Document:

Prepared by MerrillDirect

 

 

 

 

 

 

 

EXECUTIVE SEVERANCE AGREEMENT

Cobalt Corporation

TABLE OF CONTENTS

	ARTICLE
  1	ESTABLISHMENT,
  TERM, AND PURPOSE	 
	 	 	 
	ARTICLE 2	DEFINITIONS	 
	 	 	 
	ARTICLE
  3	LOSS
  OF ELIGIBILITY UNDER THIS AGREEMENT	 
	 	 	 
	ARTICLE 4	SEVERANCE
  BENEFITS	 
	 	 	 
	ARTICLE
  5	FORM
  AND TIMING OF SEVERANCE BENEFITS	 
	 	 	 
	ARTICLE
  6	EXCISE
  TAX EQUALIZATION PAYMENT	 
	 	 	 
	ARTICLE
  7	THE
  COMPANY’S PAYMENT OBLIGATION	 
	 	 	 
	ARTICLE
  8	LEGAL
  REMEDIES	 
	 	 	 
	ARTICLE
  9	OUTPLACEMENT
  ASSISTANCE	 
	 	 	 
	ARTICLE
  10	SUCCESSORS
  AND ASSIGNMENT	 
	 	 	 
	ARTICLE 11	MISCELLANEOUS	 

 

Cobalt Corporation

Executive Severance Agreement

             THIS
AGREEMENT is made and entered into as of the ___ day of ________, 2001, by and
between Cobalt Corporation (hereinafter referred to as the “Company”) and «FirstName»
(hereinafter referred to as the “Executive”).

             WHEREAS,
the Executive is a key executive of the Company;

             WHEREAS,
should the possibility of a Change in Control of the Company (as defined in
Section 2.6 hereof) arise, the Board believes it is imperative that the Company
and the Board should be able to rely upon the Executive to continue in his or
her position, and that the Company should be able to receive and rely upon the
Executive’s advice, if requested, as to the best interests of the Company
without concern that the Executive might be distracted by the personal
uncertainties and risks created by the possibility of a Change in Control;

             WHEREAS,
should the possibility of a Change in Control arise, in addition to his or her
regular duties, the Executive may be called upon to assist in the assessment of
such possible Change in Control, advise management and the Board as to whether
such Change in Control would be in the best interests of the Company, and to
take such other actions as the Board might determine to be appropriate;

             WHEREAS,
the Executive previously entered into an executive severance agreement (the
“Prior Agreement”) with Blue Cross & Blue Shield United of Wisconsin
(“BCBSUW”) which is substantially similar to this Agreement;

             WHEREAS,
through a reorganization, BCBSUW has become a subsidiary of the Company;

             WHEREAS,
the Prior Agreement would have covered a Change in Control of the Company and
imposed the financial obligations of the Prior Agreement on BCBSUW which is now
a subsidiary of the Company;

             WHEREAS,
the Board of Directors of the Company believes that the Executive Severance
Agreement and the obligations thereunder should be between the Company and the
Executive now that the Company has become BCBSUW’s parent; and

             WHEREAS,
the Board of Directors of the Company desires to substitute this Agreement for
the Prior Agreement.

             NOW,
THEREFORE, to assure the Company that it will have the continued dedication of
the Executive and the availability of his or her advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control
of the Company, and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:

Article
1    ESTABLISHMENT, TERM, AND
PURPOSE

             This
Agreement will commence on the Effective Date and, subject to Article 3, shall
continue in effect for three (3) full years. 
However, at the end of such three (3) year period and, if extended, at
the end of each additional year thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year, unless the Committee
delivers written notice six (6) months prior to the end of such term, or
extended term, to the Executive, that the Agreement will not be extended.  In the latter case, the Agreement will
terminate at the end of the term, or extended term, then in progress, or as
provided in Article 3.

             However,
in the event a Change in Control occurs during the original or any extended
term, this Agreement will remain in effect for the longer of:  (i) twenty-four (24) months beyond the month
in which such Change in Control occurred; or (ii) until all obligations of the
Company hereunder have been fulfilled, and until all benefits required
hereunder have been paid to the Executive.

Article
2    DEFINITIONS

             Whenever
used in this Agreement, the following terms shall have the meanings set forth
below and, when the meaning is intended, the initial letter of the word is
capitalized.

             2.1  “Base
Salary” means the salary of record paid to an Executive by the Company, or by
Blue Cross & Blue Shield United of Wisconsin or any other subsidiary of the
Company as annual salary, excluding amounts received under incentive or other
bonus plans, whether or not deferred.

