EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of March 29, 1999 by
and between HUMANA INC. (hereinafter "Company"), a
Delaware corporation having its principal place of
business in Louisville, Kentucky, and Kenneth J. Fasola
(hereinafter "Employee"):
WITNESSETH:
WHEREAS, Employee desires to render faithful and
efficient service to the Company; and
WHEREAS, the Company desires to receive the
benefit of Employee's service; and
WHEREAS, Employee is willing to be employed by the
Company; and
WHEREAS, both Company and Employee desire to
formalize the conditions of Employee's employment by
written agreement;
NOW, THEREFORE, in consideration of the premises
and the mutual covenants hereinafter set forth, the
parties agree as follows:
1. Office. The Company hereby employs Employee
as Senior Vice President of Company and
Employee hereby agrees to serve the Company
in such capacity.
2. Term of Employment. Employee's employment shall
be for the "Employment Period" with the initial term
commencing on March 29, 1999 and extending through
March 29, 2001. 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 Senior Vice
President of the Company. 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
discuss any such board service in advance
with the Company's Board.
4. Incapacity. If, during the Employment
Period, Employee should be prevented from
performing his duties or fulfilling his
responsibilities by reason of any incapacity
or disability for a continuous period of six
(6) months, then the Company's Board, in its
sole and absolute discretion, may, based on
the opinion of a qualified physician,
consider such incapacity or disability to be
total and may on ninety (90) days written
notice to Employee terminate the Employment
Period. Benefits and payments shall be made
under this Agreement following incapacity as
if it were a termination without Good Cause
in accordance with Section 8(a).
5. Death. The Employment Period shall
automatically terminate upon the death of
Employee, and payments will be made to the
Employee's estate as if it was a termination
without Good Cause in accordance with Section
8(a).
6. Compensation. During the Employment Period,
Employee shall (i) receive a base salary
(hereinafter "Annual Base Salary") that shall
be an annual amount of not less than Four
Hundred and Seventy Thousand Dollars
($470,000) payable in accordance with the
payroll practices of the Company, and shall
(ii) participate in an incentive plan
providing for a target incentive compensation
amount of not less than seventy-five percent
(75%) of his Annual Base Salary. Employee
shall be guaranteed a minimum of fifty
percent (50%) of base salary as bonus for the
1999 Performance Year.
7. Benefit Plans and Programs. During the
Employment Period, Employee shall be eligible
for participation in all benefit plans and
programs, including those for executive
employees, made available by the Company to
its respective employees.
8. Severance Payments.
(a) In the event that (i) Employee's
employment is terminated by the Company
while this Agreement is in effect
without Good Cause, (ii) the Employment
Period is terminated by reason of
incapacity or disability in accordance
with Section 4, or (iii) the Employment
Period is terminated by reason of death
in accordance with Section 5:
(1) The Company shall pay to Employee
or his estate, no later than thirty
(30) calendar days after such
Termination Date, an amount equal
to any unpaid current Annual Base
Salary accrued through the
Termination Date, his bonus,
calculated at one hundred percent
(100%) of his Annual Base Salary
prorated for the current fiscal
year through the Termination Date,
plus one (1) times the sum of his
then current Annual Base Salary,
calculated at one hundred percent
(100%) of his Annual Base Salary.
The Company shall continue to keep
in full force and effect all plans
or policies of medical, accident
and life insurance benefits with
respect to Employee and his
dependents with the same level of
coverage available to employees
under the terms of those employee
benefit plans for a period of
twelve (12) months, upon the same
terms, costs and otherwise to the
same extent as such plans are in
effect for employees of the Company
who were similarly situated to
Employee as of the Termination
Date.
(2) All restricted shares previously
awarded to Employee but not yet
vested shall become vested and non-
forfeitable as of the Termination
Date.
(3) To the extent stock options granted
to Employee have not become fully
vested and exercisable as of the
Termination Date, such options
shall become fully vested and all
vested stock options shall be
exercisable for two (2) years
commencing on the Termination Date.
