary of the Termination Date, (ii) 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 restrictions have been waived or have otherwise lapsed), or (iii) 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. On the Termination Date, and without any reduction or limitation on the obligations described above, 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 9(e) at the conclusion of the coverage provided under this Section.

 

 

(5)

Notwithstanding the terms and provisions of any equity compensation plan of the Company as in effect as of the date hereof or as amended hereafter, (i) to the extent any of the restricted shares or other equity-based awards thereunder granted to Employee that may be outstanding which have not yet vested or been forfeited, such shares or awards shall become vested and non-forfeitable as of the Termination Date; provided, that performance-based shares and awards shall vest at the percentage earned under the applicable plan or award based on actual performance for the applicable performance period, (ii) to the extent stock options thereunder granted to Employee have not become fully vested and exercisable as of the Termination Date, such options shall become fully vested; provided, that if such stock options are performance-vested stock options, they will vest only to the extent they would have vested if the target level of performance had been achieved and (iii) all vested stock options granted after the date of this Agreement shall be exercisable until the earlier of (A) two (2) years following the Termination Date, or (B) the original term of the option grant.

 

8


The amount of any payment provided for in this Section 10 shall be offset by any lump sum cash payments due the Employee upon termination under any other provisions of this Agreement

11. Gross-Up Payment.

 

 

(a)

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) (collectively, “Payments”) constitutes an “excess parachute payment” within the meaning of Section 280G and Section 4999 of the Internal Revenue Code (“Section 4999”), then the Company shall pay to the Employee an additional sum (“Gross-Up Payment”) 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 4999 been imposed. All payments and reimbursements to which the Employee is entitled under this Section 11 shall be made not later than April 15 of the taxable year of the Employee next following the taxable year of the Employee in which the Employee receives amounts subject to Section 4999.

 

 

(b)

Notwithstanding the immediately preceding paragraph, in the event that a reduction to the Payments in respect of the Employee of 10% or less, but not more than $200,000, would cause none of the Payments to be “excess parachute payments,” the Employee will not be entitled to a Gross-Up Payment and the Payments shall be reduced to the extent necessary so that none of the Payments shall be “excess parachute payments.” Unless the Employee shall have given prior written notice to the Company specifying a different order by which to effectuate the foregoing, the Company shall reduce or eliminate the Payments (x) by first reducing or eliminating the portion of the Payments which are not payable in cash (other than that portion of the Payments subject to clause (z) hereof), (y) then by reducing or eliminating cash payments (other than that portion of the Payments subject to clause (z) hereof) and (z) then by reducing or eliminating the portion of the Payments (whether payable in cash or not payable in cash) to which Treasury Regulation § 1.280G-1 Q/A 24(c) (or successor thereto) applies, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the date of the Change in Control. Any notice given by the Employee pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Employee’s rights and entitlements to any benefits or compensation.

 

9


12. Timing of Payments and Provision of Benefits.

 

 

(a)

Notwithstanding any other provision of this Agreement, if Employee is a “specified employee” (as defined in Section 409A) at the time of his Termination Date, the payments provided pursuant to Sections 9(a)(1)(B), 9(a)(1)(C), 10(b)(2) and 10(b)(3) of this Agreement shall not be made or commenced until the date that is six (6) months and one (1) day after the Termination Date (“Delay Period”) or such later date specified in any such section, and shall be paid or commenced on such date; providedhowever, that the payments shall not be delayed during the Delay Period if the termination occurs by reason of his death. If this Section applies and the method of payment is not a lump sum, the first payment to Employee will include all amounts that would have been paid during the Delay Period but for this Section.

 

 

(b)

In addition, to the extent that benefits to be provided to Employee pursuant to Sections 9(a)(2), 9(e), 10(b)(4) or 14(a) of this Agreement are not “disability pay,” “death benefit” plans or non-taxable medical benefits within the meaning of Treasury Regulation Section 1.409A-1(a)(5) or other benefits not considered nonqualified deferred compensation within the meaning of that regulation, such provision of benefits shall be delayed until the end of the Delay Period, unless Employee’s termination occurs by reason of his death. Notwithstanding the foregoing, to the extent that the previous sentence applies to the provision of any ongoing benefits that would not be required to be delayed if the premiums were paid by Employee, Employee shall pay the full cost of the premiums for such benefits during the Delay Period and the Company shall pay Employee an amount equal to the amount of such premiums paid by Employee during the Delay Period within ten (10) days after the end of the Delay Period.

 

 

(c)

To the extent that any benefits to be provided to Employee pursuant to this Agreement are considered nonqualified deferred compensation and are reimbursements subject to Treasury Regulation Section 1.409A-3(i)(1)(iv), the reimbursement of eligible expenses related to such benefits shall be made on or before the last day of Employee’s taxable year following Employee’s taxable year in which the expense was incurred.

13. 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.

 

10


 

(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), or (ii) required to be disclosed by any applicable law.

 

 

(c)

Except as required to perform Employee’s duties hereunder or as may be required by law or an order of a court of competent jurisdiction, 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 13.

 

 

(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.

14. Agreement Not To Compete and Agreement Not To Solicit.

 

 

(a)

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

 

11


 

entity, shall not 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; providedhowever that in the case of a termination of employment by Employee during the Employment Period without Good Reason or Employee terminates the Employment Period pursuant to Section 2 of this Agreement, (1) this Section 14(a) shall not apply unless the Company elects within thirty (30) days after the Termination Date (the “Election Period”) that this Section 14(a) shall apply and agrees to (i) pay Employee an amount equal to one (1) times his then current Annual Base Salary (ii) pay Employee his annual bonus for the fiscal year in which the Termination Date occurs calculated at the percentage earned under the applicable plan based on actual performance for such fiscal year, prorated for the portion of the fiscal year of the Company that has elapsed prior to the Termination Date and paid at the same time as bonuses are paid to other participants in the plan for such fiscal year and (iii) 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 dependent(s) 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 the Employee as of the Termination Date and (2) the Company may elect during the Election Period that this Section 14(a) shall apply for twenty four (24) months after Employee’s Termination Date, in which case the payment provided for in clause (i) above shall be equal to two (2) times Employee’s then current Annual Base Salary.

 

 

(b)

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


15. Specific Enforcement. Employee specifically acknowledges and agrees that the restrictions set forth in Sections 13 and 14 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 13 or 14 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.

16. Notice. Any notice required to be given by the Company hereunder to Employee shall be in proper form and signed by an officer or member of the Board. 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., 500 West Main Street, Louisville, Kentucky 40202; Attention: Chairman of the Board, with a copy to the Company’s General Counsel.

 

 

(b)

To Employee if delivered to Michael B. McCallister, or if mailed to him by certified or registered mail, postage prepaid, to Michael B. McCallister, 2101 Club Vista Place, Louisville, Kentucky 40245.

17. Benefit. This Agreement shall bind and inure to the benefit of the Company and the Employee, their respective heirs, successors and assigns.

18. 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.

19. Other. This Employment Agreement shall not be construed as replacing or superseding any other agreements between the parties, all of which will be deemed to be in full force and effect unless specifically stated otherwise.

 

13


IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.

 

HUMANA INC.

By:

 

/s/ Kurt Hilzinger

Name:

 

Kurt Hilzinger

Title:

 

Member of the Board of Directors

EMPLOYEE

/s/ Michael B. McCallister

Name:

 

Michael B. McCallister

Title:

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

EX-10.2 3 a50465203_ex102.htm EXHIBIT 10.2

Exhibit 10.2

 

October 31, 2012

Michael B. McCallister
Chairman and Chief Executive Officer
500 West Main Street
Louisville, Kentucky 40202

Re:  Non-Executive Chairmanship and Related Matters

Dear Mike:

This letter is intended to set forth our mutual understanding regarding your anticipated service as Non-Executive Chairman (“Chairman”) of the Board of Directors of Humana Inc. (the “Company”).  You have provided notice that you intend to retire as Chief Executive Officer of the Company effective as of December 31, 2012.  You and the Company agree that your service as Chairman will commence on January 1, 2013.  The period during which you serve as Chairman is referred to in this letter as the “Term.”  

During the Term, you will receive an annual Chairman’s retainer in the amount of $175,000.  This will be in addition to any other compensation to which you are entitled as a member of the Board of Directors.  You will be provided office space at one of the Company’s existing facilities in Louisville (other than the corporate headquarters at 500 W. Main Street) and you will have access to administrative and other customary support, in each case as necessary to perform your duties as Chairman.  Your current administrative assistant will become part of the Company’s Office of the Chief Executive.   

Reference is made to your Amended and Restated Employment Agreement dated as of May 16, 2008 (the “Employment Agreement”).  The Company hereby exercises its option under Section 14(a) of the Employment Agreement to enforce the restrictive covenant set forth therein.  You and the Company agree that the restrictive covenants will apply during the period commencing on January 1, 2013 and ending on the second anniversary of the termination of your service as a member of the Board.  As provided in Section 14(a) of the Employment Agreement, the Company will pay you in a lump sum on or before January 31, 2013 in the amount of $2,170,000, which represents two times your current base salary.  This amount is in addition to your annual bonus for 2012 which will be paid in the ordinary course.  The Company will continue to provide you benefits (i) during the Term, under either the medical, accident and life insurance plans available to members of the Company’s Board of Directors attached hereto as Exhibit A or the letter agreement with Company officers concerning health insurance availability (as described in Exhibit 10(mm) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994) attached hereto as Exhibit B (the “Officer’s Plan”); and (ii) after the Term, under the Officers Plan (which for clarity will extend until you or your spouse are eligible for Medicare).