             2.2  “Beneficial
Owner” shall have the meaning ascribed to such term in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, but excluding those whose
status arises from the holding of proxies and including option holders on a
fully diluted basis.

             2.3  “Beneficiary” means the persons or entities designated or deemed
designated by the Executive pursuant to Section 11.2 herein.

             2.4  “Board”
means the Board of Directors of the Company.

             2.5  “Cause”
means:  (a) the Executive’s willful and
continued failure to substantially perform his or her duties with the Company
(other than any such failure resulting from Disability or occurring after
issuance by the Executive of a Notice of Termination for Good Reason), after a
written demand for substantial performance is delivered to the Executive that
specifically identifies the manner in which the Company believes that the
Executive has willfully failed to substantially perform his or her duties, and
after the Executive has failed to resume substantial performance of his or her
duties on a continuous basis within thirty (30) calendar days of receiving such
demand; (b) the Executive willfully engaging in conduct (other than conduct
covered under (a) above) which is demonstrably and materially injurious to the
Company, monetarily or otherwise; or (c) the Executive having been convicted of
a felony (as evidenced by binding and final judgment, order or decree of a
court of competent jurisdiction, in effect after exhaustion of all rights of
appeal) which substantially impairs the Executive’s ability to perform his or
her duties or responsibilities.  For
purposes of this Section 2.5, the Executive’s actions or failures to act will
be deemed “willful” only if done or omitted in bad faith and without reasonable
belief that the action or omission was in the best interests of the Company.

             2.6  “Change in
Control” shall mean:

             (i)          Any
individual, entity or group (within the meaning of Section 13(d)(3) of the
Exchange Act) (a “Person”), other than the Wisconsin United for Health
Foundation, Inc. (the “Foundation”) becoming the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of the either (x) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (y) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in an election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
Section 2.6, the following acquisitions shall not constitute a Change in
Control: (A) any acquisition directly from the Company, (B) any acquisition by
the Company, (C) any acquisition by any employee benefit plan (or related
trust) sponsored by or maintained by the Company or any corporation controlled
by the Company, (D) any acquisition by any corporation controlled by the
Company, or (E) any acquisition by any corporation pursuant to a transaction
that complies with clauses (A), (B) and (C) of Section 2.6 (iii); or (F) any
acquisition where the Person owns, after the acquisition, less of the Outstanding
Company Voting Securities or Outstanding Company Common Stock than the
Foundation then owns after such acquisition.

             (ii)         Individuals who, as of the date of this Agreement,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company’s shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or

             (iii)        Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case, unless, following such
Business Combination: (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then Outstanding shares of common stock and
the combined voting power of the then Outstanding voting Company Securities
entitled to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination (including, without
limitation, a corporation that as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board providing for such Business
Combination; or

             (iv)       Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company.

             2.7  “Code” means
the United States Internal Revenue Code of 1986, as amended, and any successors
thereto.

             2.8  “Committee”
means the Management Review Committee of the Board or any other committee
appointed by the Board to perform the functions of the Management Review
Committee or any successor committee which performs the functions of the
Management Review Committee or, in the absence of one, by the Board.

             2.9  “Company”
means Cobalt Corporation, a Wisconsin corporation, or any successor thereto as
provided in Article 10 herein.

             2.10 
“Disability” means a complete and permanent disability as determined by
the Committee in accordance with the Company Long-Term Disability Plan, as in
effect on the Effective Date.

             2.11  “Effective
Date” means the date of this Agreement set forth above.

             2.12  “Effective
Date of Termination” means the date on which a Qualifying Termination occurs.

             2.13  “Exchange
Act” means the United States Securities Exchange Act of 1934, as amended.

             2.14  “Good
Reason” shall mean, without the Executive’s express written consent, the
occurrence of any one or more of the following:

(a)         The
assignment of the Executive to duties materially inconsistent with the
Executive’s authorities, duties, responsibilities, and status (including
offices and reporting requirements) as an employee of the Company, or a
reduction or alteration in the nature or status of the Executive’s authorities,
duties, or responsibilities from the greater of those in effect (i) on the
Effective Date; (ii) during the fiscal year immediately preceding the year of
the Change in Control; or (iii) immediately preceding the Change in Control;

(b)        Any
breach of this Agreement by the Company, other than an isolated, insubstantial
or inadvertent failure which is not taken in bad faith and which the Company or
any successor remedies promptly after notice from the Executive;

