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EXHIBIT D
EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 30, 1999 by and between UNIVERSAL
AMERICAN FINANCIAL CORP. (the "Company") and XXXXXXX XXXXXXX ("Executive").
WHEREAS, the Company and Executive wish to enter into an
agreement relating to the employment of Executive by the Company;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment.
(a) Employment Term. Subject to the provisions of
Section 8 of this Agreement, Executive shall be employed by the Company
for a period commencing on the closing of the transaction (the
"Transaction") contemplated by the Share Purchase Agreement between the
Company and Capital Z Financial Services Fund II, L.P. (the
"Commencement Date") and ending on third anniversary of the
Commencement Date (the "Employment Term"), on the terms and subject to
the conditions set forth in this Agreement. Notwithstanding the
preceding sentence, the Employment Term shall be automatically extended
for an additional one-year period, unless the Company or Executive
provides the other party hereto 6 months prior written notice before
the expiration of the Employment Term that the Employment Term shall
not be so extended. "Employment Term" shall include any extension that
becomes applicable pursuant to the preceding sentence.
2. Position.
(a) During the Employment Term, Executive shall serve
as the Company's Chairman of the Board of Directors and Chief Executive
Officer. In such position, Executive shall have the powers, duties and
responsibilities which are customary for a Chairman and Chief Executive
Officer of a corporation of the size, type and nature of the Company,
and shall report exclusively to the Board of Directors of the Company
(the "Board").
(b) During the Employment Term, Executive will devote
his full business time to the performance of his duties hereunder and
will not engage in any other business, profession or occupation for
compensation or otherwise which would conflict with the rendition of
such services either directly or indirectly, without the prior written
consent of the Board. Nothing contained herein shall preclude Executive
from (i) serving on
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corporate, civic and charitable boards or committees and (ii) managing
his personal investments; provided that none of the activities set
forth in clauses (i) and (ii) interfere in any material respect with
the performance of Executive's employment hereunder or conflict in any
material respect with the business of the Company.
3. Base Salary. During the Employment Term, the Company shall
pay Executive a base salary (the "Base Salary") at the annual rate of $475,000,
payable in regular installments in accordance with the Company's usual payment
practices. Executive shall be entitled to such annual increases in his Base
Salary, if any, as may be determined in the sole discretion of the Board.
4. Bonus.
(a) For fiscal year 1999, the Executive shall be
eligible to earn a target annual bonus ("Bonus") equal to (i) for the
period prior to the Commencement Date, a pro rated bonus based on the
existing Company executive bonus plan plus (ii) the product of Base
Salary times a fraction, the numerator of which is the number of days
from the Commencement Date through the end of such fiscal year and the
denominator of which is 365 and shall be based on the achievement of
goals established in good faith by the Board in consultation with
Executive; provided, however, that if such goals are not established
such amount shall be determined by reference to the existing Company
executive bonus plan; provided, further, that with respect to any Bonus
over 100% of Base Salary, the Company shall use its best efforts to
structure such Bonus to satisfy the exception for qualified
performance-based compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). If the Bonus is not so
structured, the portion of the Bonus payment not deductible by the
Company shall be deferred, on terms reasonably satisfactory to
Executive, until such time as it shall be fully deductible by the
Company.
(b) With respect to each fiscal year during the
Employment Term, commencing with 2000, Executive shall be eligible to
earn a Bonus based two-thirds upon the Company's operating performance
results and one-third on individual performance goals (the "Targets").
The financial Target shall be established in good faith by the Board in
consultation with Executive. If the Targets are satisfied, Executive's
Bonus shall be 100% of Base Salary (the "Target Bonus"); provided that,
based on criteria established by the Compensation Committee, the
Executive has an opportunity to earn a maximum Bonus of up to 200% of
Base Salary; provided, further, that with respect to any Bonus over
100% of Base Salary, the Company shall use its best efforts to
structure such Bonus to satisfy the exception for qualified
performance-based compensation under Section 162(m) of the Code. If the
Bonus is not so structured, the portion of the Bonus payment not
deductible by the Company shall be deferred, on terms reasonably
satisfactory to Executive, until such time as it shall be fully
deductible by the Company.
