SEVERANCE AND NONCOMPETITION
AGREEMENT
THIS SEVERANCE AND
NONCOMPETITION AGREEMENT (the “Agreement”), dated as of
July 30, 2009, is by and between HealthSpring, Inc., a
Delaware corporation (the “ Company ”), and
Karey L. Witty (“ Executive ”).
WHEREAS, Executive
has accepted the Company’s offer to serve as Executive Vice
President and Chief Financial Officer of the Company and, as a
condition of such employment, the Company and Executive each have
agreed to execute this Agreement to provide for certain rights and
obligations as set forth herein.
NOW THEREFORE, in
consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
1.
Severance Benefits . If Executive’s employment
is terminated by the Company without Cause (as defined below) or
upon Executive’s resignation with Good Reason (as defined
below), Executive shall be entitled to (i) continue to receive
his base salary as in effect immediately prior to such termination,
payable in regular installments in accordance with the
Company’s normal payroll policies then in effect, and
(ii) continue to be eligible to participate in employee
benefit programs for senior executive employees (other than bonus
and incentive compensation plans), at the Company’s cost, to
the extent permitted under the terms of such programs and under
applicable law, as special severance payments from the date of
termination for a period of eighteen months thereafter (the “
Severance Period ”), if and only if Executive has
executed and delivered to the Company the General Release
substantially in form and substance as set forth in
Exhibit A attached hereto and the General Release has
become effective, and only so long as Executive has not revoked or
breached the provisions of the General Release or breached the
provisions of Section 2 or 3 hereof and does not apply for
unemployment compensation chargeable to the Company or any
Subsidiary during the Severance Period. Executive shall not be
entitled to any other salary, compensation, or benefits after
termination of his employment, except as specifically provided for
in the Company’s employee benefit plans or as otherwise
expressly required by applicable law. Unless Executive is
terminated by the Company or its successor without Cause in
connection with or within twelve months following a Change of
Control (as defined below), the amounts payable pursuant to this
Section 1 shall be reduced by the amount of any
compensation Executive receives with respect to any other
employment during the Severance Period; provided that Executive
shall have no duty or obligation to seek other employment during
the Severance Period or otherwise mitigate damages hereunder. Upon
request from time to time, Executive shall furnish the Company with
a true and complete certificate specifying any such compensation
earned or received by him from any Person other than the Company
during the Severance Period. All payments required to be made, or
other benefits required to be provided, by the Company hereunder to
Executive or Executive’s dependents, beneficiaries, or estate
will be subject to the withholding of such amounts relating to tax
and other payroll deductions as may be required by law.
2.
Noncompete/Nonsolicitation .
2.1 In further
consideration of the benefits to Executive hereunder and as a
condition of his continued employment with the Company, Executive
acknowledges that during the course of his employment with the
Company and its Subsidiaries (as defined below), he will become
familiar with the Company’s and its Subsidiaries’ trade
secrets and with other Confidential
Information (as
defined below) concerning the Company and its Subsidiaries and that
his services have been and shall continue to be of special, unique,
and extraordinary value to the Company and its Subsidiaries.
Executive agrees that, during his employment with the Company and
for eighteen months thereafter (the “ Noncompete
Period ”), he shall not directly or indirectly own any
interest in, manage, control, participate in, consult with, render
services for, be employed in an executive, managerial or
administrative capacity by, or in any manner engage in any business
within the United States that is engaging in the businesses of the
Company or its Subsidiaries, as such businesses exist at any time
during his employment with the Company or, as of the date of
termination of such employment, are contemplated to exist during
the twelve-month period following the date of termination of
employment (the “ Restricted Business ”).
Nothing herein shall prohibit Executive from (i) being a
passive owner of not more than 2% of the outstanding stock of any
class of a corporation that is publicly traded, so long as
Executive has no active participation in the business of such
corporation; or (ii) becoming employed, engaged, associated or
otherwise participating with a separately managed division or
Subsidiary of a competitive business that does not engage in the
Restricted Business (provided that Executive’s services are
provided only to such division or Subsidiary); or
(iii) accepting employment with any federal or state
government or governmental subdivision or agency.
2.2 During the
Noncompete Period, Executive shall not directly or indirectly
through another Person (i) induce or attempt to induce any
employee of the Company or any Subsidiary to leave the employ of
the Company or such Subsidiary, or in any way interfere with the
relationship between the Company or any Subsidiary and any employee
thereof; (ii) hire any Person who was an employee of the
Company or any Subsidiary at any time during the twelve-month
period immediately prior to the termination of his employment with
the Company; or (iii) induce or attempt to induce any member,
provider, payor or other business relation of the Company or any
Subsidiary to cease or materially reduce doing business with the
Company or such Subsidiary, or in any way interfere with the
relationship between any such customer, supplier, licensee or
business relation and the Company or any Subsidiary (including,
without limitation, making any negative or disparaging statements
or communications regarding the Company or its Subsidiaries).
Notwithstanding the foregoing, nothing in this Agreement shall
prohibit Executive from employing an individual (i) with the
consent of the Company or (ii) who responded to general
solicitations in publications or on websites, or through the use of
search firms, so long as such general solicitations or search firm
activities are not targeted specifically at an employee of the
Company or any of its Subsidiaries. In addition, nothing in this
Agreement will prohibit the making of any truthful statements made
by any Person in response to a lawful subpoena or legal proceeding
or to enforce such Person’s rights under this Agreement, or
any other agreement between Executive, the Company, and its
Subsidiaries.
3.
Confidentiality; Trade Secrets.