(c)         The
Executive’s principal office is moved to a location that is more than fifty
(50) miles farther from the Executive’s home than the principal office location
immediately prior to the Change in Control;

(d)        A
reduction by the Company in the Executive’s Base Salary as in effect on the
Effective Date or as the same shall be increased from time to time;

(e)         A
material reduction in the Executive’s level of participation in any of the
Company’s short- and/or long-term incentive compensation plans, or employee
benefit or retirement plans, policies, practices, or arrangements in which the
Executive participates from the greater of the levels in place on:  (i) the Effective Date; (ii) the fiscal year
immediately preceding the Change in Control; or (iii) immediately preceding the
Change in Control;

(f)         The
failure of the Company to obtain a satisfactory agreement from any successor to
the Company to assume and agree to perform this Agreement, as contemplated in
Article 10 herein; or

(g)        Any
termination of Executive’s employment by the Company that is not effected
pursuant to a Notice of Termination.

             The
existence of Good Reason shall not be affected by the Executive’s temporary
incapacity due to physical or mental illness not constituting a
Disability.  The Executive’s continued
employment shall not constitute a waiver of the Executive’s rights with respect
to any circumstance constituting Good Reason.

             2.15  “Notice of
Termination” means a written notice which shall indicate the specific provision
in this Agreement governing the Executive’s termination of employment and shall
set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the provision so
indicated.

             2.16  “Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act and used in Sections 13(d) and 14(d) thereof, including a “group” as
provided in Section 13(d).

             2.17  “Profit
Sharing Plan” means the Company Profit Sharing Plan.

             2.18  “Qualifying
Termination” means termination of the Executive’s employment under one of the
circumstances described in Section 4.2 below.

             2.19 
“Retirement” shall mean termination of employment after the Executive
has attained Age 55 and completed 10 “Years of Service” (as such term is
defined in the Company’s tax-qualified defined benefit pension plan.)  “Retirement” shall be deemed to occur only
if it is pursuant to a mandatory retirement provision in such plan or if the
Executive and the Company agree in writing that “Retirement” has occurred for
purposes of this Agreement.  (Retirement
pursuant to a mandatory retirement provision added on or after a date six
months prior to a Change in Control will not be treated as mandatory retirement
for purposes of this Agreement.)

             2.20  “Severance
Benefits” means the payment of severance compensation as provided in Section
4.3 herein.

Article 3    LOSS OF ELIGIBILITY UNDER THIS AGREEMENT

             In
the event Executive’s job classification is reduced, the Committee, in its sole
discretion, may cancel this Agreement by written notice delivered to the
Executive.  A cancellation occurring
later than six (6) months prior to a Change in Control shall be null and void.

Article 4    SEVERANCE BENEFITS

             4.1        Right
to Severance Benefits.  The Executive shall be entitled
to receive from the Company Severance Benefits, as described in Section 4.3
herein, if the Executive incurs a Qualifying Termination during the six (6)
month period immediately prior to a Change in Control or within twenty-four
(24) calendar months following a Change in Control.

             The
Executive shall not be entitled to receive Severance Benefits if he or she is
terminated for Cause, or if his or her employment with the Company ends due to
death, Disability, or Retirement or due to termination of employment by the
Executive without Good Reason.

             4.2  Qualifying Termination of Employment.  Upon the
occurrence of any one or more of the following events the Company shall pay
Severance Benefits to the Executive under this Agreement:

                           (a)  Termination of the Executive’s employment by
the Company for reasons other than Cause.

                           (b)  Termination by the Executive for Good Reason
pursuant to a Notice of Termination delivered to the Company by the Executive.

             4.3  Description of Severance Benefits.  In the event
the Executive becomes entitled to receive Severance Benefits as provided in
Sections 4.1 and 4.2 herein, the Company shall pay to the Executive and provide
him or her with the following:

(a)         An
amount equal to one and one half (1 1⁄2) times the highest rate of the
Executive’s annualized Base Salary in effect at any time up to and including
the Effective Date of Termination.

(b)        An
amount equal to one and one half (1 1⁄2) times the Executive’s target award under
the annual bonus plan and the Profit Sharing Plan established for the plan year
in which the Executive’s Effective Date of Termination occurs, or the prior
plan year if a target award has not been established for the plan year in which
the Executive’s Effective Date of Termination occurs.

