Daou Systems Inc – ‘10-Q’ for 3/31/00 – EX-10.2

On:  Monday, 5/15/00   ·   For:  3/31/00   ·   Accession #:  912057-0-24700   ·   File #:  0-22073

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Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     78K 
 2: EX-10.1     Material Contract                                     11     42K 
 3: EX-10.2     Material Contract                                     12     46K 
 4: EX-10.3     Material Contract                                     11     44K 
 5: EX-27.1     Financial Data Schedule (Pre-XBRL)                     2      6K 

EX-10.2   —   Material Contract
Exhibit Table of Contents

EX-10.2
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                                                                    Exhibit 10.2

RETENTION AND SEVERANCE AGREEMENT 

              THIS RETENTION AND SEVERANCE AGREEMENT (this "AGREEMENT"),
dated as of March 1, 2000, is made by and between DAOU Systems, Inc., a Delaware
corporation ("DAOU"), DAOU-Sentient, Inc., a Delaware corporation and a         
wholly-owned subsidiary of DAOU ("DAOU-SENTIENT"), and Stephen M. Casey         
("EMPLOYEE").                                                                   

RECITALS

        WHEREAS, DAOU and each of its wholly-owned subsidiaries (collectively,
the COMPANY") recognize that the possibility of a Change in Control (as defined 
below) of DAOU exists and that such possibility, including the uncertainty that 
such possibility may raise among the Company's key employees, may result in the 
departure or distraction of such employees to the detriment of the Company and  
DAOU's stockholders;                                                            

    WHEREAS, DAOU's Board of Directors has determined that appropriate
steps should be taken to reinforce and encourage the continued employment of the
Company's key employees without distraction from the possibility of a Change in 
Control of DAOU or any related events and circumstances;                        

WHEREAS, Employee is a key employee of the Company;           

 WHEREAS, Employee has entered into an Employment Agreement with
DAOU-Sentient dated as of March 30, 1998 (the "EMPLOYMENT AGREEMENT");          

     WHEREAS, the Company considers that providing Employee with certain
retention and severance benefits will operate as an incentive for Employee to   
remain employed by the Company in the event of a Change in Control of DAOU.     

      NOW THEREFORE, to induce Employee to remain employed by the Company,
and for other good and valuable consideration, the receipt and sufficiency of   
which are hereby acknowledged, DAOU, DAOU-Sentient and Employee agree as        
follows:                                                                        

AGREEMENT 

1.       DEFINITIONS.                                                           

       1.1 "BASE SALARY" shall mean the Employee's gross annual salary as of
the Termination Date.                                                           

1.2 "CAUSE" shall mean:                                       

     (a) Employee's material breach of the Employment Agreement;

            (b) Employee's material failure to adhere to any written policy of
the Company generally applicable to officers of the Company if Employee has been
given a reasonable opportunity (but in no event later than thirty (30) days) to 
comply with such policy or cure his failure to comply after receiving notice of 
such failure;                                                                   

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        (c) Employee's appropriation (or attempted appropriation) of a
material business opportunity of the Company, including attempting to secure or 
securing any personal profit in connection with any transaction entered into on 
behalf of the Company;                                                          

            (d) Employee's misappropriation (or attempted misappropriation) of
any of the Company's funds or property;                                         

             (e) the conviction of Employee, or the entering of a guilty plea or
plea of no contest by Employee with respect to, a felony, the equivalent        
thereof, or any other crime with respect to which imprisonment is a possible    
punishment;                                                                     

(f) willful misconduct;                               

            (g) Employee's physical or mental disability or other inability to
perform the essential functions of his position, with or without reasonable     
accommodation; or                                                               

(h) Employee's death.                                 