Finally, the Company agrees that you will be entitled to purchase the painting currently located in your office at its appraised value of $7,500 and the desk in your office at its appraised value of $6,500.    

If the above correctly reflects our understanding and agreement with respect to the foregoing matters, please confirm by signing below.

Very truly yours,

 

Humana Inc.

 

 

 

By:

/s/ James H. Bloem

Name:

James H. Bloem

Title:

Senior Vice President, Chief Financial Officer &

Treasurer

 

 

 

 

 

Accepted and agreed this 31st day of October, 2012:

 

 

 

/s/ Michael B. McCallister

Michael B. McCallister


Exhibit A

Board of Directors Medical, Accident and Life Insurance Plans

DIRECTOR COMPENSATION

2013 Director Compensation Program (a)

 

Annual Retainer (2)

$85,000

Non-Employee Chairman of the Board

Additional Annual Retainer (1)

$175,000

Lead Independent Director

Additional Annual Retainer

$25,000

Committee Chairman fee per year:

1. Audit Committee Chair

2. Organization & Compensation Committee Chair

3. All other Committee Chairs

$25,000

$18,000

$12,000

Executive Committee Member fee per year (1)

$12,000

Common Stock per year

(1st Business Day of January) (1)(3)

$140,000 in common stock

(variable # of shares)

Charitable Contributions Annual Match

up to $25,000

Group Life and Accidental Death Insurance —

(except Chairman)

$150,000 of coverage

Group Life and Accidental Death Insurance—Chairman (1)

$400,000 of coverage

Business Travel Accident Insurance

$250,000 of coverage

Restricted Stock Units

Granted Initial Date of Election (2)

Restricted Stock Unit grant equal to the dollar value
of the then current annual stock grant for directors

Medical and Dental

Directors may elect to participate in the medical and
dental programs offered to Humana associates at a
comparable rate as paid by associates.

 

(1)

Only applicable to non-employee directors.

(2)

Effective December 9, 2010, this initial award of Restricted Stock Units is forfeited if the director serves less than one year on the Company’s Board of Directors.

(3)

Effective January 1, 2013, this annual stock award will be prorated if a director leaves the Board during the year for any reason.

 

(a) Adopted as of 10/18/12


Exhibit B

Officers Plan

MEMO TO: Officers - Humana Inc.

COPY TO:

FROM:

DATE:

SUBJECT:  EXTENDED HEALTH BENEFIT

This is to advise you that the Compensation Committee of the Board of Directors has decided to make available an extended post-termination health insurance benefit to persons who are officers of Humana Inc.

Such benefit will apply to persons who are officers at the time of termination whether such termination is voluntary or involuntary or by reason of disability or retirement; provided, that the benefit will not be available if termination shall be for cause.

Participants will be entitled to continuation of health coverage, under an insured program available to Humana employees, until age sixty-five (65) by paying an amount for such coverage calculated in the manner provided under the Consolidated Omnibus Budget Reconciliation Act (COBRA).  This amount is equal to the total premium for such coverage, plus a small administrative fee.  Each participant's spouse also shall be entitled, as participant's dependent, to continuation of health insurance coverage until the spouse reaches age sixty-five (65) under the same plans as the participant and subject to the same terms and cost of coverage under those plans as the participant.  However, once the participant or spouse reaches age sixty-five (65) and is entitled to coverage under Medicare (or its successor), the Medicare-eligible individual shall not be entitled to dependent coverage under the other's coverage.  If the participant discontinues coverage for any reason, coverage will not be reinstated.

 

 

 

 

 

 

EX-10.1 2 a50465203_ex101.htm EXHIBIT 10.1

Exhibit 10.1

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of November 2, 2012 (this “Employment Agreement”), by and among Humana Inc., a Delaware corporation (the “Company”), and Bruce D. Broussard (the “Executive”) (each of the Executive and the Company a “Party,” and together, the “Parties”).   

WHEREAS, the Executive is currently employed as the President of the Company pursuant to an employment agreement between the Company and the Executive dated as of November 2, 2011 (the “Prior Agreement”); and

WHEREAS, the Company’s Board of Directors (the “Board”) has appointed the Executive to also be its Chief Executive Officer effective as of January 1, 2013, and the Company and the Executive desire to amend and restate the Prior Agreement effective as of such date as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valid consideration, the sufficiency of which is acknowledged, the Parties hereto agree as follows:

Section 1.  Employment.   

  1.1.  Term.  Subject to Section 3 hereof, the Company agrees to continue to employ the Executive, and the Executive agrees to continue to be employed by the Company, in each case pursuant to this Employment Agreement, for a period commencing on January 1, 2013 (such date of commencement, the “Effective Date”), and ending on the day preceding the third (3rd) anniversary of the Effective Date (the “Initial Term”); provided, however, that the period of the Executive’s employment pursuant to this Employment Agreement shall be automatically extended for successive one (1) year periods thereafter (each, a “Renewal Term”), in each case unless either Party hereto provides the other Party hereto with written notice that such period shall not be so extended at least one hundred eighty (180) days in advance of the expiration of the Initial Term or the then-current Renewal Term, as applicable (the Initial Term and any Renewal Term, collectively, the “Term”).  Each additional one (1) year Renewal Term shall be added to the end of the next scheduled expiration date of the Initial Term or Renewal Term, as applicable, as of the first day after the last date on which notice may be given pursuant to the preceding sentence.  The Executive’s period of employment pursuant to this Employment Agreement shall hereinafter be referred to as the “Employment Period.”

  1.2.  Duties.  During the Employment Period, the Executive shall serve as the President and Chief Executive Officer of the Company.  The Executive shall report directly to the Board.  In his position of President and Chief Executive Officer of the Company, the Executive shall perform such duties, functions and responsibilities during the Employment Period, commensurate with the Executive’s positions, as reasonably and lawfully directed by the Board.   


  1.3.  Exclusivity.  During the Employment Period, the Executive shall devote substantially all of his business time and attention to the business and affairs of the Company, shall faithfully serve the Company, and shall conform to and comply with the lawful and reasonable directions and instructions given to him by the Board, consistent with Section 1.2 hereof.  During the Employment Period, the Executive shall use his best efforts to promote and serve the interests of the Company and shall not engage in any other business activity, whether or not such activity shall be engaged in for pecuniary profit; provided, that nothing herein contained shall preclude service by the Executive on the boards of directors or trustees of other entities not engaged in any business competitive with the business of the Company or any of its Affiliates, provided that the Executive shall have received approval for any such board service in advance from the Board.

Section 2.  Compensation.

  2.1.  Salary.  As compensation for the performance of the Executive’s services hereunder, during the Employment Period, the Company shall pay to the Executive a salary at an annual rate of $1,085,000 (the “Base Salary”) payable in accordance with the Company’s standard payroll policies.  The Base Salary will be reviewed annually and may be adjusted upward (but not downward) by the Organization & Compensation Committee of the Board (the “Committee”) in its discretion.

  2.2.  Annual Incentive.  For each calendar year ending during the Employment Period, the Executive shall be eligible to receive an annual cash incentive payment (the “Annual Incentive”) to be based upon Company performance and other criteria for each such calendar year as determined by the Committee and generally applicable to the Company’s other senior executives.  The Executive’s target Annual Incentive opportunity for each calendar year that ends during the Employment Period shall equal 150% of the Base Salary (the “Target Annual Incentive”) paid during the applicable year.  The maximum Annual Incentive which the Executive may receive shall be 150% of the Target Annual Incentive.  The actual Annual Incentive paid in respect of any calendar year depends on the extent to which performance goals, set annually by the Committee, are achieved and shall be payable in accordance with the terms of the Humana Inc. Executive Management Incentive Compensation Plan (the “Incentive Plan”).  The Annual Incentive shall be paid in cash.

  2.3.  Long-Term Compensation.  The Executive will be entitled to a  long-term incentive award in 2013 that will have a value of $5,000,000 (such value to be determined on the same basis as the Committee values such awards generally) and shall be in a form and on terms consistent with the long-term incentive awards for other senior executives of the Company granted in 2013.  Thereafter, the Executive shall be eligible for annual grants of equity awards or other long-term incentive awards in amounts and on terms and conditions comparable to the Company’s other senior executives, as determined by the Committee.  

  2.4.  Other Compensation and Employee Benefits.  During the Employment Period, the Executive shall be eligible to participate in such other compensation, employee benefit and executive perquisite plans, programs, policies and arrangements of the Company as in effect from time to time on the same basis as other senior executives of the Company.  

2


  2.5.  Paid Time Off.  During each calendar year of the Employment Period, the Executive shall be entitled to twenty-eight (28) days of paid time off to be accrued, taken and carried over to subsequent years in accordance with the terms and conditions of the Company’s policy for its senior executives as in effect from time to time.

  2.6.  Business Expenses.  The Company shall pay or reimburse the Executive, upon presentation of documentation, for all commercially reasonable business out-of-pocket expenses that the Executive incurs during the Employment Period in performing his duties under this Employment Agreement and in accordance with the expense reimbursement policy of the Company.