(c)         A
continuation of the welfare benefits of health care, life and accidental death
and dismemberment, and disability insurance coverage (collectively,
“Supplemental Benefits”) for one and one half (1 1⁄2) full years after the
Effective Date of Termination.  These
benefits shall be provided at the same cost to the Executive (if any), and at
the same coverage level, as in effect as of the Executive’s Effective Date of
Termination.  However, in the event the
premium cost and/or level of coverage shall change for all management employees
with respect to Supplemental Benefits, the cost and/or coverage level,
likewise, shall change for the Executive in a corresponding manner.  COBRA-related benefits will begin as of the
end of the three year period (or upon earlier discontinuance described below).

The
continuation of any or all of the Supplemental Benefits shall be discontinued
prior to the end of the one and one half (1 1⁄2) year period in the event the
Executive has available substantially similar benefits at a comparable cost
from a subsequent employer.

The
Executive must supply all information reasonably requested by the Company
pursuant to this subsection.

(d)        An
amount equal to the Executive’s unpaid targeted annual bonus, established for
the plan year in which the Executive’s Effective Date of Termination occurs,
multiplied by a fraction, the numerator of which is the number of days
completed in the then-existing fiscal year through the Effective Date of
Termination, and the denominator of which is three hundred sixty-five (365).

(e)         An
amount equal to the Executive’s unpaid allocation from the Profit Sharing Plan,
established for the plan year in which the Executive’s Effective Date of
Termination occurs, multiplied by a fraction, the numerator of which is the
number of days completed in the then-existing fiscal year through the Effective
Date of Termination, and the denominator of which is three hundred sixty-five
(365).

             Incentive
awards granted under the Company Equity Incentive Plan and other incentive
arrangements adopted by the Company shall be governed by the terms of the
applicable plan.

             The
aggregate benefits accrued by the Executive as of the Effective Date of
Termination under the Company Pension Plan, the UGS Pension Plan, the Company
401(k) Plan, and other qualified savings and retirement plans sponsored by the
Company shall be governed by the terms of the applicable plan.  For purposes of the Company Supplemental
Executive Retirement Plan, such benefits shall be calculated under the
assumption that the minimum service requirement under Section 4.1 of the
Company Supplemental Executive Retirement Plan (vesting requirement) shall be
deemed to have been satisfied as of the date of a Qualifying Termination and
the Executive’s employment continued following the Effective Date of Termination
for one and one half (1 1⁄2) full years (i.e., one and one half (1 1⁄2) additional
years of service credits shall be added); provided, however, that for purposes
of determining “final average pay” under such program, the Executive’s actual
pay history as of the Effective Date of Termination shall be used.

             For
purposes of the Company Retiree Medical Plan, such benefits shall be calculated
under the assumption that the Executive’s employment continued following the
Effective Date of Termination of one and one-half (1 1⁄2) years (i.e., one and
one-half additional years of service credits shall be added and the Executive’s
age advance to correspond).

             Compensation
which has been deferred under the Company Deferred Compensation Plan or other
plans sponsored by the Company, as applicable, together with all interest that
has been credited with respect to any such deferred compensation balances,
shall be governed by the terms of the applicable plan.

             4.4        Termination
for Disability.  In the event the Executive’s
employment is terminated due to Disability, the Executive shall not be entitled
to the Severance Benefits described in Section 4.3.  The terms and conditions of the Executive’s employment rights
under that circumstance shall be determined without regard to this Agreement.

             4.5        Termination
for Retirement or Death.  If the Executive’s employment is
terminated by reason of his or her Retirement or death, the Executive shall not
be entitled to the Severance Benefits described in Section 4.3.  The terms and conditions of the Executive’s
employment rights under those circumstances are to be determined without regard
to this Agreement.

             4.6  Termination for Cause or by the Executive
Other Than for Good Reason.  If the Executive’s employment is
terminated either:  (a) by the Company
for Cause; or (b) by the Executive other than for Good Reason, the Company
shall pay the Executive the amounts specified in Section 4.8 and the Company
shall have no further obligations to the Executive under this Agreement.

             4.7  Notice of Termination.  Any
termination of employment by the Company or by the Executive for Good Reason
shall be communicated by a Notice of Termination.  If the Executive is providing the notice, it should be delivered
to a member of the Committee.  If the
Company is providing notice, it should be delivered to the Executive.