(b) In the event that Employee's employment
is terminated by the Company with Good
Cause or if employee voluntarily
terminates his employment:
(1) The Company shall pay to Employee,
no later than thirty (30) calendar
days after the Termination Date, an
amount equal to his then current
Annual Base Salary accrued but
unpaid through the Termination
Date; and Employee shall have a
period of ninety (90) days after
such Termination Date in which to
exercise any exercisable vested
stock options, subject to the
provisions of any applicable stock
option agreement.
(2) Any restricted shares or stock
options previously granted but
still subject to restriction or
unvested at the Termination Date
shall be forfeited.
(c) Good Cause shall mean the Company's
Board has determined in good faith,
without being bound by the Company's
progressive discipline policy for
employees:
(1) that Employee has engaged in acts
or omissions against the Company or
any of its subsidiaries
constituting dishonesty,
intentional breach of fiduciary
obligation or intentional
wrongdoing or misfeasance; or
(2) that Employee has been arrested or
indicted in a possible criminal
violation involving fraud or
dishonesty; or
(3) that Employee has intentionally and
in bad faith acted in a manner
which results in a material
detriment to the assets, business
or prospects of the Company or any
of its subsidiaries; or
(4) that after due consideration and with notice to
the Employee, Employee has performed poorly.
(d) In the event that Employee's employment is
terminated (I) by the Company for Good Cause as defined
in Section 8(c)(4) above, (ii) because either the
Company or Employee terminated the Employment Period
pursuant to Section 2 of this Employment Agreement, or
(iii) because Employee voluntarily leaves the employ of
the Company during the Employment Period, then the
Company shall pay to Employee, no later than thirty
(30) calendar days after such Termination Date, an
amount equal to any unpaid current Annual Base Salary
accrued through the Termination date, plus one (1)
times his then current Annual Base Salary. Any bonus
finally determined to be payable at the end of the
fiscal year in which the Termination Date is included
shall be prorated for the period up to and including
the Termination Date and shall be promptly paid to
Employee at the same time any other similar bonuses are
paid to any other employee of the Company for such
fiscal year. The Company shall continue to keep in
full force and effect all plans or policies of medical,
accident and life insurance benefits with respect to
Employee and his dependents with the same level of
coverage available to employees under the terms of
those employee benefit plans for a period of twelve
(12) months, upon the same terms, costs and otherwise
to the same extent as such plans are in effect for
employees of the Company who were similarly situated to
Employee as of the Termination Date.
(e) Following the Employment Period, Employee shall be
eligible for continuation of health and dental
insurance coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act (COBRA) for eighteen (18)
months. For the first twelve (12) months, Employee's
cost will be an amount equal to the normal employee
contribution. Thereafter, the cost will be an amount
equal to the COBRA cost of such coverage. During the
first eighteen (18) months, Employee may elect any of
the coverages available to Humana employees.
Thereafter, Humana agrees that Employee may elect
coverage under any of the insured products offered by
Humana's health insurance or HMO subsidiaries for
Employee, his spouse as of the date hereof ("Spouse"),
and any eligible dependent until the later of
Employee's age sixty-five (65) or eligibility for
Medicare coverage (hereinafter "Extended Coverage").
At the earlier of Employee attaining Medicare
eligibility or death, Employee's Spouse and any now
current eligible dependent of Employee and Spouse will
be eligible for Extended Coverage until the later of
Spouse's age sixty-five (65) or Medicare coverage
eligibility. If at any time during which the Extended
Coverage is in effect Employee or his Spouse obtains
Medicare or becomes eligible for other employee group
health insurance coverage which does not exclude a pre-
existing condition of Employee, Spouse or dependent,
Humana's obligation will cease as to the one who has
obtained Medicare or, in the case of other employee
group health coverage, as to that person and their
eligible dependents. Employee's premium for the
Extended Coverage and Spouse's premium, if she retains
Extended Coverage, will be amount equal to the COBRA
cost of such coverage. If Humana hereafter adopts a
retiree health insurance program and Humana still has
obligations under this provision, Employee will be
offered the option of participating in that program in
lieu of the Extended Coverage described herein. The
health and dental insurance benefits hereunder shall be
administered in conjunction with any other similar
benefits which the Employee has from the Company but in
no case shall be duplicative.