  2.7.  Relocation.  The Executive will relocate his principal residence to the Louisville, Kentucky area no later than August 31, 2013.  The Company will provide the Executive with the standard relocation benefits under its relocation policy as in effect from time to time for the Company’s senior executives in connection with the Executive’s relocation from his current residence in the Houston, Texas area to the Louisville, Kentucky area.  Prior to his relocation, (i) the Executive shall be permitted to use Company aircraft for purposes of commuting from his current residence to the Company’s principal offices in Louisville, Kentucky upon terms and conditions to be agreed between the Company and the Executive from time to time and (ii) the Company shall pay the Executive a housing allowance in the amount of $10,000 per month.  There shall be no gross-up for, and the Executive shall be solely responsible for, any taxes he may incur in connection with the payments made or the benefits provided to him pursuant to this Section 2.7.

  2.8.  Attorney’s Fees.  The Company agrees to pay or reimburse the Executive for all reasonable attorney’s fees and related expenses incurred by the Executive in connection with the negotiation and execution of this Employment Agreement and related agreements, up to a maximum amount of $25,000.  

Section 3.  Employment Termination.  

  3.1.  Termination of Employment.  The Company may terminate the Executive’s employment hereunder for any reason during the Term, and the Executive may voluntarily terminate his employment hereunder for any reason during the Term, in each case (other than a termination by the Company for Cause) at any time which in the case of a termination by the Executive shall be upon not less than thirty (30) days’ written notice to the Company (the date on which the Executive’s employment terminates for any reason is herein referred to as the “Termination Date”).  Upon the termination of the Executive’s employment with the Company for any reason, the Executive shall be entitled to (a) payment of any Base Salary earned but unpaid through the Termination Date, (b) any Annual Incentive that the Executive may be entitled to pursuant to the terms of the Incentive Plan for any fiscal year completed prior to the Termination Date, (c) accrued and unused paid time off (consistent with Section 2.5 hereof) paid out at the then effective per-business-day Base Salary rate and (d) any unreimbursed expenses in accordance with Section 2.6 hereof (collectively, the “Accrued Amounts”).

3


  3.2.  Certain Terminations.

       (a)             Termination by the Company other than for Cause or Disability; Termination by the Executive for Good Reason; Non-Renewal; Change in Control-Related Termination.  If (i) during the Term, the Executive’s employment is terminated (A) by the Company other than for Cause or Disability or (B) by the Executive for Good Reason, or (ii) the Term expires by reason of the Company providing the Executive with written notice pursuant to Section 1.1 that the Term shall not be extended and the Executive terminates his employment for any reason within thirty (30) days after the expiration of the Term, in addition to the Accrued Amounts, the Company shall pay or provide to the Executive the amounts and benefits described below:

(1) (A) if such termination is not a Change in Control-Related Termination, severance in an amount equal to two (2) times the Executive’s Base Salary (at the rate in effect immediately prior to the Termination Date), payable in a lump sum or (B) if such termination is a Change in Control-Related Termination, an amount equal to two (2) times the sum of (x) the Base Salary (at the rate in effect immediately prior to the Termination Date) plus (y) the maximum Annual Incentive that could have been earned by the Executive calculated as if all relevant goals applicable to such Annual Incentive had been met during the then fiscal year of the Company pursuant to the terms of the incentive compensation plan in which the Executive participates, payable in a lump sum (the amount described in (A) or (B), as applicable, the “Severance”);

(2) (A) if such termination is not a Change in Control-Related Termination, the Executive and his qualifying spouse (the “Executive’s Spouse”) and other qualifying dependents shall be eligible for continuation of health and dental coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the terms of the applicable Company-sponsored health and dental plans (the “Group Health Plan”) and the Company will reimburse the Executive or the Executive’s Spouse, if the Executive dies, for the amount of the COBRA premiums the Executive or the Executive’s Spouse (in the case of the death of the Executive) pays in excess of the normal employee contribution for comparable Group Health Plan coverage provided by the Company and any reimbursement by the Company to the Executive or the Executive’s Spouse required under this Section 3.2(a)(2)(A) shall be made on the last day of the month in which the Executive or the Executive’s Spouse pays the amount required for such COBRA Coverage and (B) if such termination is a Change in Control-Related Termination, the Executive, the Executive’s Spouse and other qualifying dependents shall be eligible for continuation of Group Health Plan coverage pursuant to COBRA and the terms of the Group Health Plan and shall be eligible for continued coverage under all life insurance, accidental death and dismemberment insurance and disability insurance under plans and programs in which the Executive and/or the Executive’s dependents and beneficiaries participated immediately prior to the Termination Date, provided that continued participation is permitted under the general terms and provisions of such plans and programs, until, with respect to any plan or program including COBRA continuation coverage, the earliest of (x) twenty-four (24) months following the Termination Date, or (y) the effective date of the Executive’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), and the Company will reimburse the Executive or the Executive’s Spouse, if the Executive dies, for the amount of all the premiums and payments the Executive or the Executive’s Spouse (in the case of the death of the Executive) pays for such continued coverage and any reimbursement by the Company to the Executive or the Executive’s Spouse required under this Section 3.2(a)(2)(B) shall be made on the last day of the month in which the Executive or the Executive’s Spouse pays the amount required for such continued coverage (the “Benefit Continuation”).

4


(3) a pro-rata incentive for the year in which the Termination Date occurs, equal to the Annual Incentive the Executive would have been entitled to receive had his employment not been terminated, based on the actual performance of the Company for the full year, multiplied by a fraction, the numerator of which is the number of days the Executive is employed by the Company during the applicable year prior to and including the Termination Date and the denominator of which is 365 (the “Pro-Rata Incentive”); provided, that, for the avoidance of doubt, the Pro-Rata Incentive shall satisfy any obligation the Company may have to pay a pro-rata incentive payment under the Incentive Plan; and

(4) the following provisions shall apply to the Executive’s stock options and other equity-based compensation awards outstanding on the Termination Date, notwithstanding any contrary provision in the applicable award agreement or plan under which the award is granted:

(A) all time-vested stock options shall become fully vested and exercisable and all time-vested equity-based awards other than stock options shall become fully vested and all restrictions thereon shall lapse, in each case as of the Termination Date;

(B) all performance-vested stock options shall vest and become exercisable as of the Termination Date to the extent the options would have become exercisable had the target performance level been attained;

(C) all vested stock options (including those which become vested pursuant to this Section 3.2(a) shall remain outstanding and exercisable until the second anniversary of the Termination Date or, if earlier, until the expiration of the term of the stock option; and

(D) with respect to performance-vested equity-based awards other than stock options, a pro-rated number of shares or stock units subject to the award (based on the number of days in the performance period that have elapsed through the Termination Date) shall remain outstanding until the end of the applicable performance period and the percentage of such shares or stock units that become vested shall be determined based on the actual level of performance attained.

5


       (b)  The Company’s obligations to pay the Severance and Pro-Rata Incentive and to provide the Benefit Continuation shall be conditioned upon: (i) the Executive’s continued compliance with his obligations under Section 4 of this Employment Agreement and (ii) the Executive’s execution, delivery and non-revocation of a valid and enforceable general release of claims (the “Release”) substantially in the form attached hereto as Exhibit A, within sixty (60) days after the Executive’s Termination Date.  Subject to the previous sentence and to Section 7.3, (i) the Pro-Rata Incentive shall be paid at the time when annual incentives are paid generally to the Company’s senior executives and (ii) the Severance will be paid to the Executive on the first payroll date following the date that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service.  For purposes of this Employment Agreement, the term “Separation From Service” means a “separation from service” within the meaning of the default rules under section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and all regulations, guidance, and other interpretative authority issued thereunder (collectively, “Section 409A”).  In the event that the Executive is a “specified employee” within the meaning of Section 409A the Company shall pay the Executive the Severance as provided in Section 7.3(d).

       (c)   If participation in any of the Company plans or programs necessary to provide the Benefits Continuation is not permitted under the terms of any plan or program, the Company shall arrange at its own expense to provide the Executive with benefits substantially similar to those which the Executive would have been entitled to receive under such plans and programs.  At the end of the period of coverage, the Executive shall have the right to have assigned to him, at no cost and with no apportionment of unpaid premiums, any assignable life insurance policy relating specifically to him.  

  3.3.  Termination by Reason of Death or Disability.

       (a)  If the Executive’s employment is terminated by reason of the Executive’s death or Disability, in addition to the Accrued Amounts, the Company shall pay the Executive (or his heirs upon a termination by death) the Pro-Rata Incentive, payable at the time when annual bonuses are paid generally in respect of the year in which the Termination Date occurs.  For the avoidance of doubt, payment of a Pro-Rata Incentive pursuant to this Section 3.3 shall be in satisfaction of any obligation the Company may have to pay a pro-rata incentive under the Incentive Plan.  In addition, the following provisions shall apply to the Executive’s stock options and other equity-based compensation awards outstanding on the Termination Date, notwithstanding any contrary provision in the applicable award agreement or plan under which the award is granted:

(1) all time-vested stock options shall become fully vested and exercisable and all time-vested equity-based awards other than stock options shall become fully vested and all restrictions thereon shall lapse, in each case as of the Termination Date;

(2) all performance-vested stock options shall vest and become exercisable as of the Termination Date to the extent the options would have become exercisable had the target performance level been attained;

6


(3) all vested stock options (including those which become vested pursuant to this Section 3.3(a) shall remain outstanding and exercisable until the second anniversary of the Termination Date or, if earlier, until the expiration of the term of the stock option; and

(4) with respect to performance-vested equity-based awards other than stock options, a pro-rated number of shares or stock units subject to the award (based on the number of days in the performance period that have elapsed through the Termination Date) that would have vested at the end of the performance period had the target performance level been attained shall vest as of the Termination Date.