             4.8        Payment
of Accrued Compensation and Benefits.  In all
events, Executive shall, upon termination of employment with the Company, be
paid an amount equal to Executive’s unpaid Base Salary, accrued vacation pay
and any other accrued but unpaid compensation in cash or cash equivalents
within ten (10) days of the termination except where the terms of the
compensation arrangement or plan govern instead of this Agreement and
specifically provide for later payment.

             4.9        Coordination with Other Agreements.  The
Severance Benefits described in Section 4.3 shall be reduced by any severance
benefits paid pursuant to either: (i) other agreements between the Company and
the Executive or (ii) any plan adopted by the Company, unless such plan
or agreement expressly provides that the benefits under such plan or agreement
are in addition to the benefits payable under this Agreement.

Article 5    FORM AND
TIMING OF SEVERANCE BENEFITS

             5.1        Form
and Timing of Severance Benefits.  The
Severance Benefits described in Sections 4.3(a), 4.3(b), 4.3(d), and 4.3(e)
herein shall be paid in cash or cash equivalents to the Executive in a single
lump sum as soon as practicable following the Effective Date of Termination,
(or, if later, the date of the Change in Control) but in no event beyond ten
(10) days from such date.  The
Supplemental Benefits described in Section 4.3(c) shall be paid at the times
due under each applicable plan.

             5.2        Withholding
of Taxes.  The Company shall be entitled to
withhold from any amounts payable under this Agreement the minimum taxes
legally required to be withheld (including, without limitation, any United
States Federal taxes and any other state, city, or local taxes).

Article 6    EXCISE TAX EQUALIZATION PAYMENT

             6.1  Benefit Adjustment/Excise Tax Equalization
Payment.  If the
Committee reasonably determines that any benefit under this Plan, alone or when
aggregated with other compensation payable to the Executive, would constitute
an excess parachute payment within the meaning of Section 280G of the Code, the
amount payable under this Plan will be limited to the extent necessary to avoid
creation of an excess parachute payment, unless the excess parachute payment
results from the inability to include compensation paid by Blue Cross &
Blue Shield United of Wisconsin, Inc. for purposes of determining the “base
amount” under Section 280G of the Code.

             In
the event that the Executive becomes entitled to Severance Benefits or any
other payment or benefit under this Agreement, or under any other agreement
with or plan of the Company (in the aggregate, the “Total Payments”), if all or
any part of the Total Payments will be subject to the tax (the “Excise Tax”)
imposed by Section 4999 of the Code (or any similar tax that may hereafter be
imposed) due to the inability to include compensation paid by Blue Cross &
Blue Shield United of Wisconsin, Inc. for purposes of determining the “base
amount” under Section 280G of the Code, the Company shall pay to the Executive
in cash an additional amount (the “Gross-Up Payment”) such that the net amount
retained by the Executive after deduction of any Excise Tax upon the Total
Payments and any federal, state, and local income tax, penalties, interest, and
Excise Tax upon the Gross-Up Payment provided for by this Section 6.1
(including FICA and FUTA), shall be equal to the Total Payments or, if less,
the amount Executive would have received had the compensation paid by Blue
Cross & Blue Shield United of Wisconsin, Inc. been included in compensation
for purposes of Section 280G of the Code. 
Such payment shall be made by the Company to the Executive as soon as
practical following the Effective Date of Termination, but in no event beyond
thirty (30) days from such date.

             6.2        Tax Computation.  For purposes
of determining whether any of the Total Payments will be subject to the Excise
Tax and the amounts of such Excise Tax:

(a)         The
Severance Benefits and any other payments or benefits received or to be
received by the Executive in connection with a Change in Control of the Company
or the Executive’s termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement, or agreement with the Company
and subsidiaries or affiliates, or with any Person whose actions result in a
Change in Control of the Company or any Person affiliated with the Company or
such Persons) shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess parachute payments” within the
meaning of Section 280G(b)(l) shall be treated as subject to the Excise Tax,
unless in the opinion of a nationally recognized tax counsel selected by the
Company’s independent auditors and reasonably acceptable to the Executive:  (i) the Severance Benefits and such other
payments or benefits (in whole or in part) do not constitute parachute
payments; (ii) such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the meaning
of Section 280G(b)(3) of the Code; or (iii) are otherwise not subject to the
Excise Tax;

(b)        The
amount of the Total Payments which shall be treated as subject to the Excise
Tax shall be equal to the lesser of: 
(i) the total amount of the Total Payments; or (ii) the amount of excess
parachute payments within the meaning of Section 280G(b)( 1) (after applying clause
(a) above); and

(c)         The
value of any noncash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.