3.1 Executive
acknowledges that the Company and its Subsidiaries continually
develop Confidential Information, that Executive may develop
Confidential Information for the Company or its Subsidiaries, and
that Executive may learn of Confidential Information during the
course of his employment. Executive agrees that all Confidential
Information that Executive creates or to which Executive has access
as a result of Executive’s employment, whether before or
after the date of this Agreement, is and shall remain the sole and
exclusive property of the Company and that Executive will comply
with the policies and procedures of the Company and its
Subsidiaries for protecting Confidential Information. Executive
further agrees that, except as required for the proper performance
of Executive’s duties for the Company or as required by
applicable law (and then only to the extent required), Executive
will not, directly or indirectly, use for Executive’s own
benefit or gain, or assist others in the application of or disclose
any Confidential Information. Executive understands and agrees that
these restrictions will continue to apply after Executive’s
employment terminates, regardless of the reason for termination
and
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regardless
whether Executive is receiving or is entitled to receive any
payments or other benefits under this Agreement.
3.2 Executive
acknowledges that all discoveries, concepts, ideas, inventions,
innovations, improvements, developments, methods, designs,
analyses, drawings, reports, patent applications, copyrightable
work and mask work (whether or not including any Confidential
Information) and all registrations or applications related thereto,
all other proprietary information and all similar or related
information (whether or not patentable) that relate to the
Company’s or any of its Subsidiaries’ actual or
anticipated business, research and development or existing or
future products or services and that are conceived, developed or
made by Executive (whether alone or jointly with others) while
employed by the Company and its Subsidiaries, whether before or
after the date of this Agreement (“ Work Product
”), belong to the Company or such Subsidiary. Executive shall
promptly disclose all patentable inventions and other material Work
Product to the Board of Directors and, at the Company’s
expense, perform all actions reasonably requested by the Board of
Directors (whether during or after his employment with the Company)
to establish and confirm such ownership (including, without
limitation, assignments, consents, powers of attorney and other
instruments). Executive acknowledges that all Work Product shall be
deemed to constitute “works made for hire” under the
U.S. Copyright Act of 1976, as amended. In accordance with Title
19, Section 805 of the Delaware Code, Executive is hereby
advised that this Section 3.2 regarding the
Company’s and its Subsidiaries’ ownership of Work
Product does not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company or
any Subsidiary was used and which was developed entirely on
Executive’s own time, unless (i) the invention relates
to the business of the Company or any Subsidiary or to the
Company’s or any Subsidiaries’ actual or demonstrably
anticipated research or development, or (ii) the invention
results from any work performed by Executive for the Company or any
Subsidiary.
4.
Enforceability and Remedies.
4.1 Executive
agrees that the restrictions on, and other provisions relating to,
Executive’s activities contained in this Agreement are fully
reasonable and necessary to protect the goodwill, Confidential
Information and other legitimate interests of the Company.
Executive also acknowledges and agrees that, were Executive to
breach the provisions of this Agreement, the harm to the Company
would be irreparable. Executive therefore agrees that in the event
of such a breach or threatened breach the Company shall, in
addition to any other remedies available to it, have the right to
obtain preliminary and permanent injunctive relief against any such
breach without having to post bond. Executive further agrees that,
in addition to any other relief awarded to the Company as a result
of Executive’s breach of any of the provisions of this
Agreement, the Company shall be entitled to recover all payments
made to Executive or on Executive’s behalf
hereunder.
4.2 Executive
hereby agrees that in the event any provision of this Agreement
shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too long a time,
too large a geographic area, or too great a range of activities,
such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
5.
Definitions . Words or phrases which are initially
capitalized or within quotation marks shall have the meanings
provided in this Section 5 and as provided elsewhere
herein. For purposes of this Agreement, the following definitions
apply:
“ Act
” shall mean the Securities Exchange Act of 1934, as
amended.
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“
Cause ” shall mean, with respect to Executive, one or
more of the following: (i) the conviction of a felony or other
crime involving moral turpitude or the commission of any other act
or omission involving material dishonesty or fraud with respect to
the Company or any of its Subsidiaries; (ii) reporting to work
under the influence of illegal drugs, the use of illegal drugs
(whether or not at the workplace) or other repeated conduct causing
the Company or any of its Subsidiaries substantial public disgrace
or disrepute or substantial economic harm, which is not cured
within 20 days following written notice thereof to the
Executive; (iii) material and repeated failure to perform his
duties as reasonably directed by the Board of Directors or the
Company’s Chief Executive Officer, which is not cured within
20 days following written notice thereof to the Executive;
(iv) breach of fiduciary duty or engaging in gross negligence
or willful misconduct with respect to the Company or any of its
Subsidiaries; or (v) any other material breach of this
Agreement which is not cured within 20 days after written
notice thereof to Executive.
“ Change
of Control ” shall be deemed to take place if hereafter
(i) any Person becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Act) of securities of the
Company representing more than 50% of the combined voting power of
the Company’s then-outstanding securities; or (ii) the
Company is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to
such transaction or event constitute less than a majority of the
Board of Directors thereafter. Notwithstanding the foregoing
provisions of this paragraph, a “Change of Control”
will not be deemed to have occurred solely because of the
occurrence of a leveraged buyout or recapitalization of the Company
in which the Executive participates as an equity
investor.
“
Confidential Information ” shall mean any and all
information of the Company and its Subsidiaries that is not
generally known by others with whom they compete or do business, or
with whom they plan to compete or do business, and any and all
information, which, if disclosed by the Company or any of its
Subsidiaries, would assist in competition against any of them.
Confidential Information includes without limitation such
information relating to the financial performance and
strategic
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