       (b)  If the Executive’s employment is terminated by reason of the Executive’s death or Disability before a Change in Control the Executive (in the case the Executive’s employment is terminated by reason of his Disability), the Executive’s Spouse and other qualifying dependents shall be eligible for continuation of Group Health Plan coverage pursuant to COBRA and the terms of the Group Health Plan and the Company will reimburse the Executive (in the case the Executive’s employment is terminated by reason of his Disability) or the Executive’s Spouse (in the case the Executive’s employment is terminated by reason of his death) for the amount of the COBRA premiums the Executive or the Executive’s Spouse pays in excess of the normal employee contribution for comparable Group Health Plan coverage for up to the first 18 months of such coverage provided by the Company and any reimbursement by the Company to the Executive or the Executive’s Spouse required under this Section 3.3(b) shall be made on the last day of the month in which the Executive or the Executive’s Spouse pays the amount required for such COBRA Coverage.

       (c)  If the Executive’s employment is terminated by reason of the Executive’s death or Disability on or after a Change in Control the Executive (in the case the Executive’s employment is terminated by reason of his Disability), the Executive’s Spouse and other qualifying dependents shall be eligible for continuation of Group Health Plan coverage pursuant to COBRA and the terms of the Group Health Plan and shall be eligible for continued coverage under all life insurance, accidental death and dismemberment insurance and disability insurance under plans and programs in which the Executive and/or the Executive’s dependents and beneficiaries participated immediately prior to the date of the Executive’s death or Disability, provided that continued participation is permitted under the general terms and provisions of such plans and programs, until, with respect to any plan or program other than COBRA continuation coverage twenty-four (24) months following the Termination Date and in the case of COBRA continuation coverage for no less than twenty-four (24) months following the Termination Date and the Company will reimburse the Executive or the Executive’s Spouse, if the Executive dies, for the amount of all the premiums and payments the Executive or the Executive’s Spouse (in the case of the death of the Executive) pays for such continued coverage, provided, that in the case of COBRA continuation coverage such reimbursement under this Section 3.3(c) shall be limited to the first twenty-four (24) months of premiums paid by the Executive or the Executive’s Spouse, as the case may be, and any reimbursement by the Company to the Executive or the Executive’s Spouse required under this Section 3.3(c) shall be made on the last day of the month in which the Executive or the Executive’s Spouse pays the amount required for such continued coverage.

7


       (d)  If participation in any of the Company plans or programs necessary to provide the benefits continuation described in Section 3.3(b) or Section 3.3(c) is not permitted under the terms of any plan or program, the Company shall arrange at its own expense to provide the Executive with benefits substantially similar to those which the Executive would have been entitled to receive under such plans and programs.  At the end of the period of coverage, the Executive shall have the right to have assigned to him, at no cost and with no apportionment of unpaid premiums, any assignable life insurance policy relating specifically to him.  

  3.4.  Exclusive Remedy.  The foregoing payments upon termination of the Executive’s employment shall constitute the exclusive severance payments and benefits due the Executive upon a termination of his employment.  

  3.5.  Resignation from All Positions.  Upon the termination of the Executive’s employment with the Company for any reason, unless otherwise requested by the Company, the Executive shall resign, as of the date of such termination, from all positions he then holds as an officer, director, employee and member of the board of directors (and any committee thereof) of the Company and its Affiliates.  The Executive agrees to execute such writings as are required to effectuate the foregoing.

  3.6.  Cooperation.  Following the termination of the Executive’s employment with the Company for any reason, the Executive shall reasonably cooperate with the Company upon reasonable request of the Board and agrees to be reasonably available to the Company (taking into account any other full-time employment of the Executive) with respect to matters arising out of the Executive’s services to the Company and its subsidiaries.  The Executive shall be reimbursed for any expenses incurred by him at the request of the Company pursuant to this Section 3.6.

Section 4.  Certain Covenants.

  4.1.  Confidential Information and Trade Secrets.

       (a)  The Executive recognizes that the Executive’s position with the Company requires considerable responsibility and trust, and, in reliance on the Executive’s loyalty, the Company may entrust the Executive with highly sensitive confidential, restricted and proprietary information involving Trade Secrets and Confidential Information.

       (b)  For purposes of this Employment 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 the Executive’s possession (unless such information was used in connection with formulating the Company’s business plans, obtained by the Executive from the Company or was obtained by the Executive in the course of the Executive’s employment by the Company), or (ii) required to be disclosed by any applicable law.

8


       (c)  Except as required to perform the Executive’s duties hereunder or as may be required by law or legal process or an order of a court of competent jurisdiction, the Executive 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 the Executive in violation of this Section 4.1.

       (d)  Upon the request of the Company and, in any event, upon the termination of employment hereunder, the Executive will surrender to the Company all memoranda, notes, records, plans, manuals or other documents pertaining to the Company’s business or the Executive’s employment (including all copies thereof). The Executive 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 the Executive, shall be the sole and exclusive property of the Company, and the Executive hereby assigns to the Company all of the Executive’s right, title and interest in and to any and all of such information and materials.

  4.2.  Agreement Not to Compete and Agreement Not to Solicit.

       (a)  The Executive hereby covenants and agrees that for a period commencing on the date hereof and ending twenty-four (24)  months after the Executive’s Termination Date (the “Restricted Period”), the Executive, directly or indirectly, personally, or as an employee, officer, director, partner, member, owner, stockholder, investor or principal of, or consultant or independent contractor with, another entity, shall not 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 Executive’s employment Termination Date (“Company Business”), in any Geographic Area (as defined below) in which the Company and/or any of its Affiliates is then doing business.  For purposes of this Employment Agreement, “Geographic Area” means any state, commonwealth or territory of the United States or any equivalent entity in any foreign country.

       (b)  The Executive hereby covenants and agrees that during the Restricted Period, the Executive, directly or indirectly, personally, or as an employee, officer, director, partner, member, owner, stockholder, investor or principal of, or consultant or independent contractor with, another entity, shall not:

9


          (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 Geographic Area in which the Company and/or any of its Affiliates is then doing business.

  4.3.  Extension of Restriction Period.  The Restricted Period shall be extended for any period during which the Executive is in breach of any provision of Section 4.2  hereof.

  4.4.  Proprietary Rights.  The Executive shall disclose promptly to the Company any and all inventions, discoveries, and improvements (whether or not patentable or registrable under copyright or similar statutes), and all patentable or copyrightable works, initiated, conceived, discovered, reduced to practice, or made by him, either alone or in conjunction with others, during the Executive’s employment with the Company and related to the business or activities of the Company and its Affiliates (the “Developments”).  Except to the extent any rights in any Developments constitute a work made for hire under the U.S. Copyright Act, 17 U.S.C. § 101 et seq. that are owned ab initio by the Company and/or its applicable Affiliate, the Executive assigns all of his right, title and interest in all Developments (including all intellectual property rights therein) to the Company or its nominee without further compensation, including all rights or benefits therefor, including without limitation the right to sue and recover for past and future infringement. The Executive acknowledges that any rights in any Developments constituting a work made for hire under the U.S. Copyright Act, 17 U.S.C § 101 et seq. are owned upon creation by the Company and/or its applicable Affiliate as the Executive’s employer.  Whenever requested to do so by the Company, the Executive, at the Company’s expense, shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain trademarks, patents or copyrights of the United States or any foreign country or otherwise protect the interests of the Company and its Affiliates therein.  These obligations shall continue beyond the end of the Executive’s employment with the Company with respect to inventions, discoveries, improvements or copyrightable works initiated, conceived or made by the Executive while employed by the Company, and shall be binding upon the Executive’s employers, assigns, executors, administrators and other legal representatives.  In connection with his execution of this Employment Agreement, the Executive has informed the Company in writing of any interest in any inventions or intellectual property rights that he holds as of the date hereof.  If the Company is unable for any reason, after reasonable effort, to obtain the Executive’s signature on any document needed in connection with the actions described in this Section 4.4, the Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Executive’s agent and attorney in fact to act for and on the Executive’s behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 4.4 with the same legal force and effect as if executed by the Executive.

10


  4.5.  Confidentiality of Agreement.  Other than with respect to information required to be disclosed by applicable law, the Executive agrees not to disclose the terms of this Employment Agreement to any Person; provided the Executive may disclose this Employment Agreement and/or any of its terms to the Executive’s immediate family, financial advisors and attorneys, so long as the Executive instructs every such Person to whom the Executive makes such disclosure not to disclose the terms of this Employment Agreement further.  Anytime after this Employment Agreement is filed with the Securities and Exchange Commission or any other government agency by the Company and becomes a public record, this provision shall no longer apply.   