             For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be
made, and state and local income taxes at the highest marginal rate of taxation
in the state and locality of the Executive’s residence on the Effective Date of
Termination, net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.

             6.3        Subsequent
Recalculation.  In the event the Internal Revenue
Service adjusts the computation of the Company under Section 6.2 herein so that
the Executive did not receive the greatest net benefit, the Company shall
reimburse the Executive for the full amount necessary to make the Executive whole,
plus a market rate of interest, as determined by the national tax counsel
referred to above.

             6.4        Costs of Calculations.  The Company
agrees to bear all costs associated with, and to indemnify and hold harmless,
the national tax counsel of and from any and all claims, damages, and expenses
resulting from or relating to its determination pursuant to this Article 6,
except for claims, damages, or expenses resulting from the gross negligence or
willful misconduct of such firm.

Article 7    THE COMPANY’S PAYMENT OBLIGATION

             7.1        Payment
Obligations Absolute.  The Company’s obligation to make
the payments and the arrangements provided for herein shall be absolute and
unconditional, and shall not be affected by any circumstances, including, without
limitation, any offset, counterclaim, recoupment, defense, or other right which
the Company may have against the Executive or anyone else.  All amounts payable by the Company hereunder
shall be paid without notice or demand. 
Subject to the provision set forth in Section 8.1 and 8.2, each and
every payment made hereunder by the Company shall be final, and the Company
shall not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reasons whatsoever.

             The
Executive shall not be obligated to seek other employment in mitigation of the
amounts payable or arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event effect any
reduction of the Company’s obligations to make the payments and arrangements
required to be made under this Agreement, except to the extent provided in
Section 4.3(c) herein.

             7.2        Contractual
Rights to Benefits.  This Agreement establishes and
vests in each Executive a contractual right to the benefits to which he or she
is entitled hereunder.  However, nothing
herein contained shall require or be deemed to require, or prohibit or be
deemed to prohibit, the Company to segregate, earmark, or otherwise set aside
any funds or other assets, in trust or otherwise, to provide for any payments
to be made or required hereunder.

Article
8    LEGAL
REMEDIES

             8.1  Payment of Legal Fees.  To the
extent permitted by law, the Company shall pay all legal fees, costs of litigation,
prejudgment interest, and other expenses incurred in good faith by the
Executive as a result of the Company’s refusal to provide the Severance
Benefits, the Gross-Up Payment and/or any other benefits under this Agreement
to which the Executive becomes entitled under this Agreement, or as a result of
the Company’s contesting the validity, enforceability, or interpretation of
this Agreement, or as a result of any conflict (including conflicts related to
the calculation of parachute payments) between the parties pertaining to this
Agreement; provided, however, that the Company shall be reimbursed by the
Executive for all such fees and expenses in the event the Executive fails to
prevail with respect to any one (1) material issue of dispute in connection with
such legal action.  The Executive shall
not be liable for the Company’s fees or costs related to any such litigation.

             8.2  Arbitration.  Executive shall have the right
and option to elect (in lieu of litigation) to have any dispute or controversy
arising under or in connection with this Agreement settled by arbitration,
conducted before a panel of three (3) arbitrators sitting in a location
selected by the Executive within fifty (50) miles from the location of his or
her employment with the Company, in accordance with the rules of the American
Arbitration Association then in effect.

             Judgment
may be entered on the award of the arbitrator in any court having proper
jurisdiction.  All expenses of such
arbitration, including the fees and expenses of the counsel for the Executive,
shall be borne by the Company; provided, however, that the Company shall be
reimbursed by the Executive for all such fees and expenses in the event the
Executive fails to prevail with respect to any one (1) material issue of dispute
in connection with such legal action. 
The Executive shall not be liable for the Company’s fees or costs
related to any such arbitration.

Article 9    OUTPLACEMENT ASSISTANCE

             Following
a Qualifying Termination (as described in Section 4.2 herein), the Executive
shall be reimbursed by the Company for the costs of all outplacement services
obtained by the Executive within the two (2) year period after the Effective
Date of Termination; provided, however, that the total reimbursement shall be
limited to an amount equal to fifteen percent (15%) of the Executive’s Base
Salary as of the Effective Date of Termination.