(c) Subject to Section 4(a) and (b) above, as soon as
practicable after the end of the fiscal year (but in no event later
than 45 days after the end of the fiscal year),
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the Bonus shall be paid (i) 50% in cash and (ii) 50% in shares of the
common stock, par value $1.00 per share, of the Company issued by the
Company ("Shares") based on the Market Value (as defined below) of the
Shares on the date of issuance. For purposes of this paragraph, "Market
Value" means the 20-day average of the closing price of the Shares on
Nasdaq or, if the Shares are not then-traded on Nasdaq, on such other
national stock exchange on which the Shares are principally traded.
5. Equity Arrangements.
(a) The Executive shall be entitled to an initial
grant on the Commencement Date (the "Initial Grant") of stock options
to purchase 600,000 Shares (the "Options"). The Options shall be
granted at $3.15, adjusted pursuant to Section 1.6 of the Share
Purchase Agreement between the Company and Capital Z Financial Services
Fund II, L.P. and shall have a 10 year term. Options representing the
right to purchase 400,000 Shares shall vest ratably over a five year
period, subject to Executive's continued employment with the Company,
with 1/5 of such Shares initially granted vesting on the date of grant
and each of the first, second, third and fourth anniversaries of the
date of grant. Options representing the right to purchase 200,000
Shares shall vest on the seventh anniversary of the grant date but
shall become immediately exercisable if Capital Z Financial Services
Fund II, L.P. ("Cap. Z") has achieved an internal rate of return on its
equity interest in the Company as of the Commencement Date greater than
30% (i) as a result of a transaction in which Cap. Z disposes of at
least 50% of its holdings in the Company or (ii) on the fifth
anniversary of the Transaction. Except as otherwise provided in this
Agreement, all unvested Options shall immediately terminate and expire
upon Executive's termination of employment. In addition, the Executive
shall be entitled to participate in long-term incentive compensation,
equity participation opportunities and all other arrangements on a
basis no less favorable to Executive than those arrangements that are
generally made available to other senior executives of the Company;
provided, that the Compensation Committee of the Board shall not be
required to adopt such arrangements; provided, further, that Executive
shall not be entitled, pursuant to the foregoing, to any additional
grants of stock options or similar opportunities merely because grants
are made to certain other senior executives of the Company in special
circumstances; e.g. initial grants or special grants upon promotion or
exceptional performance.
(b) Unless otherwise indicated, references in this
Agreement to "stock options" shall mean (i) the options to acquire
Shares granted to Executive on December 8, 1998, (ii) the Options and
(iii) all options to acquire Shares granted to Executive after the date
hereof.
6. Employee Benefits. During the Employment Term, Executive
shall be provided, in accordance with the terms of the Company's employee
benefit plans as in effect from time to time, health insurance and short term
and long term disability insurance, retirement benefits, vacation and fringe
benefits (collectively "Employee Benefits") on the same basis as those benefits
are generally made available to other senior executives of the Company.
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7. Business Expenses. During the Employment Term, reasonable
business expenses incurred by Executive in the performance of his duties
hereunder shall be reimbursed by the Company in accordance with Company
policies.
8. Termination. Notwithstanding any other provision of this
Agreement:
(a) By the Company For Cause or By Executive
Resignation Without Good Reason.
(i) The Employment Term and Executive's
employment hereunder may be terminated by the Company for
Cause (as defined below) or by Executive's resignation without
Good Reason (as defined in Section 8(c)).
(ii) For purposes of this Agreement, "Cause"
shall mean (A) the Executive's willful and continued failure
to substantially perform the duties of his position or breach
of material terms of his Agreement, after notice (specifying
the details of such alleged failure) and a reasonable
opportunity to cure; (B) any willful act or omission which is
demonstrably and materially injurious to the Company or any of
its subsidiaries or affiliates; or (C) conviction or plea of
nolo contendere to a felony or other crime of moral turpitude.
No act or failure to act will be deemed "willful" (i) unless
effected without a reasonable belief that such action or
failure to act was in or not opposed to the Company's best
interest; or (ii) if it results from any physical or mental
incapacity.