  4.6.  Specific Enforcement.  The Executive specifically acknowledges and agrees that the restrictions set forth in this Section 4 are reasonable and necessary to protect the legitimate interest of the Company and that the Company would not have entered into this Employment Agreement in the absence of such restrictions. The Executive further acknowledges and agrees that any violation of the provisions of Section 4 hereof will result in irreparable injury to the Company, that the remedy at law for any violation or threatened violation of this Section 4 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.

Section 5.  Representation.  The Executive represents and warrants that (i) he is not subject to any contract, arrangement, policy or understanding, or to any statute, governmental rule or regulation, that in any way limits his ability to enter into and fully perform his obligations under this Employment Agreement and (ii) he is not otherwise unable to enter into and fully perform his obligations under this Employment Agreement.

Section 6.  Non-Disparagement. From and after the Effective Date and following termination of the Executive’s employment with the Company, (i) the Executive agrees not to make any statement that is intended to become public, or that should reasonably be expected to become public, and that criticizes, ridicules, disparages or is otherwise derogatory of the Company or any of its Affiliates, employees, officers, directors or stockholders and (ii) the Company agrees not to issue any public statement that criticizes, ridicules, disparages or is otherwise derogatory of the Executive or any of his Affiliates or family and shall advise its directors and officers not to make any such public statement on the Company’s behalf.  

Section 7.  Taxes.

  7.1. Withholding.  All amounts paid to the Executive under this Employment Agreement shall be subject to withholding and other income and employment taxes imposed by applicable law.  The Executive shall be solely responsible for the payment of all taxes imposed on him relating to the payment or provision of any amounts or benefits hereunder.  

11


  7.2.  Section 280G.  (a) Notwithstanding anything contained in this Employment Agreement to the contrary, (i) to the extent that any payment or distribution of any type to or for the Executive by the Company, any Affiliate of the Company, any Person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Code and the regulations thereunder), or any Affiliate of such Person, whether paid or payable or distributed or distributable pursuant to the terms of this Employment Agreement or otherwise (the “Payments”) constitute “parachute payments” (within the meaning of Section 280G of the Code), and if (ii) such aggregate would, if reduced by all federal, state and local taxes applicable thereto, including the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), be less than the amount the Executive would receive, after all taxes, if the Executive received aggregate Payments equal (as valued under Section 280G of the Code) to only three times the Executive’s “base amount” (within the meaning of Section 280G of the Code), less $1.00, then (iii) such Payments shall be reduced (but not below zero) if and to the extent necessary so that no Payments to be made or benefit to be provided to the Executive shall be subject to the Excise Tax.  All determinations required to be made under this Section 7.2 shall be made by a nationally recognized accounting firm that is (i) not serving as accountant or auditor for the individual, entity or group effecting the Change in Control and (ii) agreed upon by the Company and the Executive (the “Accounting Firm”), which shall provide detailed supporting calculations (which detailed supporting calculations shall include specific information about each Payment (including the amount of each Payment) and such other information as the Executive shall reasonably request or need to make the determination required of the Executive under this Section 7.2 both to the Company and the Executive within thirty (30) business days after the Termination Date (or such earlier time as is requested by the Company) and an opinion to the Executive that he has substantial authority not to report any Excise Tax imposed under section 4999 of the Code on his federal income tax return with respect to the Payments (as eliminated or reduced, if applicable, under such initial determination).  Any such determination by the Accounting Firm shall be binding upon the Company and the Executive.  If the Payments are so reduced, the Company shall reduce or eliminate the Payments (A) by first reducing or eliminating the portion of the Payments which are not payable in cash (other than that portion of the Payments subject to clause (C) hereof), (B) then by reducing or eliminating cash payments (other than that portion of the Payments subject to clause (C) hereof) and (C) then by reducing or eliminating the portion of the Payments (whether payable in cash or not payable in cash) to which Treasury Regulation § 1.280G-1 Q/A 24(c) (or successor thereto) applies, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time.

(b)       It is possible that after the determinations and selections made pursuant to this Section 7.2 the Executive will receive Payments  that are, in the aggregate, either more or less than the amount provided under this Section 7.2 (hereafter referred to as an “Excess Payment” or “Underpayment,” respectively).  If it is established, pursuant to a final determination of a court or an Internal Revenue Service proceeding that has been finally and conclusively resolved, that an Excess Payment has been made, then the Executive shall promptly pay an amount equal to the Excess Payment to the Company, together with interest on such amount at the applicable federal rate (as defined in and under Section 1274(d) of the Code) from the date of the Executive’s receipt of such Excess Payment until the date of such payment.  In the event that it is determined (i) by a court or (ii) by the Accounting Firm upon request by a Party, that an Underpayment has occurred, the Company shall promptly pay an amount equal to the Underpayment to the Executive, together with interest on such amount at the applicable federal rate from the date such amount would have been paid to the Executive had the provisions of this Section 7.2 not been applied until the date of such payment.

12


                              7.3  Section 409A.  (a) The parties intend that any compensation, benefits and other amounts payable or provided to the Executive under this Employment Agreement are intended to be paid or provided in compliance with Section 409A such that there will be no adverse tax consequences, interest, or penalties for the Executive under Section 409A as a result of the payments and benefits so paid or provided to him.  The parties agree to modify this Employment Agreement, or the timing (but not the amount) of the payment hereunder of severance or other compensation, or both, and any reimbursements to the extent necessary to comply with and to the extent permissible under Section 409A.  

(b)       The terms “terminate,” “terminated” and “termination” mean a termination of the Executive’s employment that constitutes a Separation From Service and the date of the Executive’s Separation From Service shall be treated as the Executive’s Termination Date for purpose of determining the time of payment of any amount that becomes payable to Executive pursuant to Section 3 hereof upon the termination of his employment and that is treated as a “deferral of compensation” within the meaning of Section 409A.

(c)       In the case of any amounts that are payable to the Executive under this Employment Agreement in the form of installment payments, the Executive’s right to receive such payments shall be treated as a right to receive a series of separate payments for purposes of Section 409A.  

(d)       If the Executive is a “specified employee” within the meaning of Section 409A at the time of his Separation From Service within the meaning of Section 409A, then any payment otherwise required to be made to him under this Employment Agreement on account of his Separation From Service, to the extent such payment (after taking in to account all exclusions applicable to such payment under Section 409A) is properly treated as deferred compensation subject to Section 409A, shall not be made until the first business day after (i) the expiration of six months from the date of Executive’s Separation From Service, or (ii) if earlier, the date of Executive’s death (the “Delayed Payment Date”).  On the Delayed Payment Date, there shall be paid to the Executive or, if the Executive has died, to the Executive’s estate, in a single cash lump sum, an amount equal to the aggregate amount of the payments delayed pursuant to the preceding sentence.

(e)       To the extent that the reimbursement of any expenses or the provision of any in-kind benefits pursuant to this Employment Agreement constitutes a “deferral of compensation” within the meaning of Section 409A, (i) the amount of such expenses eligible for reimbursement, or in-kind benefits to be provided hereunder during any one calendar year shall not affect the amount of such expenses eligible for reimbursement or in-kind benefits to be provided hereunder in any other calendar year (except for any life-time or other aggregate limitation applicable to medical expenses); (ii) all such expenses eligible for reimbursement hereunder shall be paid to the Executive as soon as administratively practicable after any documentation required for reimbursement for such expenses has been submitted, but in any event by no later than December 31 of the calendar year following the calendar year in which such expenses were incurred; and (iii) the Executive’s right to receive any such reimbursements or in-kind benefits shall not be subject to liquidation or exchange for any other benefit.   

13


Section 8.  Miscellaneous.

  8.1.  Certain Definitions. For purposes of this Employment Agreement, the following terms have the following meanings:

       (a)  “Affiliate” shall mean, with respect to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.

       (b)  “Cause” shall mean one of the following has occurred: (A) the Executive’s indictment for, or conviction or entry of a plea of guilty or nolo contendere to (1) any felony or (2) any crime (whether or not a felony) involving moral turpitude, fraud, theft, breach of trust or other similar acts, whether of the United States or any state thereof or any similar foreign law to which the Executive may be subject that has a substantial and adverse effect on the Executive’s qualifications or ability to perform his duties, (B) the Executive’s engaging in conduct constituting willful misconduct, gross negligence or fraud that results in a significant risk of economic harm to the Company or any of its Affiliates, (C) the Executive’s continued failure to substantially perform his duties if such failure is not remedied within fifteen (15) days after the Executive receives written notice thereof from the Company, (D) the Executive’s material violation of the provisions of Section 4 of this Employment Agreement or (E) the Executive’s failure to relocate to the Louisville, Kentucky area in accordance with Section 2.7; provided, however, that if the Executive is terminated for Cause by reason of his indictment pursuant to clause (A) above and the indictment is subsequently dismissed or withdrawn or the Executive is found to be not guilty in a court of law in connection with such indictment, then the Executive’s termination shall be treated for purposes of this Employment Agreement as a termination by the Company other than for Cause or Disability, and the Executive shall be entitled to receive (without duplication of benefits) the payments and benefits set forth in Section 3.2(a) as applicable following such dismissal, withdrawal or finding, payable in the manner and subject to the conditions set forth in such Section 3.2(a). For purposes of this Section 8.1(b), 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.  

       (c)  “Change in Control” shall have the meaning set forth on Exhibit B.    