Article 10    SUCCESSORS AND ASSIGNMENT

             10.1     Successors
to the Company.  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) of all or substantially all of the business and/or assets of the
Company or of any division or subsidiary thereof to expressly assume and agree
to perform the Company’s obligations under this Agreement in the same manner
and to the same extent that the Company would be required to perform them if no
such succession had taken place. 
Failure of the Company to obtain such assumption and agreement prior to
the effective date of any such succession shall be a breach of this Agreement
and shall entitle Executives to compensation from the Company in the same
amount and on the same terms as they would be entitled to hereunder if they had
terminated their employment with the Company voluntarily for Good Reason.  Except for the purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Effective Date of Termination.

             10.2     Assignment
by the Executive.  This Agreement shall inure to the
benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees.  If the
Executive dies (prior to receipt of all amounts due under Sections 4.3(a), (b),
(d) or (e) and 4.8, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive’s
Beneficiary.  If the Executive has not
named a Beneficiary, then such amounts shall be paid to the Executive’s devisee,
legatee, or other designee, or if there is no such designee, to the Executive’s
estate.

Article 11    MISCELLANEOUS

             11.1     Employment
Status.  Except as may be provided under
any other agreement between the Executive and the Company, the employment of
the Executive by the Company is “at will,” and may be terminated by either the
Executive or the Company at any time, subject to applicable law.

             11.2     Beneficiaries.  The
Executive may designate one or more persons or entities as the primary and/or
contingent Beneficiaries of any Severance Benefits owing to the Executive under
this Agreement.  Such designation must
be in the form of a signed writing acceptable to the Committee.  The Executive may make or change such
designations at any time.

             11.3     Severability.  In the
event any provision of this Agreement shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
the Agreement, and the Agreement shall be construed and enforced as if the illegal
or invalid provision had not been included. 
Further, the captions of this Agreement are not part of the provisions
hereof and shall have no force and effect.

             11.4     Modification.
 No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver, or discharge
is agreed to in writing and signed by the Executive and by the Company, or by
the respective parties’ legal representatives and successors.

             11.5     Effect
On Prior Agreement.  This Agreement shall completely
supercede the Prior Agreement between the Company and the Executive and the
Prior Agreement shall have no further force or effect.  BCBSUW shall be a third party beneficiary of
this Section 11.5.

             11.6     Applicable
Law.  To the extent not preempted by the
laws of the United States, the laws of the state of Wisconsin shall be the
controlling law in all matters relating to this Agreement.

             IN
WITNESS WHEREOF, the parties have executed this Agreement on this _____ day of
___________________, 2001.

 

	Cobalt Corporation 	Executive:	 
	 	 	

	 	 	«FirstName»
	By:	 	 
	 	

	 	 
	Its:	 	 
	 	

	 	 
	Attest:Prepared by MerrillDirect

 

	 	Bank One, Michigan
M11 8946
125 South Main Street
P.O. Box 8501
Ann Arbor, Michigan 48104
jim_wolfington@bankone.com	tel 734 995 8146

  fax 734 995 8000

[BANK ONE LOGO]

June 25, 2001

Mr. Justin
Grubbs

Chief Financial Officer

American Medical Technologies, Inc.

5555 Bear Lane

Corpus Christi, Texas 78405

	Re:	Amendment to the Revolving Business Credit
  Note (LIBOR-Based Interest Rate) (The "Note") and Line of Credit
  Agreement, (the "Agreement") both dated September 21, 2000.

Dear Justin:

No more than
you Ben and John, I am please with your continued success under the new sales
model, and hope that the arrangement with CEFLA is as beneficial as expected. I
said that we were restoring the interest rate (that has already reduced by its
terms), borrowing base and reporting requirements contained in the Loan
Documents to the requirements that existed prior to this March. Further, we
added $1 million in standby letter of credit availability to your $7.5 million
line-of-credit. This letter will amend the Agreement by adding letter-of credit
language to Section 1.1 and by removing those sections shown with an underline.
It also amends the Note by remove the language shown with an underline.

Please indicate
your acceptance of these changes by having a corporate officer sign one copy of
this letter, returning it to my attention at your earliest convenience.

The Note is
amended by restating the definition of "Applicable Margin" as
follows:

"Applicable Margin" means, with
respect to any Floating Rate Loan, 0% per annum and, with respect to any
Eurodollar Loan, 2.5% per annum until the Cash Flow Coverage Ratio,
as defined in the Credit Agreement is not less than 2.00:1:00 for the fiscal
quarter immediately preceding calculation, and, thereafter, 1.5 per annum.

Mr. Justin Grubbs

June 25, 2001

Page 2...

