AMENDED AND
RESTATED
EXECUTIVE EMPLOYMENT
AGREEMENT
This Amended and
Restated Executive Employment Agreement (this “
Agreement ”), by and among Independence Holding
Company, a Delaware corporation (“ IHC
”), IHC Health Solutions, Inc., a Delaware corporation
(“ IHCHS ”), and Mr. Jeffrey C. Smedsrud,
an individual resident in the State of Minnesota (the “
Executive ”), is made as of July 1,
2009.
Recitals
A.
IHC and the Executive
are parties to that certain Amended and Restated Employment
Agreement, dated as of January 1, 2007 (the “ Prior
Agreement ”), pursuant to which the Executive serves,
inter alia , as Chief Marketing and Strategy Officer and
Senior Vice President of IHC and Chief Executive Officer and
President of IHCHS.
B.
IHCHS wishes to employ
the Executive, and the Executive wishes to be employed by IHCHS, in
the capacity and on the terms and conditions set forth
herein.
C.
IHC intends to merge, or
otherwise to combine the operations of, certain of its
subsidiaries, including (without limitation): (i) Insurers
Administrative Corporation; (ii) Health Plan Administrators, Inc.;
(iii) IHCHS; and (iv) GroupLink, Inc., into a new operating company
(“ Newco ”) whose legal name and state of
domicile are to be determined. As used herein, the term
“ the Company ” means: (i) if Newco has
been created, Newco; or (ii) if, and for so long as, Newco has not
been created, IHCHS.
Terms and
Conditions
In consideration of the
mutual covenants contained herein, along with other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1.
Employment
1.1.
Term of
Employment .
The initial term of the employment agreed to hereunder shall
commence on the date hereof and shall end at 11:59 p.m., New York
City local time, on June 30, 2011 (the “ Initial
Employment Term ”); provided , however
, that such term of employment shall be automatically extended for
successive one (1) year periods thereafter (each, an “
Employment Renewal Period ”), unless either the
Company or the Executive shall, at least ninety (90) days prior to
the expiration of the then-applicable term, have given written
notice to the other party that such employment term shall not be so
extended, in which case no such extension shall occur. The
Initial Employment Term together with each Employment Renewal
Period, if any, are collectively referred to herein as the “
Employment Term .”
1.2.
Term of
Agreement .
The term of this Agreement shall commence on the date hereof
and shall continue until any and all obligations of any party
hereto to any other party hereto shall have been performed in-full
or validly waived pursuant to the applicable provisions hereof (the
“ Agreement Term ”).
1.3.
Nature of
Duties .
The Executive shall be employed by IHCHS as its Chief
Executive Officer and President; provided , however ,
that, should Newco be created, the Executive shall be employed by
it in a position of no less apparent authority than that of
Co-Chief Executive Officer. In
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addition, regardless of
Newco’s creation, the Executive shall be an executive officer
of IHC, with title of no less apparent authority than that of
Senior Vice President. Except as provided herein, the
Executive shall work exclusively for the Company and its corporate
affiliates and shall, at each moment in time, have the actual
authority, powers and duties (the “ Duties
”) with the Company customarily associated with the officer
position the Executive then holds. The Executive shall devote
his full business time and effort to the performance of his duties
for the Company, which he shall perform faithfully and to the best
of his ability; provided , however , that nothing in
this Agreement shall be construed so as to prohibit the Executive
from serving as an executive officer and/or director of Smedsrud,
Inc. (or its successor) and/or of CAEP, LLC (or its successor),
provided that activities incident to such service are
conducted predominantly during non-business hours. At all
times during which the Executive remains an employee of the
Company, the Executive shall, if elected, serve as a member of the
Company’s board of directors and, at the request of
IHC’s Secretary, as an officer or director of any other
affiliate or subsidiary of IHC, in each case without additional
remuneration therefor. The Executive shall be subject to the
Company’s policies, procedures and approval practices, as
generally in effect and as the same may be modified from
time-to-time.
1.4.
Place of
Performance .
The Executive shall, at all times, be based only in the
Company’s offices maintained within fifty (50) miles of
Minneapolis, Minnesota, and shall be capable of performing all
duties of the Executive that the Company shall require of him (in
accordance with the other terms hereof) in such office,
except for required travel in the ordinary course of
business of frequency not greater than is reasonable, equitable and
customary within the applicable industry for executives of similar
responsibility, under the circumstances.
2.
Compensation
2.1.
Base
Salary .
The Company shall pay the Executive a base salary at an
annual rate of three hundred twenty-nine thousand six hundred
dollars ($329,600) (as the same may be adjusted upward from time to
time in IHC’s sole and absolute discretion, the “
Base Salary ”). The Base Salary shall be
paid in conformity with the Company’s usual salary payment
practices, as then generally in effect.
2.2.
Bonus
. During the
Agreement Term, the Executive shall receive annually, in cash, and
at IHC’s sole and absolute discretion, a bonus from the
Company, based on such criteria as IHC, in its sole and absolute
discretion, shall determine or may from time to time adopt as part
of a bonus plan applicable to other executive employees of the
Company.
2.3.
Benefits
. During the
Agreement Term, the Executive shall be entitled to participate in
all employee benefit plans and programs, including paid vacations,
to the same extent generally available to the Company’s other
officers, in accordance with the terms of those plans and programs;
provided , however , that in no event shall the
annual vacation time to which the Executive is entitled during each
calendar year, as of January 1 of each such year be less than
twenty (20) business days.
2.4.
Expenses
. Executive shall
be entitled to receive prompt reimbursement for all reasonable and
customary travel and business expenses incurred in connection with
his employment, but must incur and shall account for those expenses
in accordance with the policies and procedures established by the
Company.