9. Termination After A Change in Control. In the
event of a "Change in Control" of the Company (as
defined as of the date hereof in the Company's 1996
Stock Incentive Plan for Employees), if, within twenty-
four (24) months following the closing of such a Change
in Control (or at any time prior thereto but in
contemplation thereof):
(i) There is a material reduction in the Employee's
title, authority or responsibilities, including
reporting responsibilities;
(ii) The Employee's Annual Base Salary is reduced;
(iii) The Employee's office at which he is to
perform his duties is relocated to a location more than
thirty (30) miles from the location at which the
Employee performed his duties prior to the Change in
Control;
(iv) The Company fails to continue in effect any
incentive, bonus or other compensation plan in which
the Employee participates, unless the Company
substitutes a substantially equivalent benefit;
(v) The Company fails to continue in effect any
employee benefit plan (including any medical,
hospitalization, life insurance, dental or disability
benefit plan in which the Employee participated) or any
material fringe benefit or perquisite enjoyed by the
Employee at the time of the Change in Control, unless
the Company substitutes benefits which, in the
aggregate, are substantially equivalent;
(vi) The Company breaches any material provision of
this Employment Agreement; or
(vii) The Company fails to obtain a satisfactory
agreement from any successor or assign of the Company
to assume and agree to perform this Employment
Agreement;
Then the Employee shall have the option to
voluntarily terminate his employment and the
Company shall:
(a) Pay the Employee his full base salary earned but
not yet paid through the Termination Date at the
greater of the rate in effect at the time of the Change
in Control or the Termination Date ("Higher Annual Base
Salary"), plus 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 Termination Date. For purposes of this Agreement,
bonuses and incentive compensation shall be 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.
(b) Pay the Employee a lump sum in an amount equal to
one and one-half (1.5) times the amount equal to the sum
of (1) the Employee's Annual Base Salary plus (2) the
maximum target bonus or incentive compensation which
could have been earned by the Employee calculated as if
all relevant goals had been met during the then current
fiscal year of the Company pursuant to the terms of the
incentive compensation plan in which he participates.
If there is no incentive compensation plan in effect as
of the Termination Date, then for purposes of this
Agreement it shall be assumed that the amount of
incentive compensation to be paid to the Employee shall
be the maximum target amount under any incentive
compensation plan in which he participated at the date
of the Change in Control or the most recent plan
participated in, whichever would be greater.
(c) Maintain in full force and effect for the benefit
of the Employee and the Employee's dependents and
beneficiaries, at the Company's expense, all life
insurance, health insurance, dental insurance,
accidental death and dismemberment insurance and
disability insurance under plans and programs in which
the Employee and/or the Employee's dependents and
beneficiaries participated immediately prior to the
Termination Date, provided that continued participation
is possible under the general terms and provisions of
such plans and programs ("Extended Benefits"). The
Extended Benefits shall be continued until the earlier
of (A) the second (2nd) anniversary of the Termination
Date, (B) the effective date of the Employee's coverage
under equivalent benefits from a new employer (provided
that no such equivalent benefits shall be considered
effective unless and until all pre-existing condition
limitations and waiting period restrictions have been
waived or have otherwise lapsed), or (C) the death of
the Employee. If participation in any such plan or
program is barred, the Company shall arrange at its own
expense to provide the Employee with benefits
substantially similar to those which he was entitled to
receive under such plans and programs. At the end of
the period of coverage, the Employee shall have the
right to have assigned to him, at no cost and with no
apportionment of prepaid premiums, any assignable
insurance policy relating specifically to him.
Employee shall be entitled to continuation coverage as
provided by COBRA at the conclusion of the coverage
provided under this Section.
The amount of any payment or benefit
provided for in this Section 9 shall be
offset by any lump sum cash payments due the
Employee upon termination under any other
provisions of this Employment Agreement.
10. Restrictive Covenants. Employee shall not
during the Employment Period, directly or
indirectly, alone or as a member of a
partnership or association, or as an officer,
director, advisor, consultant, agent or
employee of any other company, be engaged in
or concerned with any other duties or
pursuits requiring his personal services
except with the prior consent of the
Company's Board. Nothing herein contained
shall preclude the ownership by Employee of
stocks or other investment securities.
11. Confidential Information and Trade Secrets.
(a) Employee recognizes that Employee's position with
the Company requires considerable responsibility and
trust, and, in reliance on Employee's loyalty, the
Company may entrust Employee with highly sensitive
confidential, restricted and proprietary information
involving Trade Secrets and Confidential Information.