(iii) If Executive's employment is
terminated by the Company for Cause, or if Executive resigns
without Good Reason, Executive shall be entitled to receive
(A) any accrued but unpaid Base Salary through the date of
termination, (B) the opportunity to exercise vested stock
options for 90 days following such termination and (C) such
compensation and Employee Benefits, if any, as to which
Executive may be entitled under the employee compensation and
benefit plans of the Company and any other long-term incentive
or equity program. Following such termination of Executive's
employment by the Company for Cause or resignation by
Executive without Good Reason, except as set forth in this
Section 8(a), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
(b) Disability, Death or Retirement.
(i) The Employment Term and Executive's
employment hereunder shall terminate (A) upon his death, (B)
if Executive becomes physically or mentally incapacitated for
a period of indefinite duration and is therefore unable for a
period of six (6) consecutive months or for an aggregate of
eight (8) months in any twelve (12) consecutive month period
to perform his duties (such incapacity is hereinafter referred
to as "Disability") and (C) upon his Retirement (as defined
below). Any question as to the existence of the Disability of
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Executive as to which Executive and the Company cannot agree
shall be determined in writing by a qualified independent
physician mutually acceptable to Executive and the Company. If
Executive and the Company cannot agree as to a qualified
independent physician, each shall appoint such a physician and
those two physicians shall select a third who shall make such
determination in writing. For purposes of this Agreement,
"Retirement" shall mean a Participant's voluntary resignation
at any time after attaining age 65 (or at any earlier date
with the permission of the Board).
(ii) Upon termination of Executive's
employment hereunder for death, Disability or Retirement,
Executive or his estate (as the case may be) shall be entitled
to receive (v) any accrued but unpaid Base Salary through the
end of the month in which such termination occurs, (w) a pro
rata portion of any Bonus that the Executive would have been
entitled to receive pursuant to Section 4 hereof in such year
based upon the percentage of the calendar year that shall have
elapsed through the date of Executive's termination of
employment, payable when such Bonus would have otherwise been
payable had the Executive's employment not terminated, (x) the
opportunity to exercise vested stock options and Executive's
stock options scheduled to vest during the year following such
termination (i) in the case of death or Disability, for one
year following such termination or (ii) in the case of
Retirement, for four years following such termination, (y) a
pro rata portion of any long term incentive granted to the
Executive and (z) such compensation and Employee Benefits, if
any, as to which he may be entitled under the employee
compensation and benefit plans and arrangements of the
Company. Following such termination of Executives employment
due to death, Disability or Retirement, except as set forth in
this Section 8(b), Executive shall have no further rights to
any compensation or any other benefits under this Agreement.
(c) By the Company Without Cause or Resignation by
Executive for Good Reason.
(i) The Employment Term and Executive's
employment hereunder may be terminated by the Company without
Cause or by Executive's resignation for Good Reason.
(ii) For purposes of this Agreement, "Good
Reason" shall mean:
(A) Failure to elect Executive as
Chairman of the Board or Chief Executive Officer;
(B) assignment of duties to
Executive inconsistent with his status as Chairman of
the Board and Chief Executive Officer;
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(C) any reduction in Executive's
Base Salary, target or maximum bonus opportunity;
(D) Executive's relocation by the
Company beyond 35 miles of his current place of
employment;
(E) any material breach of the
Agreement by the Company;
(F) failure of any successor to all
or substantially all of the business of the Company
to assume the Agreement; or
(G) notice of nonrenewal given by
the Company.
(iii) If Executive's employment is
terminated by the Company without Cause (other than by reason
of death or Disability) or if Executive resigns for Good
Reason, Executive shall be entitled to receive (t) within 30
business days after such termination, any accrued but unpaid
Base Salary through the date of termination, (u) within 30
business days after such termination, unpaid Bonus for the
fiscal year prior to termination, (v) a pro rata portion of
any Bonus that the Executive would have been entitled to
receive pursuant to Section 4 hereof in the year of
termination based upon the percentage of the calendar year
that shall have elapsed through the date of Executive's
termination of employment, payable when such Bonus would have
otherwise been payable had the Executive's employment not
terminated, (w) within 30 business days after such
termination, a lump sum payment equal to (A) two times the
Executive's Base Salary and (B) the lesser of (i) Executive's
Bonus for the fiscal year prior to termination or (ii)
Executive's Base Salary; provided that if Executive is
terminated at any time prior to the time the Bonus for the
year ended December 31, 1999 has been determined, the payment
described in clause (B) shall be Executive's Base Salary, (x)
continued coverage under the Company welfare benefit plans
available to senior executives for a period of 24 months or
comparable coverage for such period, (y) accelerated vesting
of all equity awards (including, but not limited to,
Executive's stock options) and the opportunity to exercise
such awards for one year following such termination and (z)
such vested compensation and Employee Benefits, if any, as to
which Executive may be entitled under the employee
compensation and benefit plans and arrangements of the
Company.