       (d)  “Change in Control-Related Termination” shall mean, during the Employment Period, (i) the Executive’s termination by the Company other than for Cause, or termination by the Executive for Good Reason, in each case within twenty-four (24) months following a Change in Control, (ii) the Executive’s termination by the Company other than for Cause at any time prior to a Change in Control if such termination occurs after the Company entered into and has not terminated a definitive agreement, the consummation of which would constitute a Change in Control or (iii) termination by the Executive for any reason after the Company enters into and has not terminated a definitive agreement, the consummation of which would constitute a Change in Control, and the Company provides the Executive with written notice pursuant to Section 1.1 that the Term shall not be extended.        

14


       (e)  “Disability” shall mean the Executive is entitled to and has begun to receive long-term disability benefits under the long-term disability plan of the Company in which the Executive participates, or, if there is no such plan, the Executive’s inability, due to physical or mental ill health, to perform the essential functions of the Executive’s job, with or without a reasonable accommodation, for 180 days out of any 270 day consecutive day period.          

       (f)  “Good Reason” shall mean one of the following has occurred without the Executive’s written consent: (i) a material and adverse change in the Executive’s duties, authority or responsibilities, (ii) the Executive being required to report to anyone other than the Board, (iii) a reduction in the Executive’s base salary or target incentive opportunity, other than in connection with an across-the-board reduction applicable to all senior executives of the Company, (iv) following the Executive’s relocation to Louisville, Kentucky, the relocation of the Executive’s principal place of business resulting in an increase in the Executive’s one-way commute of more than thirty (30) miles, or (v) the failure of the Company to continue in effect a material incentive or other compensation plan unless the Company substitutes a plan providing substantially equivalent compensation opportunities.  In the event the Executive believes Good Reason to exist, the Executive must provide the Company with written notice no later than ninety (90) days after the first occurrence of the event or condition the Executive claims constitutes Good Reason specifying the basis for the Executive’s belief that Good Reason exists and must provide the Company with thirty (30) days to cure such event or condition.  Failing such cure by the Company, a termination of employment by the Executive for Good Reason shall be effective on the day following the expiration of such cure period; providedhowever, that if the Term ends after the Executive provides the notice described above and prior to the Company curing any such event or condition, a termination by the Executive for Good Reason shall be effective on the last day of the Term; providedfurtherhowever, that if such notice is provided less than ten (10) business days before the end of the Term, the Term shall be extended until the end of the tenth (10th) business day following the delivery of such notice to the Company.

       (g)  “Person” shall mean any individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

  8.2. Indemnification.  The Company shall indemnify and hold harmless the Executive pursuant to and in accordance with the terms of the Indemnification Agreement entered into by the Parties.  The Executive shall be covered under any directors’ and officers’ insurance that the Company maintains for its directors and other officers in the same manner and on the same basis as the Company’s directors and other officers.       

  8.3. Amendments and Waivers. Subject to applicable law, this Employment Agreement and any of the provisions hereof may be amended, modified, or supplemented, in whole or in part, only in a writing signed by all Parties hereto.  The waiver by a Party hereto of a breach by another party hereto of any provision of this Employment Agreement shall not operate or be construed as a further or continuing waiver of such breach by such other Party or as a waiver of any other or subsequent breach by such other Party, except as otherwise explicitly provided for in the writing evidencing such waiver. Except as otherwise expressly provided herein, no failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder, or otherwise available in respect hereof at law or in equity, shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  

15


  8.4. Assignment; No Third-Party Beneficiaries.  This Employment Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive, and any purported assignment by the Executive in violation hereof shall be null and void.  Nothing in this Employment Agreement shall confer upon any Person not a party to this Employment Agreement, or the legal representatives of such Person, any rights or remedies of any nature or kind whatsoever under or by reason of this Employment Agreement, except the personal representative of the deceased Executive may enforce the provisions hereof applicable in the event of the death of the Executive. The Company is authorized to assign this Employment Agreement to a successor to substantially all of its assets.

  8.5. Notices.  Unless otherwise provided herein, all notices, requests, demands, claims and other communications to be given or delivered under or by reason of the provisions of this Employment Agreement shall be in writing and shall be deemed to have been duly received (a) upon receipt by hand delivery, (b) upon receipt after being mailed by certified or registered mail, postage prepaid, (c) upon receipt after being sent by email, (d) the next business day after being sent via a nationally recognized overnight courier, or (e) upon confirmation of delivery when sent via facsimile to the recipient.  Such notices, demands and other communications shall be sent to the address or facsimile number indicated below:

If to the Company:

Humana Inc.

500 West Main Street

Louisville, Kentucky

Attention: General Counsel

Facsimile: 502-508-4073

E-mail Address: ctodoroff@humana.com

 

 

with a copy to:

 

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attention: Donald P. Carleen, Esq.

Facsimile: 212-859-4000

E-mail Address: donald.carleen@friedfrank.com

16


If to the Executive:

Bruce D. Broussard at his principal office at the Company (during the Employment Period), and at all times to his principal residence as reflected in the records of the Company.

  8.6.  Governing Law.  This Employment Agreement shall be construed and enforced in accordance with, and the rights and obligations of the parties hereto shall be governed by, the laws of the Commonwealth of Kentucky, without giving effect to the conflicts of law principles thereof.

  8.7.  Arbitration.  Other than with respect to provisions under Section 4 of this Employment Agreement, in the event of any dispute, controversy or claim between the Parties that arises out of or relates to this Employment Agreement, the Executive’s employment with the Company, or any termination of such employment, then either Party may, by written notice to the other, require that such dispute, controversy or claim be submitted to arbitration in accordance with the Commercial Arbitration Rules (the “Rules”) of the American Arbitration Association (the “AAA”).  A single arbitrator shall be selected by agreement of the Parties or, if they do not agree on an arbitrator within thirty (30) days after one Party has notified the other of his or its desire to have the matter settled by arbitration, then the arbitrator shall be selected pursuant to the Rules by the AAA in Louisville, Kentucky.  The determination reached in such arbitration shall be final and binding on the Parties without any right of appeal or further dispute, except as otherwise required by applicable law.  Unless otherwise agreed by the Parties, any such arbitration shall take place in Louisville, Kentucky.  Each party shall bear its own costs and expenses of the arbitrator’s expenses and administrative fees of arbitration; providedthat, if the Executive prevails on at least one material issue, the Company shall reimburse the Executive for reasonable attorney’s fees and related expenses incurred in connection with such dispute.

  8.8.  Severability.  Whenever possible, each provision or portion of any provision of this Employment Agreement, including those contained in Section 4 hereof, will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Employment Agreement is held to be prohibited by or invalid under applicable law and if the rights or obligations of any party hereto under this Employment Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Employment Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Employment Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Employment Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.  In addition, should a court or arbitrator determine that any provision or portion of any provision of this Employment Agreement, including those contained in Section 4 hereof, is not reasonable or valid, either in period of time, geographical area, or otherwise, the parties hereto agree that such provision should be interpreted and enforced to the maximum extent which such court or arbitrator deems reasonable or valid.

17


  8.9.  Entire Agreement.  From and after the Effective Date, this Employment Agreement constitutes the entire agreement between the parties hereto, and supersedes all prior representations, term sheets, agreements and understandings (including the Prior Agreement and any prior course of dealings), both written and oral, between the parties hereto with respect to the subject matter hereof.

 8.10.  Counterparts.  This Employment Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument.

 8.11.  Binding Effect.  This Employment Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and any of their respective successors, personal representatives and permitted assigns, including, without limitation, the Executive’s heirs and the personal representatives of the Executive’s estate and any successor to all or substantially all of the business and/or assets of the Company.

 8.12.  General Interpretive Principles.  Whenever used in this Employment Agreement, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. The headings of the sections, paragraphs, subparagraphs, clauses and subclauses of this Employment Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of any of the provisions hereof. Unless otherwise specified, the terms “hereof,” “herein” and similar terms refer to this Employment Agreement as a whole (including the exhibits hereto), and references herein to Sections refer to Sections of this Employment Agreement.  Words of inclusion shall not be construed as terms of limitation herein, so that references to “include,” “includes” and “including” shall not be limiting and shall be regarded as references to non-exclusive and non-characterizing illustrations.

 8.13.  Non-Exclusivity of Rights; Full Settlement.  Except as provided in Section 3.4, nothing in this Employment Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or its Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or its Affiliates.  Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with the Company or its Affiliates at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Employment Agreement.  The Executive shall not be obligated to seek other employment or otherwise mitigate the amounts payable to the Executive under this Employment Agreement.

[Signature Page Follows]

18


IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the date first written above.

 

HUMANA INC.