      1.3 "CHANGE OF CONTROL" is defined to have occurred if, and only if,
during Employee's employment:                                                   

          (a) any individual, partnership, firm, corporation, association,
trust, unincorporated organization or other entity or person, or any syndicate  
or group deemed to be a person under Section 14(d)(2) of the Exchange Act is or 
becomes the "Beneficial Owner" (as defined in Rule 13d-3 of the General Rules   
and Regulations under the Exchange Act), directly or indirectly, of securities  
of DAOU representing fifty percent (50%) or more of the combined voting power of
DAOU's then outstanding securities entitled to vote in the election of directors
of DAOU;                                                                        

           (b) there occurs a reorganization, merger, consolidation or other
corporate transaction involving DAOU (a "TRANSACTION"), in each case, with      
respect to which the stockholders of DAOU immediately prior to such Transaction 
do not, immediately after the Transaction, own more than fifty percent (50%) of 
the combined voting power of DAOU or other corporation resulting from such      
Transaction; or                                                                 

      (c) all or substantially all of the assets of DAOU are sold,
liquidated or distributed.                                                      

      1.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended.

1.5 [Reserved.]                                               

       1.6 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.                                                                        

1.7 [Reserved.]                                               

1.8 [Reserved.]                                               

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         1.9 "RETENTION BONUS" shall mean the payment made pursuant to SECTION 4
of this Agreement.                                                              

         1.10 "RESIGNATION FOR GOOD REASON" shall mean the voluntary resignation
by Employee of his employment with the Company within two (2) years following a 
Change in Control and within three (3) months of any of the following "GOOD     
REASONS":                                                                       

      (a) any reduction in Employee's Base Salary or Target Bonus;

             (b) any significant reduction in Employee's responsibilities and/or
authority; or                                                                   

           (c) a relocation by the Company of Employee's place of Employment
outside a twenty-five (25) mile radius of Employee's current place of           
employment.                                                                     

An event described in Section 1.10(a) through (c) will not constitute Good      
Reason unless Employee provides written notice to the Company (or its successor)
of his intention to resign for Good Reason and unless the Company (or its       
successor) does not cure the Good Reason within ten (10) days of the Company's  
(or its successor's) receipt of the written notice.                             

      1.11 "TARGET BONUS" shall mean the variable annual cash compensation
that Employee is eligible to receive, prior to a Change in Control, as          
additional compensation or as an incentive bonus in the event targeted goals are
achieved for the year.                                                          

1.12 "TERMINATION DATE" shall mean the date of termination of 
Employee's employment relationship with the Company.                            

       1.13 "TERMINATION PAYMENTS" shall mean any payment or distribution of
compensation or benefits made pursuant to SECTIONS 5.1 (a)-(d) of this          
Agreement.                                                                      

2. TITLE AND DUTIES. Employee currently holds the positions of Director and     
President and Chief Executive Officer of DAOU-Sentient and Director and         
President and Chief Executive Officer of Enosus, Inc, a wholly-owned subsidiary 
of DAOU. Employee will: (i) devote his entire business time, attention, skill,  
and energy exclusively to the business of the Company; (ii) use his best efforts
to promote the success of the Company's business; and (iii) cooperate fully with
the President and the Board of Directors of the Company in the advancement of   
the best interests of the Company.                                              

3. AT-WILL EMPLOYMENT. Employee reaffirms that Employee's employment            
relationship with the Company is at-will, terminable at any time and for any    
reason by either the Company or Employee. While certain paragraphs of this      
Agreement describe events that could occur at a particular time in the future,  
nothing in this Agreement may be construed as a guarantee of employment of any  
length.                                                                         

4. RETENTION BONUS. If the Employee is continuously employed by the Company from
the date of this Agreement through the consummation of a Change in Control,     
then, within fifteen (15) days after the consummation of such Change in Control,
DAOU (or its successor) shall pay to Employee a lump sum amount equal to Two    
Hundred Seventy-Five Thousand Dollars                                           

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($275,000), less applicable state and federal taxes and/or other payroll        
deductions (the "RETENTION BONUS"). Such payment of the Retention Bonus shall be
in addition to any compensation paid to Employee hereunder or under the         
Employment Agreement.                                                           

5. TERMINATION PAYMENTS. The provisions of this Section 5 of this Agreement     
shall replace the provisions of Section 8 of the Employment Agreement, and the  
Employment Agreement shall be deemed to be amended accordingly.                 