(iv) If the Executive's employment is
terminated by the Company without Cause (other than by reason
of death or Disability) or if Executive resigns for Good
Reason within 12 months after a Change in Control (as defined
below), Executive shall be entitled to receive, in addition to
his entitlements in (iii) above (x) within 30 business days
after such termination, an additional lump sum payment equal
to two times the Executive's Base Salary and (y) continued
coverage under the Company welfare benefit plans available to
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senior executives for an additional 12 month period and (z)
the value of full vesting of the Executive's account balance
under the Company's 401(k) plan.
(v) For purposes of this Agreement, "Change
in Control" shall mean:
(A) any Person (as defined in
Section 3(a)(9) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and as used in
Sections 13(d) and 14(d), and shall include a "group"
as defined in Section 13(d)) (other than the Company,
any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or
any company owned, directly or indirectly, by the
stockholders of the Company immediately prior to the
occurrence with respect to which the evaluation is
being made in substantially the same proportions as
their ownership of the common stock of the Company
immediately prior to the occurrence with respect to
which the evaluation is being made) becomes the
Beneficial Owner (as defined in Rule 13d-3 of the
Exchange Act) (except that a Person shall be deemed
to be the Beneficial Owner of all shares that any
such Person has the right to acquire pursuant to any
agreement or arrangement or upon exercise of
conversion rights, warrants or options or otherwise,
without regard to the sixty day period referred to in
Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company or any
Significant Subsidiary (as defined below),
representing 40% or more of the combined voting power
of the Company's or such Significant Subsidiary's
then-outstanding securities and is the largest
shareholder of the Company;
(B) during any period of two
consecutive years, individuals who at the beginning
of such period constitute the Board, and any new
director (other than a director designated by a
Person who has entered into an agreement with the
Company to effect a transaction described in clause
(i), (iii), or (iv) of this paragraph) whose election
by the Board or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds of the directors then still in
office who either were directors at the beginning of
the two-year period or whose election or nomination
for election was previously so approved but excluding
for this purpose any such new director whose initial
assumption of office occurs as a result of either an
actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf
of an individual, corporation, or partnership, group,
associate or other entity or Person other than the
Board (the "Continuing Directors"), cease for any
reason to constitute at least a majority of the
Board;
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(C) the consummation of a merger or
consolidation of the Company or any subsidiary owning
directly or indirectly all or substantially all of
the consolidated assets of the Company (a
"Significant Subsidiary") with any other entity,
other than a merger or consolidation which would
result in the voting securities of the Company or a
Significant Subsidiary outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving or resulting entity) more
than 50% of the combined voting power of the
surviving or resulting entity outstanding immediately
after such merger or consolidation;
(D) the Company disposes of all or
substantially all of the consolidated assets of the
Company (other than such a sale or disposition
immediately after which such assets will be owned
directly or indirectly by the shareholders of the
Company in substantially the same proportions as
their ownership of the common stock of the Company
immediately prior to such sale or disposition) in
which case the Board shall determine the effective
date of the Change in Control resulting therefrom; or
Notwithstanding the foregoing, the Transaction shall not, in
any event constitute a Change of Control.
(d) Notice of Termination. Any purported termination
of employment by the Company or by Executive (other than due to
Executive's death) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 12(i)
hereof. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of employment under the provision so indicated.