 

By:

/s/ Michael B. McCallister

Name:

Michael B. McCallister

Title:

Chairman and Chief Executive Officer

 

 

 

EXECUTIVE

 

 

/s/ Bruce D. Broussard

Bruce D. Broussard

[Signature Page to Employment Agreement]

19


Exhibit A

Release

1.                 In consideration of the payments and benefits to be made under the Amended and Restated Employment Agreement, dated as of November 2, 2012 (the “Employment Agreement”), by and between Bruce D. Broussard (the “Executive”) and Humana Inc. (the “Company”) (each of the Executive and the Company, a “Party” and together, the “Parties”), the sufficiency of which the Executive acknowledges, the Executive, with the intention of binding himself and his heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge the Company and each of its subsidiaries and Affiliates (as defined in the Employment Agreement) (the “Company Affiliated Group”), their present and former officers, directors, executives, stockholders, agents, attorneys, employees and employee benefit plans (and the fiduciaries thereof), and the successors, predecessors and assigns of each of the foregoing (collectively, the “Company Released Parties”), of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected, which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, arising on or prior to the date hereof, against any Company Released Party that arises out of, or relates to, the Employment Agreement, the Executive’s employment with the Company or any of its subsidiaries and Affiliates, or any termination of such employment, including claims (i) for severance or vacation or paid time off benefits, unpaid wages, salary or incentive payments, (ii) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort, (iii) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and unfair labor and employment practices) and (iv) for employment discrimination under any applicable federal, state or local statute, provision, order or regulation, and including, without limitation, any claim under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Civil Rights Act of 1988, the Fair Labor Standards Act, the Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Age Discrimination in Employment Act (“ADEA”), the Equal Pay Act, the Uniformed Services Employment and Reemployment Rights Act and any similar or analogous state statute.

Notwithstanding the foregoing, this Release shall not apply and expressly excludes: (a) vested benefits under any plan maintained by the Company that provides for deferred compensation, equity compensation or pension or retirement benefits; (b) health benefits under any policy or plan currently maintained by the Company that provides for health insurance continuation or conversion rights including, but not limited to, rights and benefits to continue health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended or similar state law; (c) any claim that cannot by law be waived or released by private agreement; (d) claims arising after the date of the Release; (e) to the extent not paid as of the date of this Release, payments and benefits to be made under the Employment Agreement; (f) claims under any directors and officers insurance policies; and (g) rights to indemnification Executive may have under the by-laws or certificate of incorporation of the Company and its Affiliates, any applicable indemnification agreements with the Company and its Affiliates or applicable law.

A-1


2.                 The Executive acknowledges and agrees that the release of claims set forth in this Release is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied.

3.                 The release of claims set forth in this Release applies to any relief no matter how called, including, without limitation, (i) wages, (ii) back pay or front pay, (iii) compensatory damages, liquidated damages, punitive damages, damages for pain or suffering, (iv) costs, (v) attorneys’ fees and expenses, and (vi) any right to receive any compensation or benefit from any complaint, claim, or charge with any local, state or federal court, agency or board, or in any proceeding of any kind which may be brought against the Company as a result of such a complaint, claim or charge.  

4.        The Executive specifically acknowledges that his acceptance of the terms of the release of claims set forth in this Release is, among other things, a specific waiver of his rights, claims and causes of action under Title VII, ADEA, ADA and any state or local law or regulation in respect of discrimination of any kind; providedhowever, that nothing herein shall be deemed, nor does anything contained herein purport, to be a waiver of any right or claim or cause of action which by law the Executive is not permitted to waive.

5.                 As to rights, claims and causes of action arising under the ADEA, the Executive acknowledges that he has been given a period of twenty-one (21) days to consider whether to execute this Release.  If the Executive accepts the terms hereof and executes this Release, he may thereafter, for a period of seven (7) days following (and not including) the date of execution, revoke this Release as it relates to the release of claims arising under the ADEA.  If no such revocation occurs, this Release shall become irrevocable in its entirety, and binding and enforceable against the Executive, on the day next following the day on which the foregoing seven-day period has elapsed.  If such a revocation occurs, the Executive shall irrevocably forfeit any right to payment of the Severance and Pro-Rata Incentive and provision of Benefit Continuation (each, as defined in the Employment Agreement), but the remainder of the Employment Agreement shall continue in full force.

6.                 Other than as to rights, claims and causes of action arising under the ADEA, the release of claims set forth in this Release shall be immediately effective upon execution by the Executive.  

7.                 The Executive acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints, charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.

8.                 The Executive acknowledges that he has been advised to seek, and has had the opportunity to seek, the advice and assistance of an attorney with regard to the release of claims set forth in this Release, and has been given a sufficient period within which to consider the release of claims set forth in this Release.

A-2


9.                 The Executive acknowledges that the release of claims set forth in this Release relates only to claims that exist as of the date of this Release.

10.                The Executive acknowledges that the Severance, Pro-Rata Incentive and Benefit Continuation he is receiving in connection with the release of claims set forth in this Release and his obligations under this Release are in addition to anything of value to which the Executive is entitled from the Company.

11.       Each provision hereof is severable from this Release, and if one or more provisions hereof are declared invalid, the remaining provisions shall nevertheless remain in full force and effect.  If any provision of this Release is so broad, in scope, or duration or otherwise, as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.  

12.       This Release constitutes the complete agreement of the Parties in respect of the subject matter hereof and shall supersede all prior agreements between the Parties in respect of the subject matter hereof except to the extent set forth herein.

13.       The failure to enforce at any time any of the provisions of this Release or to require at any time performance by another party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect the validity of this Release, or any part hereof, or the right of any party thereafter to enforce each and every such provision in accordance with the terms of this Release.

14.       This Release may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.  Signatures delivered by facsimile shall be deemed effective for all purposes.

15.       This Release shall be binding upon any and all successors and assigns of the Executive and the Company.

16.       Except for issues or matters as to which federal law is applicable, this Release shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Kentucky without giving effect to the conflicts of law principles thereof.  

[Signature Page Follows]

A-3


IN WITNESS WHEREOF, this Release has been signed as of ____________________, 20__.

 

By:

 

 

 

Name:

Bruce D. Broussard

A-4


Exhibit B

The below definition of Change in Control is the definition used in the Humana Inc. Amended and Restated 2011 Stock Incentive Plan.  All definitions referred to but not defined herein shall have the meaning ascribed to them in the 2011 Stock Incentive Plan.

          “Change in Control” shall mean the occurrence of:

          (a)       An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a “Subsidiary”), (ii) the Company or its Subsidiaries, or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined);

          (b)       The individuals who, as of the effective date of this Plan are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the members of the Board; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Proxy Contest; or

          (c)       The consummation of:

                    (i)       A merger, consolidation or reorganization involving the Company, unless such merger, consolidation or reorganization is a “Non-Control Transaction.” A “Non-Control Transaction” shall mean a merger, consolidation or reorganization of the Company where:

                              (A)       the stockholders of the Company, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least seventy-five percent (75%) of the combined voting power of the outstanding Voting Securities of the corporation resulting from such merger or consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization;

B-1


                              (B)       the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, or a corporation beneficially directly or indirectly owning a majority of the Voting Securities of the Surviving Corporation, and no agreement, plan or arrangement is in place to change the composition of the board of directors following the merger, consolidation or reorganization; and

                              (C)       no Person other than (i) the Company, (ii) any Subsidiary, (iii) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities.

                    (ii)      A complete liquidation or dissolution of the Company; or

                    (iii)     The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities then outstanding, increases the proportional number of Shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

 

B-2

 

 

 

Exhibit 10(n)

CHANGE IN CONTROL AGREEMENT

This CHANGE IN CONTROL AGREEMENT (“Agreement”) is made as of                     , 2008 by and between HUMANA INC., Louisville, Kentucky (the “Company”), and                                          (the “Employee”).

WHEREAS, the Board of Directors (the “Board”) of the Company desires to foster the continuous employment of the Employee and has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of the Employee to his or her duties free from distractions which could arise in the event of a threatened Change in Control of the Company.

WHEREAS, the Company and the Employee are each a party to a Change in Control Agreement dated [                    ], and whereas the parties desire to amend the Change in Control Agreement to comply with Section 409A of the Internal Revenue Code and the regulations and other interpretive guidance issued thereunder (“Section 409A”) and to make certain other changes to the Change in Control Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the Employee agree as follows:

1. QUALIFYING TERMINATIONS. The Employee shall receive the termination benefits set forth in Section 2 of this Agreement if the Employee’s employment with the Company is terminated:

(i) by the Company other than for Cause, or by the Employee for Good Reason within twenty-four (24) months following a Change in Control and during the term of this Agreement, or

(ii) by the Company other than for Cause at any time prior to the date of a Change in Control and such termination occurred after the Company entered into a definitive agreement, the consummation of which would constitute a Change in Control.

2. TERMINATION BENEFITS. In the event of a Qualifying Termination, the Employee shall receive the following termination benefits:

(i) The Company shall, within ten (10) days following the Date of Termination, pay the Employee:

(a) The Employee’s base salary earned but not yet paid through the Date of Termination at the greater of the rate in effect at the time the Change in Control occurred, if applicable, or when the Notice of Termination was given, plus any bonuses or incentive compensation which, pursuant to the terms of any compensation or benefit plan, have been earned and are payable as of the Date of Termination. For purposes of this Agreement, bonuses and incentive compensation shall be

 

1


considered payable if all conditions for earning them have been met and any requirement that Employee be actively employed as of the date of payment shall be disregarded; and

(b) A lump sum in an amount equal to                      (            ) times the amount equal to the sum of (A) the Employee’s Annual Base Salary at the greater of the rate in effect at the time the Change in Control occurred, if applicable, or when the Notice of Termination was given plus (B) the maximum 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 the Employee participates. If there is no incentive compensation plan in effect at the time the Notice of Termination is given, 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 the Employee participated at the date of the Change in Control, if applicable, or the most recent plan participated in, whichever would be greater.