         5.1 If, within two (2) years immediately following a Change in Control,
Employee's employment with the Company (or its successor) terminates as the     
result of (i) termination by the Company (or its successor) of Employee's       
employment for a reason other than Cause or (ii) Employee's Resignation for Good
Reason:                                                                         

           (a) Employee will receive a pro-rata share of the Base Salary and
Target Bonus accrued and owing to Employee through the Termination Date, less   
applicable state and federal taxes and/or other payroll deductions, and accrued 
but unused vacation, sick days and floating holidays through the Termination    
Date in accordance with the Company's (or its successor's) regular policies,    
less applicable state and federal taxes and/or other payroll deductions;        

           (b) Within fifteen (15) days after the Termination Date, DAOU (or
its successor) shall pay to Employee a severance payment in a lump-sum amount   
equal to Five Hundred Fifty Thousand Dollars ($550,000), less applicable state  
and federal taxes and/or other payroll deductions;                              

(c) [Reserved.]                                       

           (d) If Employee elects to continue insurance coverage as afforded
to Employee according to the Consolidated Omnibus Budget Reconciliation Act of  
1985 ("COBRA"), DAOU (or its successor) will reimburse Employee the amount of   
the premiums incurred by Employee during the period beginning on the Termination
Date and extend for twelve (12) months following the Termination Date. Nothing  
in this Agreement will extend Employee's COBRA period beyond the period allowed 
under COBRA, nor is the Company assuming any responsibility which Employee has  
for formally electing to continue coverage;                                     

        5.2 The Termination Payments set forth in SECTIONS 5.1(b), (c) AND (d)
above are in exchange for, and contingent upon Employee's execution of a release
of all claims as of the Termination Date, in substantially the form attached to 
this Agreement as EXHIBIT 1.                                                    

       5.3 If Employee's employment terminates at any time prior to a Change
of Control or after the two (2) year period immediately following a Change in   
Control as the result of (i) termination by the Company (or its successor) of   
Employee's employment for a reason other than Cause, or (ii) Employee's         
Resignation for Good Reason, Employee will be entitled to receive (A) payments  
in an aggregate amount equal to the Base Salary, payable over a twelve (12)     
month period following the Termination Date, (B) that part of the Target Bonus, 
if any, for the fiscal year in which such termination occurs, prorated through  
the end of the calendar month during which such termination occurs and (C)      
accrued but unused vacation, sick days and floating holidays through the        
Termination Date in accordance with the Company's (or its                       

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successor's) regular policies, each less applicable state and federal taxes     
and/or other payroll deductions.                                                

        5.4 If Employee's employment with the Company terminates (i) for Cause
or (ii) due to Employee's resignation without Good Reason, then DAOU (or its    
successor) will pay to Employee a pro-rata share of the Base Salary and Target  
Bonus accrued and owing to Employee through the Termination Date, less          
applicable state and federal taxes and/or other payroll deductions, and accrued 
but unused vacation, sick days and floating holidays through the Termination    
Date in accordance with the Company's (or its successor's) regular policies,    
less applicable state and federal taxes and/or other payroll deductions.        

      5.5 If Employee resigns his employment for Good Reasons described in
Section 1.10 (b) above, payment of the above Termination Payments is further    
contingent upon Employee's willingness, at the Company's (or its successor's)   
request, to continue performing his duties on behalf of the Company (or its     
successor) in good faith for up to sixty (60) days following the occurrence of  
the events described in Section 1.10 (b); PROVIDED, HOWEVER, that Employee shall
not be required to travel to perform his duties in good faith. DAOU (or its     
successor) will pay to Employee a pro-rata share of the Base Salary and Target  
Bonus and accrued but unused vacation, sick days and floating holidays according
to the Company's (or its successor's) regular policies, less applicable state   
and federal taxes and/or other payroll deductions, during the up-to sixty (60)  
day period and will receive the Termination Payments upon completion of that    
period.                                                                         

   5.6 Upon the Termination Date, Employee shall be entitled to take
possession of the office furnishings which are located in his office at         
DAOU-Sentient, including a desk, a credenza, a bookshelf and chairs.            