9. Non-Competition. (a) Executive acknowledges and recognizes
the highly competitive nature of the businesses of the Company and its
subsidiaries and accordingly agrees as follows:
(i) During the Employment Term and for a
period of two years following the Executive's termination of
employment, unless such termination occurs within 12 months
after a Change in Control, (the "Restricted Period"), the
Executive will not, (i) engage in any business that is in
Competition with the business of the Company or its
subsidiaries (including, without limitation, businesses which
the Company or its subsidiaries have specific plans to conduct
in the future and as to which Executive is aware of such
planning), (ii) render any services, as an employee or
otherwise, to any business in Competition with the business of
the
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Company or its subsidiaries, (iii) acquire a financial
interest in any person engaged in any business that is in
Competition with the business of the Company or its
subsidiaries, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant, or (iv)
interfere with business relationships (whether formed before
or after the date of this Agreement) between the Company or
any of its subsidiaries and their customers and suppliers. For
purposes of this Section 9, a business shall be deemed to be
in "Competition" with the business of the Company or its
subsidiaries if such business substantially involves (i) the
provision of any services or financial products provided by
the Company or its subsidiaries as a material part of the
business of the Company or subsidiary or (ii) the purchase or
sale of any property (other than securities purchased for
investment) purchased or sold by the Company or subsidiary as
a material part of the business of the Company or subsidiary.
For the avoidance of doubt, Executive shall not be prohibited
from rendering any services to any company (even if such
company is engaged in a business which is in Competition with
the business of the Company or any of its subsidiaries) if
such services relate to a business of the company that is not
in Competition with the business of the Company or any of its
subsidiaries. For purposes of this Agreement, "subsidiary"
means any person that directly or indirectly, through one or
more intermediaries, is controlled by the Company.
(ii) Notwithstanding anything to the
contrary in this Agreement, the Executive may, directly or
indirectly own securities of any person engaged in the
business of the Company or its affiliates which are publicly
traded on a national or regional stock exchange or on the
over-the-counter market if the Executive (i) is not a
controlling person of, or a member of a group which controls,
such person and (ii) does not, directly or indirectly, own 3%
or more of any class of securities of such person.
(iii) During the Restricted Period, the
Executive will not, directly or indirectly, solicit or
encourage any employee of the Company or its subsidiaries to
leave the employment of the Company or its subsidiaries.
(b) It is expressly understood and agreed that
although Executive and the Company consider the restrictions contained
in this Section 9 to be reasonable, if a final judicial determination
is made by a court of competent jurisdiction that the time or territory
or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such maximum extent
as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any
restriction contained in this Agreement is unenforceable, and such
restriction cannot be amended so as to make it enforceable, such
finding shall not affect the enforceability of any of the other
restrictions contained herein.
10. Confidentiality. Executive will not at any time (whether
during or after his employment with the Company), unless required by a court or
administrative agency, disclose or
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use for his own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other
business organization, entity or enterprise other than the Company and any of
its subsidiaries or affiliates, any trade secrets, information, data, or other
confidential information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or the
business and affairs of the Company generally, or of any subsidiary or affiliate
of the Company, provided that the foregoing shall not apply to information which
is not unique to the Company or which is generally known to the industry or the
public other than as a result of Executive's breach of this covenant.
11. Gross Up. (a) In the event (i) it shall be determined that
any payment, benefit or distribution, or any acceleration of vesting (or
combination thereof) by the Company or one or more trusts established by the
Company for the benefit of its employees, to or for the benefit of Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement, or under the terms of any other plan, program agreement or
arrangement) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code (which relates to payments that are contingent on a change in
ownership or effective control of, or the ownership of a substantial portion of
the assets of, a corporation) or (ii) any interest or penalties are incurred by
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, hereinafter collectively referred to as the "Excise
Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount equal to the sum of (x) the Excise Tax on any Payment
(other than a Payment resulting from the application of this Section 11) (a
"First Round Excise Tax") plus (y) any income taxes (and any interest and
penalties imposed with respect thereto) on the portion of the First Round Excise
Tax relating solely to the acceleration of Executive's stock options plus (z)
any Excise Tax imposed on the portion of the First Round Excise Tax relating
solely to the acceleration of Executive's stock options. In determining the
portion of the Gross-Up Payment that relates to the acceleration of Executive's
stock options, the base amount (as defined in Section 280G(b)(3) of the Code)
shall be attributed to such stock options by multiplying the base amount by a
fraction, the numerator of which is the value of the acceleration of Executive's
stock options included in Executive's "parachute payment" (as defined in Section
280G(b)(2)) and the denominator of which is the sum of all Payments which are
considered parachute payments. For example, if the base amount is $100 and the
total parachute payment amount is $400 ($200 of which is attributable to the
acceleration of options) then the base amount attributed to the options would be
$100 times $200/$400 = $50. The total excess parachute payment subject to the
Excise Tax would equal $300. The First Round Excise Tax payable on the excess
parachute payment would equal $60 (i.e.; $300 times 20%). The excess parachute
payment attributed to the acceleration of options would equal $150 (i.e.; $200 -
$50). The First Round Excise Tax attributed to the acceleration of options would
equal $30 (i.e.; $150 times 20%). Assuming the Executive's marginal federal,
state and local income tax rate were 50%, the Company would pay Executive the
following: (i) $60 (i.e. the First Round Excise Tax) plus (ii) $15 (i.e.; $30
times .5) (the income taxes on the portion of the First Round Excise Tax
attributable to the acceleration of the options) plus (iii) $6 (i.e.; $30 times
.2) (the Excise Tax on the portion of the First Round Excise Tax attributable to
the acceleration of the options).