(ii) The Company shall, for the period stated below, 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 Date of Termination, 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 Date of Termination, (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 the Employee would have been 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 or her, at no cost and with no apportionment of prepaid premiums, any assignable insurance policy relating specifically to him or her. At the conclusion of the coverage provided under this Subsection, Employee shall be entitled to the continuation for a period of 18 months of the health and dental insurance then being provided

 

2


to him or her at a cost to him or her equal to the amount then being charged to employees of the Company for such coverage provided pursuant to the Consolidated Omnibus Budget Reconciliation Act (COBRA). The coverage provided pursuant to this Subsection shall be in satisfaction of the Company’s obligation to provide coverage under COBRA. The Company will use all commercially reasonable efforts to provide for the continuation of benefits in a manner that (A) does not subject the benefits to Section 409A and (B) does not cause the benefits to be included in the taxable income of the Employee.

3. TIMING OF PAYMENTS AND PROVISION OF BENEFITS.

(i) Notwithstanding any other provision in this Agreement, if, on the Date of Termination, the Employee is a “specified employee” as defined under Section 409A, the amount payable to the Employee pursuant to Section 2(i)(b) of this Agreement shall not be made or commenced until the date that is six (6) months and one (1) day after the Employee’s Date of Termination (the “Delay Period”) and shall be paid on such date; providedhowever, that the payments shall not be delayed during the Delay Period if the termination occurs by reason of his death.

(ii) To the extent that benefits to be provided to the Employee pursuant to Section 2(ii) of this Agreement are not (A) “disability pay,” “death benefit” plans or non-taxable medical benefits within the meaning of Treasury Regulation Section 1.409A-1(a)(5) or (B) other benefits not considered nonqualified deferred compensation within the meaning of that regulation, such provision of benefits shall be delayed until the end of the Delay Period, unless the Employee’s termination occurs by reason of his death. Notwithstanding the foregoing, to the extent that the previous sentence applies to the provision of any ongoing benefits that would not be required to be delayed if the premiums were paid by the Employee, the Employee shall pay the full cost of the premiums for such benefits during the Delay Period and the Company shall pay the Employee an amount equal to the amount of such premiums paid by the Employee during the Delay Period within ten (10) days after the end of the Delay Period.

(iii) To the extent that any benefits to be provided to the Employee pursuant to this Agreement are considered nonqualified deferred compensation and are reimbursements subject to Treasury Regulation Section 1.409A-3(i)(1)(iv), then (i) the reimbursement of eligible expenses related to such benefits shall be made on or before the last day of the Employee’s taxable year following the Employee’s taxable year in which the expense was incurred and (ii) notwithstanding anything to the contrary in this Agreement or any plan providing for such benefits, the amount of expenses eligible for reimbursement during any taxable year of the Employee shall not affect the expenses eligible for reimbursement in any other taxable year.

 

3


4. DEFINITIONS. For purposes of this Agreement, the following definitions shall apply:

(i) “Annual Base Salary” shall mean an Employee’s stated annual compensation without regard to any bonus, perquisite or other benefits.

(ii) A termination for “Cause” shall be termination by reason of the conviction of the Employee, by a court of competent jurisdiction and following the exhaustion of all possible appeals, of a criminal act involving the Company or its assets.

(iii) “Change in Control” shall have the meaning set forth in Appendix A.

(iv) “Company” shall mean Humana Inc. or any successor thereof.

(v) “Date of Termination” shall mean the date specified in the Notice of Termination, not to exceed thirty (30) days from the date such Notice of Termination is given.

(vi) “Good Reason” shall mean the occurrence after a Change in Control of any of the following events without the Employee’s express written consent:

(a) Any material reduction in the Employee’s title, authority or responsibilities, including reporting responsibilities;

(b) A reduction by the Company in the Employee’s Annual Base Salary as in effect on the date hereof or as the same may be increased from time to time;

(c) The relocation of the Employee’s office at which the Employee is to perform his or her duties to a location more than thirty (30) miles from the location at which the Employee performed his or her duties prior to the Change in Control;

(d) The failure by the Company to continue in effect any incentive, bonus or other compensation plan in which the Employee participates, unless the Company substitutes a substantially equivalent benefit;

(e) The failure by the Company 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

 

4


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 equivalent;

(f) Any material breach by the Company of any provision of this Agreement; or

(g) The failure of the Company to obtain a satisfactory agreement from any successor or assign of the Company to assume and agree to perform this Agreement.

(vii) “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement which is relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated. Any purported termination by the Company or by the Employee hereunder shall not be effective until communicated by written Notice of Termination to the other party.

(viii) “Qualifying Termination” shall mean a termination of the Employee’s employment with the Company as described in Section 1 of this Agreement.

5. TERM OF AGREEMENT. This Agreement shall continue in effect until December 31, 20     provided, however, commencing on December 31, 20     and on each December 31 thereafter, there shall automatically be an extension of one (1) year on the then-current term of this Agreement, unless either the Company or the Employee shall have given written notice to the other on or before said December 31, that the term of this Agreement shall not be so extended. Notwithstanding any such notice by the Company not to extend, the term of this Agreement shall not expire prior to the expiration of twenty-four (24) months after a Change in Control if the Agreement is still in effect on the date of the Change in Control.

6. SUCCESSORS; BINDING AGREEMENT.

(i) The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) of 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 the Company would be required to perform it if no such succession or assignment had taken place.

(ii) This Agreement shall inure to the benefit of and be enforceable by the Employee’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Employee should die while any amounts

 

5


would still be payable to him or her hereunder if he or she had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Employee’s devisee, legatee or other designee, and if there is no such devisee, legatee or designee, to the Employee’s estate.

7. NO MITIGATION. The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment; nor shall such be reduced by any compensation earned by the Employee as a result of employment or otherwise.

8. FEES AND EXPENSES. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Employee as a result of the Employee seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Employee is or may be entitled to receive benefits. The reimbursement of the eligible expense must be made on or before the last day of the Employee’s taxable year following the Employee’s taxable year in which the expense was incurred.

9. NOTICE. For the purposes 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 personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by each party to the other, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt.

10. GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of Kentucky without giving effect to the conflicts of laws principles thereof.

11. SEVERABILITY. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

12. ENTIRE AGREEMENT/TERMINATION OF ANY PRIOR AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes and terminates all prior agreements, understandings and arrangements, oral or written, between the Employee and the Company or any of its subsidiaries or any entity acquired by the Company with respect to the salary and other benefits referenced in Section 2 of this Agreement.

 

6


[signature page follows]

 

7


IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and the Employee has executed this Agreement, each as of the day and year set forth above.

 

HUMANA INC.

 

EMPLOYEE

BY:

 

 

 

 

BY:

 

 

 

Name:

 

 

 

Name:

 

Title:

 

 

 

Title:

ATTEST:

 

 

 

BY:

 

 

 

 

 

 

Name:

 

 

 

 

Title: Secretary

 

 

 

 

8


APPENDIX A

Change in Control” shall mean the occurrence of:

 

1)

An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a “Subsidiary”) (ii) the Company or its Subsidiaries, or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined);

 

2)

The individuals who, as of the effective date of this Agreement are members of the Board (the “Incumbent Board”), cease for any reason to constitute at least two-thirds of the members of the Board; provided, however, that if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a “Proxy Contest”) including by reason of any agreement intended to avoid or settle any Proxy Contest; or

 

3)

The consummation of:

 

 

a)

A merger, consolidation or reorganization involving the Company, unless such merger, consolidation or reorganization is a “Non-Control Transaction.” A “Non-Control Transaction” shall mean a merger, consolidation or reorganization of the Company where:

 

 

i)

the stockholders of the Company, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least seventy-five percent (75%) of the combined voting power of the outstanding Voting Securities of the corporation resulting from such

 

9


 

merger or consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization;

 

 

ii)

the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, or a corporation beneficially directly or indirectly owning a majority of the Voting Securities of the Surviving Corporation, and no agreement, plan or arrangement is in place to change the composition of the board of directors following the merger, consolidation or reorganization; and

 

 

iii)

no Person other than (i) the Company, (ii) any Subsidiary, (iii) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities, has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities.

 

 

b)

A complete liquidation or dissolution of the Company; or

 

 

c)

The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities then outstanding, increases the proportional number of Shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

 

10

 

 

 

EX-10.(R) 4 dex10r.htm SEVERANCE POLICY

Exhibit 10(r)

SEVERANCE POLICY

ADOPTED 9/9/99

AMENDED AND RESTATED AS OF 10/25/07

 

I.

Severance. The severance policy for elected officers without employment contracts who are involuntarily terminated without good cause is as follows.

 

 

A.

For executive and senior vice presidents–Upon employment, one year’s base salary plus one additional month’s base salary for each of the first six full years of service to a maximum of eighteen months base pay.

 

 

B.

For other elected officers–Upon employment, six months base salary, plus one additional month’s base salary after each of the seventh through twelfth months of employment, to a maximum of twelve months base pay.

 

 

C.

In all cases, the officer shall remain eligible to receive prorated incentive compensation to be paid at the normal time after year end for such payments, provided plan targets were met.

 

 

D.

Severance payments shall require agreements containing certain covenants regarding non-competition, non-disparagement and specific enforcement.

 

II.

Timing of Payments. Severance payments pursuant to this policy shall in no event be paid later than March 15 of the year following the year in which the termination occurs.