2.5.
Additional
Compensation . In addition, during
the Employment Term, the Company shall pay or reimburse to the
Executive: (i) twenty-seven thousand four hundred dollars ($27,400)
per year in connection with the Executive’s utilization, for
business purposes, of certain Arizona real property owned by the
Executive, calculated in such manner as the Executive and the
Company shall reasonably agree; (ii) annual dues, and
reasonable incidental expenses incurred for business purposes, at
the
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Bearpath Country Club,
such club-related amounts not to exceed twenty thousand four
hundred dollars ($20,400) per year, in the aggregate; and (iii) an
auto allowance not to exceed sixteen thousand four hundred dollars
($16,400) per year, applicable to all expenses incurred in
business-related car use, such expenses including, without
limitation, auto insurance, gasoline and maintenance.
3.
Termination; Change
in Control
3.1.
Rights and
Duties .
If the Executive’s employment by the Company is
terminated, he shall be entitled to the amounts or benefits shown
below, subject to the balance of this Section 3. In the event
of such a termination, the Company and the Executive shall have no
further obligations to each other under this Agreement,
except the Executive’s obligations under Section 4 and
the mutual arbitration obligations and other rights and obligations
set forth under Section 5, all of which shall survive any such
termination.
3.2.
Qualifying
Terminations . Any of the following events
resulting in a cessation of the Executive’s employment by the
Company during the Employment Term shall constitute a “
Qualifying Termination ”: (i) discharge by the
Company without Cause (as hereinafter defined); (ii) the
Executive’s resignation with Good Reason (as hereinafter
defined); (iii) the Executive’s death; (iv) the
Executive’s Permanent Disability (as hereinafter defined); or
(v) discharge of the Executive by the Company or its successor
within twenty four (24) months following a Change in
Control.
3.3.
Disqualifying
Terminations . Any of the following events
resulting in a cessation of the Executive’s employment by the
Company during the Employment Term shall constitute a “
Disqualifying Termination ”: (i) discharge by
the Company with Cause; or (ii) the Executive’s resignation
without Good Reason.
3.4.
Definitions . For purposes of this
Agreement, the following terms shall have the following
meanings:
(A)
“
Cause ” means the existence of any of the
following circumstances:
(i)
the Executive’s
refusal to perform the Duties (other than by reason of physical or
mental illness, injury, or condition), after the Executive has been
given notice by the Company of such default and a reasonable
opportunity to cure same;
(ii)
the Executive’s
material failure to comply with applicable Company policies, as
such may be amended from time to time, after the Executive has been
given notice of such failure and a reasonable opportunity to cure
same;
(iii)
the Executive’s
breach of any of his obligations under Section 4 of this Agreement;
or
(iv)
the Executive’s
conviction of a felony or the Executive’s commission of any
crime involving financial or accounting fraud upon the Company, its
corporate affiliates or their respective clients or
policyholders.
(B)
“ Change in
Control ” means: (i) the purchase or other
acquisition by any person, entity or group of persons, within the
meaning of Section 13(d) or Section 14(d) of the Securities
Exchange Act of 1934, as amended (or any comparable successor
provision, the “ Exchange Act ”),
other than stockholders (or affiliates thereof) of
IHC as of the date hereof, of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty
percent (50%) or more of either (A)
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the outstanding shares
of common stock (on a fully diluted basis) of IHC or (B) the
combined voting power of IHC’s then-outstanding voting
securities entitled to vote generally in the election of directors
of IHC; (ii) the consummation of a reorganization, merger or
consolidation of IHC, in each case, with respect to which persons
who were stockholders of IHC immediately prior to such
reorganization, merger or consolidation do not, immediately
thereafter, own more than fifty percent (50%) of the combined
voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company; (iii)
a liquidation or dissolution of IHC; or (iv) the sale of all or
substantially all of IHC’s or of the Company’s assets,
provided , however , that, for these purposes,
IHC’s assets relating to the business of first-dollar (fully
insured) health insurance shall be deemed to constitute
“substantially all” of IHC’s assets.
The foregoing notwithstanding , in no event shall any
transaction between or among affiliates of IHC as of the date
hereto constitute a Change in Control.
(C)
“ Diminution
in Responsibility ” means any of the
following:
(i)
a material diminution in
the Executive’s authority, duties and responsibilities or the
assignation to the Executive of duties and responsibilities that
are materially inconsistent with the Executive’s apparent
authority or title, considered equitably under the circumstances
and with reference to executives with similar titles at companies
within the Company’s industry; or
(ii)
other circumstances that
would constitute “constructive termination” under
applicable employment law.
(D)
“ Good
Reason ” means the existence of the following
circumstance:
(i)
the Company’s or
IHC’s breach of any material provision of this Agreement,
after the Company or IHC (as the case may be) has been given notice
of such breach and a reasonable opportunity to cure such
breach;
(ii)
the occurrence of a
Diminution of Responsibility; or
(iii)
a Non-Qualifying Change
in Control Event.
(E)
“
Non-Qualifying Change in Control Event ” means
the announcement of, or the entering into of a binding agreement,
by the Company or IHC, in respect of, a Change in Control in which
either (i) the proposed or intended acquirer in such a Change in
Control does not agree to continue the Executive’s employment
on the terms and conditions set forth herein for the remainder of
the then-applicable Employment Term, and (ii) the ultimate
parent of such acquirer does not guarantee, on an unconditional and
full-recourse basis, such obligation to the Executive.
(F)
“ Permanent
Disability ” means Executive’s inability
substantially to perform his duties and responsibilities under this
Agreement by reason of any physical or mental incapacity for a
period of one-hundred-eighty (180) consecutive days, or two or more
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