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(b) Subject to the provisions of Section 11(c), all
determinations required to be made under this Section 11, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized certified
public accounting firm as shall be mutually agreed to by Executive and
the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within
fifteen (15) business days after the receipt of notice from Executive
or the Company that there has been a Payment, or such earlier time as
is requested by either party. All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment shall
be paid by the Company to the Internal Revenue Service on Executive's
behalf when due.
(c) As soon as practicable, but in any event within
15 days following Executive's knowledge of such claim, Executive shall
notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company
of the Gross-Up Payment. If the Company notifies Executive in writing
that it desires to contest such claim, Executive shall cooperate in all
reasonable ways with the Company in such contest and the Company shall
be entitled to control all proceedings relating to such claim
(including the choice of counsel or other representatives); provided,
however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 11, the
Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment to
Executive, on an interest-free basis, and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and provided, further, that if
Executive is required to extend the statute of limitations to enable
the Company to contest such claim, Executive may limit this extension
solely to such contested amount. The Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
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(d) If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 11(c) hereof, Executive
receives any refund with respect to such claim, Executive will promptly
pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto).
12. Miscellaneous.
(a) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York,
without regard to conflicts of laws principles thereof.
(b) Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be resolved by binding
arbitration held in New York and conducted in accordance with the
commercial arbitration rules of the American Arbitration Association in
effect at the time of the arbitration; provided, however, that a
dispute that arises under Section 9 may be resolved, at the request of
either party, by mediation. The Company shall reimburse Executive's
legal fees of one counsel and costs incurred to enforce his rights
under this Agreement if the Executive substantially prevails on any
dispute or controversy.
(c) Entire Agreement/Amendments. This Agreement
contains the entire understanding of the parties with respect to the
employment of Executive by the Company. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the
parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered,
modified, or amended except by written instrument signed by the parties
hereto.
(d) No Waiver. The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall
not be considered a waiver of such party's rights or deprive such party
of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement.
(e) Severability. In the event that any one or more
of the provisions of this Agreement shall be or become invalid, illegal
or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not
be affected thereby.
(f) Assignment. This Agreement shall not be
assignable by Executive. This Agreement may be assigned by the Company
to a company which is a successor in interest to substantially all of
the business operations of the Company. Such assignment shall become
effective when the Company notifies the Executive of such assignment or
at such later date as may be specified in such notice. Upon such
assignment, the rights and obligations of the Company hereunder shall
become the rights and obligations of such successor company, provided
that any assignee expressly assumes the obligations, rights and
privileges of this Agreement.
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(g) Mitigation. Executive shall not be required to
mitigate damages or the amount of any payment to Executive provided for
under this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for under this Agreement be
reduced by any compensation earned by Executive as a result of
employment after termination; provided, however, that any welfare
benefits the Executive receives as a result of subsequent employment
shall reduce the welfare benefits provided under this Agreement.
(h) Successors; Binding Agreement. This Agreement
shall inure to the benefit of and be binding upon personal or legal
representatives, executors, administrators, successors, heirs,
distributes, devises and legatees.
(i) Notice. For the purpose of this Agreement,
notices and all other communications provided for in the Agreement
shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set
forth on the execution page of this Agreement or such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective
only upon receipt.
(j) Withholding Taxes. The Company may withhold from
any amounts payable under this Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law
or regulation.
(k) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx Xxxxxxx
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Address
UNIVERSAL AMERICAN FINANCIAL CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
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Title: Senior Vice President & CFO
Address