The Agreement
is amended as follows:

The first
paragraph of Section 1.1 is replaced with the following:

Facility A (Including Letters
of Credit).
The Bank has approved a credit facility to the Borrower in the principal sum
not to exceed $7,500,000.00 in the aggregate at any one time outstanding
("Facility A"). Facility A shall include the issuance of standby
letters of credit not exceeding $1,000,000.00 in the aggregate of any one time
outstanding, expiring not later than one year from the issuance date. Each
Letter of Credit shall be in form acceptable to the Bank and shall bear a fee
of 11⁄2% per year of the face amount of the Letter of Credit plus $200.00 per
year. Credit under Facility A shall be in the form of disbursements evidenced
by credits to the Borrower's account and shall be repayable as set forth in a
Revolving Business Credit Note executed September 21, 2001 (referred to in this
agreement both singularly and together with any other promissory notes
referenced in this Section 1 as the "Notes") or by issuance of a
Letter of Credit upon completion of an application acceptable to the Bank. The
proceeds of Facility A shall be used for the following purpose: working
capital. Facility A shall expire on September 30, 2002 unless earlier
withdrawn.

Section 5.7 is
amended by removing the following:

	 	C.	Within 30
  days after and as of the end of each calendar month, the following lists,
  each certified as correct by one of its authorized agents:	 
	 	(1)  	a list of
  accounts receivable, aged from date of invoice;	 
	 	(2)  	a list of
  inventory, valued at the lower of cost or market;	 
	 	(3)  	a
  borrowing base certificate in form and substance satisfactory to the Bank
  calculating the Borrowing Base in accordance with paragraph 16 as of the last
  day of such month.	 
	 	 	 	 
	 	The following is deleted in its entirety
  (formerly Section 16):
	 	Borrowing
  Base. Notwithstanding any other provision of this Agreement, the aggregate
  principal amount outstanding at any one time under Facility A shall not
  exceed the lesser of the Borrowing Rate or $7,500,000.00. In the event the
  outstandings exceed such amount, Borrower shall immediately prepay the
  outstandings under Facility A in an amount not less than such excess.
  Borrowing Base means:	 
	 	 	 
	 	A.	80% of
  the Borrower's trade accounts receivable in which the Bank has a perfected,
  first priority security interest, excluding accounts more than 90 days past
  due from the date of invoice, accounts subject to offset or defense,
  government, bonded, affiliate and foreign accounts not covered by trade
  credit insurance acceptable to the Bank, accounts from trade debtors of which
  more than 50% of the aggregate amount owing from the trade debtor to the
  Borrower is more than 90 days past due, and accounts otherwise unacceptable
  to the Bank, plus,	 
	 	 	 	 
	 	B.	Inventory
  of the Borrower in which the Bank has a perfected first priority security
  interest, valued at the lower of cost or market but not exceeding
  $3,500,000.00 in the aggregate as follows:	 
	 	 	 	 
									

(1) 50% of raw material
inventory; and

Mr. Justin
Grubbs

June 25, 2001

Page 3...

(2) 50% of finished goods
inventory, plus,

	C.	Prior to
  June 1, 2001, 50% of the net book value of the Borrower's machinery  and equipment in which the Bank has a
  perfected, first priority security interest, plus
	 	 
	D.	Prior to
  June 1, 2001, 100% of the gross book value of the Borrower's real property
  located at 5555 Bear Lane, Corpus Christi, Texas in which the Bank has a
  perfected, first priority security interest. The Borrower shall deliver to
  the Bank an executed mortgage, ALTA mortgage title insurance policy without
  exceptions, mortgage survey certified to the Bank, Phase I environmental
  survey and other environmental documentation required by the Bank and, where
  applicable, an assignment of rents, subordinations of leases, and/or
  collateral assignments of land contracts, all in form and substance
  satisfactory to the Bank.
	 	 
	E. 	On June
  1, 2001, and thereafter, 85% of the appraised value as established by an
  independent third party appraiser of recognized standing hired by the Bank,
  of the Borrower's real property located at 5555 Bear Lane, Corpus Christi,
  Texas.
	 	 

No other term
of condition of any Loan Document is changed by this amendment.

With best
regards,

/s/ Jim
Wolfington

Jim Wolfington

Vice President

Accepted and
agreed this 26 day of June, 2001.

	By:	American Medical Technologies, Inc.	 	 
	 	 	 	 
	 	 	 	 
	By:	/s/
  Justin W. Grubbs	Its:	CFO

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