6. RETIREMENT AND PROFIT-SHARING PLANS. Notwithstanding anything in this        
Agreement to the contrary, Employee's rights in any retirement, pension or      
profit-sharing plans offered by the Company shall be governed by the rules of   
such plans as well as by applicable law.                                        

7. TAX CONSEQUENCES. The Company makes no representations regarding the tax     
consequence of any provision of this Agreement. Employee is advised to consult  
with his own tax advisor with respect to the tax treatment of any payment       
contained in this Agreement.                                                    

8. TAX ADJUSTMENT. Notwithstanding the foregoing or any other provision of this 
Agreement to the contrary, if tax counsel selected by the Company and acceptable
to Employee determines that any portion of any payment under this Agreement     
would constitute an "excess parachute payment" within the meaning of Section    
280G of the Code, the payments to be made to Employee under this Agreement shall
be reduced (but not below zero) such that the value of the aggregate payments   
that Employee is entitled to receive under this Agreement, and any other        
agreement or plan or program of the Company, shall be one dollar ($1) less than 
the maximum amount of payments which Employee may receive without becoming      
subject to the tax imposed by Section 4999 of the Code.                         

9. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of this      
Agreement shall be subject to final and binding arbitration. The arbitration    
will be conducted by one arbitrator who is a member of the American Arbitration 
Association ("AAA") or of the Judicial Arbitration                              

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and Mediation Services ("JAMS"), and will be conducted under the Expedited      
Procedures for Commercial Arbitration Rules of the AAA, or such similar         
procedures as may be in effect (the "Rules"). The arbitration shall be held in  
Montgomery County, Maryland. The parties will select the arbitrator from a list 
maintained by the AAA or JAMS and the parties agree that they will have five (5)
Business Days in which to return the list to AAA or JAMS with their objections  
and preferences. Discovery will be limited to no more than seven (7) depositions
by each side and written document requests, requesting the production of        
specific documents. The parties to the dispute will voluntarily produce any and 
all documents that they intend to use at the hearing before the close of        
discovery, subject to supplementation for purposes of rebuttal of good cause    
shown. The period for taking discovery shall be sixty (60) Business Days,       
commencing upon the day that the answer is due under the Rules. The arbitrator  
will hold a pre-hearing conference within three (3) Business Days of the close  
of discovery and will schedule the hearing within thirty (30) Business Days of  
the close of discovery. After the arbitrator is selected, the arbitrator shall  
have all authority to determine the arbitrability of any claim and enter a final
and binding judgment at the conclusion of any proceedings in respect of the     
arbitration. Any final judgment only may be appealed on the grounds of improper 
bias or improper conduct of the arbitrator. All fees and costs will be allocated
to the parties to the arbitration as determined by the arbitrator. Each party   
will initially pay its own fees and costs associated with the arbitration and   
each party will pay one-half of the arbitrator's fees up front, subject to the  
arbitrator's final determination on fees and costs.                             

10.      GENERAL PROVISIONS.                                                    

         10.1 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of California.                                         

  10.2 ASSIGNMENT. Employee may not assign, pledge or encumber his
interest in this Agreement or any part thereof.                                 

 10.3 AMENDMENTS; WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by both 
of the parties. No waiver of any provision or consent to any exception to the   
terms of this Agreement or any agreement contemplated hereby will be effective  
unless in writing and signed by the party to be bound and then only to the      
specific purpose, extent, and instance so provided.                             

         10.4 SEVERABILITY. The provisions of this Agreement are severable; and,
if any provision will be held to be invalid or otherwise unenforceable, in whole
or in part, then the remainder of the provisions, or enforceable parts of this  
Agreement, will not be affected.                                                

        10.5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly    
given when (a) delivered by hand (with written confirmation of receipt), (b)    
sent by facsimile (with written confirmation of receipt), provided that a copy  
is mailed by registered mail, return receipt requested or (c) when received by  
the addressee, if sent by a nationally recognized overnight delivery service    
(receipt requested), in each case to the appropriate addresses and facsimile    
numbers set forth below (or to such other addresses and facsimile numbers as a  
party may designate by notice to the other parties):                            

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If to the Company:        DAOU Systems, Inc.            
               5120 Shoreham Place
                San Diego, CA  92122
                               ATTENTION:  Chief Executive Officer
                         Facsimile No.: (619) 452-2789

With a copy to:           Baker & McKenzie              
                            101 West Broadway, Twelfth Floor
                             San Diego, California  92101-3890
                               ATTENTION:  Carlos D. Heredia, Esq.
                         Facsimile No.: (619) 236-0429

If to Employee:           Stephen M. Casey              
                  21608 Goshen Oaks Road
                        Laytonsville, Maryland 20882
                       Facsimile No.: 301-929-7677

With a copy to:          Linowes and Blocher LLP      
                         1010 Wayne Avenue, Suite 1000
                         Silver Spring, Maryland 20910
                           ATTENTION:  John R. Orrick, Jr.
                       Facsimile No. 301-495-9044.