(b) For purposes of this Agreement, a "Trade Secret"
is any scientific or technical information, design,
process, procedure, formula or improvement that is
valuable and not generally known to competitors of the
Company. "Confidential Information" is any data or
information, other than Trade Secrets, that is
important, competitively sensitive, and not generally
known by the public, including, but not limited to, the
Company's business plans, business prospects, training
manuals, product development plans, bidding and pricing
procedures, market strategies, internal performance
statistics, financial data, confidential personnel
information concerning employees of the Company,
supplier data, operational or administrative plans,
policy manuals, and terms and conditions of contracts
and agreements. The terms "Trade Secret" 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, Employee will not use or disclose any Trade
Secrets or Confidential Information of the Company
during employment, at any time after termination of
employment and prior to such time as they cease to be
Trade Secrets or Confidential Information through no
act of Employee in violation of this Section 11.
(d) Upon the request of Company and, in any event,
upon the termination of employment hereunder, Employee
shall 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.
12. Covenant Not To Compete.
Employee hereby covenants and agrees that for
a period commencing on the date hereof and
ending twelve (12) months after ceasing
employment with the Company for whatever
reason, he shall not:
(a) Compete in any way with the Company without the
Company's prior written consent.
(b) Interfere with the relationship of the Company and
any employee, agent, broker, or representative.
(c) Divert, or attempt to cause the diversion from the
Company, any business with which the Company has been
actively engaged in during any part of the past two (2)
year period preceding the Termination Date, nor
interfere with relationships of the Company with
policyholders, dealers, distributors, marketers,
sources of supply or customers.
Employee further specifically acknowledges
that the geographic area to which the
covenants contained in this Section 12 apply
is the same geographic area in which the
Company transacted its business during any
part of the twelve (12) month period
immediately prior to the Termination Date.
The time period during which the prohibitions
set forth in this Section 12 apply shall be
tolled and suspended as to Employee for a
period equal to the aggregate quantity of
time during which Employee violates such
prohibitions in any respect.
13. Specific Enforcement. Employee
specifically acknowledges and agrees that the
restrictions set forth in Sections 11 and 12
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 11 or 12 hereof
will result in irreparable injury to the
Company, that the remedy at law for any
violation or threatened violation of such
Section(s) 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.
14. Effect of Termination of the Employment
Period. Upon the termination of the
Employment Period, this Agreement shall
terminate, and all of the parties'
obligations hereunder shall forthwith
terminate, except that rights and remedies
accruing prior to such termination or arising
out of this Agreement shall survive.
15. Notice. Any notice required to be given by
the Company hereunder to Employee shall be in
proper form and signed by an officer or
Director of the Board of the Company. Until
one party shall advise the other in writing
to the contrary, notices shall be deemed
delivered:
(a) To the Company if delivered to the Chief
Executive Officer of Humana Inc., 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 Employee, or
if mailed to him by certified or
registered mail, postage prepaid, to
Kenneth J. Fasola at 7407 Pine Knoll
Circle, Prospect, Kentucky 40059.
16. Benefit. This Agreement shall bind and inure
to the benefit of the Company and the
Employee, their respective heirs, successors
and assigns.
17. 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 provisions to be unreasonable
or otherwise unenforceable. In this regard, the
parties hereto hereby agree that any judicial authority
construing this Employment Agreement shall be empowered
to sever any portion of the territory or prohibited
business activity from the coverage of Sections 11 or
12 and to apply the provisions to the remaining portion
of the territory or the remaining business activities
not so severed by such judicial authority. 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.
18. Conditions. This Agreement shall become effective
upon approval by the Compensation Committee of the
Board of Directors of the Company.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first
above written.
Attest: HUMANA INC.
/s/Kathleen Pellegrino BY:/s/Gregory H. Wolf
Kathleen Pellegrino Gregory H. Wolf
Vice President and Chief Executive Officer
Assistant Secretary Humana Inc.
/s/Kathleen Pellegrino /s/Kenneth J. Fasola
Kathleen Pellegrino Kenneth J. Fasola
Witness "EMPLOYEE"