        10.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter of this Agreement, and        
supersedes all prior and contemporaneous negotiations, agreements and           
understandings between the parties, oral or written. To the extent that the     
provisions of the Employment Agreement do not conflict with this Agreement, such
provisions of the Employment Agreement shall remain in full force and effect.   

       10.7 MODIFICATION; WAIVERS. No modification, termination or attempted
waiver of this Agreement will be valid unless in writing, signed by the party   
against whom such modification, termination or waiver is sought to be enforced. 

         10.8 AMENDMENT. This Agreement may be amended or supplemented only by a
writing signed by both of the parties hereto.                                   

         10.9 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original; PROVIDED, HOWEVER, that such counterparts 
shall together constitute only one instrument.                                  

        10.10 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or          
interpretation of this Agreement.                                               

  10.11 DRAFTING AMBIGUITIES. Each party to this Agreement and its
counsel have reviewed and revised this Agreement. The rule of construction that 
any ambiguities are to be                                                       

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resolved against the drafting party shall not be employed in the interpretation 
of this Agreement or any of the amendments to this Agreement.                   

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

                            DAOU SYSTEMS, INC.

                               By: /s/ Larry Grandia
                                                 -------------------------------
                                              Larry Grandia, President and
                                         Chief Executive Officer

                             DAOU-SENTIENT, INC.

                                By: /s/ Donald R. Myll
                                                 -------------------------------
                                Donald R. Myll
                                Vice President

                   EMPLOYEE:

                              /s/ Stephen M. Casey
                                             -----------------------------------
                          Stephen M. Casey

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EXHIBIT 1 

GENERAL RELEASE 

       THIS GENERAL RELEASE (this "RELEASE") is entered into effective as of
______________, ____, (the "EFFECTIVE DATE") by and between DAOU Systems, Inc., 
a Delaware corporation, having its principal offices at 5120 Shoreham Place, San
Diego, California 92122 (the "COMPANY"), and Stephen M. Casey ("EMPLOYEE"), with
reference to the following facts:                                               

RECITALS

        A. The parties entered into a Retention and Severance Agreement, dated
as of March 1, 2000 (the "AGREEMENT"), pursuant to which the parties agreed that
upon the occurrence of certain conditions, Employee would become eligible for   
certain Termination Payments (as defined in the Agreement) in exchange for      
Employee's release of the Company from all claims which Employee may have       
against the Company as of the Termination Date (as defined in the Agreement).   
Capitalized terms not otherwise defined herein shall have the respective        
meanings ascribed to them in the Agreement.                                     

        B. The parties desire to dispose of, fully and completely, all claims,
which Employee may have against the Company in, the manner set forth in this    
Release.                                                                        

AGREEMENT 

 1. RELEASE. Employee, for himself and his heirs, successors and
assigns, each fully releases, and discharges the Company, its officers,         
directors, employees, shareholders, attorneys, accountants, other professionals,
insurers and agents of the other (collectively "AGENTS"), and all entities      
related to each party, including, but not limited to, their respective heirs,   
executors, administrators, personal representatives, assigns, parent, subsidiary
and sister corporations, affiliates, partners and co-venturers (collectively    
"RELATED ENTITIES"), from all rights (except for those rights that Employee may 
have as a stockholder of the Company), claims, demands, actions, causes of      
action, liabilities and obligations of every kind, nature and description       
whatsoever, Employee now has, owns or holds or has at anytime had, owned or held
or may have against the Company, Agents or Related Entities from any source     
whatsoever, whether or not arising from or related to the facts recited in this 
Release. Employee specifically releases and waives any and all claims arising   
under any express or implied contract, rule, regulation or ordinance, including,
without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights 
Act of 1991, the Americans with Disabilities Act, the California Fair Employment
and Housing Act, and the Age Discrimination in Employment Act, as amended       
("ADEA").                                                                       

         2. SECTION 1542 WAIVER. This Release is intended as a full and complete
release and discharge of any and all claims that Employee may have against the  
Company, its Agents or Related Entities. In making this release, Employee       
intends to release the Company, its Agents and Related Entities from liability  
of any nature whatsoever for any claim of damages or injury or for equitable or 
declaratory relief of any kind, whether the claim, or any facts on which such   
claim might be based, is known or unknown to him. Employee expressly waives all 
rights under Section 1542 of the California Civil Code, which Employee          
understands provides as follows:                                                

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 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
      CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
    THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
 MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.                                             

Employee acknowledges that he may discover facts different from or in addition  
to those that he now believes to be true with respect to this Release. Employee 
agrees that this Release shall remain effective notwithstanding the discovery of
any different or additional facts.                                              

     3. WAIVER OF CERTAIN CLAIMS. Employee acknowledges that he has been
advised in writing of his right to consult with an attorney prior to executing  
the waivers set out in this Release, and that he has been given a 21-day period 
in which to consider entering into the release of ADEA claims, if any. In       
addition, Employee acknowledges that he has been informed that he may revoke a  
signed waiver of the ADEA claims for up to seven (7) days after executing this  
Release.                                                                        

         4. NO UNDUE INFLUENCE. This Release is executed voluntarily and without
any duress or undue influence. Employee acknowledges he has read this Release   
and executed it with his full and free consent. No provision of this Release    
shall be construed against any party by virtue of the fact that such party or   
its counsel drafted such provision or the entirety of this Release.             

         5. GOVERNING LAW. This Release is made and entered into in the State of
California and accordingly the rights and obligations of the parties hereunder  
shall in all respects be construed, interpreted, enforced and governed in       
accordance with the laws of the State of California as applied to contracts     
entered into by and between residents of California to be wholly performed      
within California, without regard to conflicts of law principles.               

 6. SEVERABILITY. If any provision of this Release is held to be
invalid, void or unenforceable, the balance of the provisions of this Release   
shall, nevertheless, remain in full force and effect and shall in no way be     
affected, impaired or invalidated.                                              

        7. CONSULTATION WITH COUNSEL. Employee acknowledges and agrees that he
has had the opportunity to consult and review this Release with counsel.        

       8. DISPUTE RESOLUTION PROCEDURES. Any dispute or claim arising out of
this Release shall be subject to final and binding arbitration. The arbitration 
will be conducted by one arbitrator who is a member of the American Arbitration 
Association ("AAA") or of the Judicial Arbitration and Mediation Services       
("JAMS"), and will be conducted under the Expedited Procedures for Commercial   
Arbitration Rules of the AAA, or such similar procedures as may be in effect    
(the "Rules"). The arbitration shall be held in Montgomery County, Maryland. The
parties will select the arbitrator from a list maintained by the AAA or JAMS and
the parties agree that they will have five (5) Business Days in which to return 
the list to AAA or JAMS with their objections and preferences. Discovery will be
limited to no more than seven (7) depositions by each side and written document 
requests, requesting the production of specific documents. The                  

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parties to the dispute will voluntarily produce any and all documents that they 
intend to use at the hearing before the close of discovery, subject to          
supplementation for purposes of rebuttal of good cause shown. The period for    
taking discovery shall be sixty (60) Business Days, commencing upon the day that
the answer is due under the Rules. The arbitrator will hold a pre-hearing       
conference within three (3) Business Days of the close of discovery and will    
schedule the hearing within thirty (30) Business Days of the close of discovery.
After the arbitrator is selected, the arbitrator shall have all authority to    
determine the arbitrability of any claim and enter a final and binding judgment 
at the conclusion of any proceedings in respect of the arbitration. Any final   
judgment only may be appealed on the grounds of improper bias or improper       
conduct of the arbitrator. All fees and costs will be allocated to the parties  
to the arbitration as determined by the arbitrator. Each party will initially   
pay its own fees and costs associated with the arbitration and each party will  
pay one-half of the arbitrator's fees up front, subject to the arbitrator's     
final determination on fees and costs.                                          

Dated:                                                                          
 -------------------------------     ---------------------------------
                    Stephen M. Casey

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