1
EXHIBIT E
EMPLOYMENT AGREEMENT
AGREEMENT dated as of __________, 1999 by and between
UNIVERSAL AMERICAN FINANCIAL CORP. ("Universal"), [ ] (the "Company") and
[ ]("Executive").
WHEREAS, Universal, 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:
13. Term of Employment. 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 Universal and Capital Z Financial Services
Fund II, L.P. (the "Commencement Date") and ending on second 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 additional one-year
periods, unless the Company or Executive provides the other party hereto 6
months prior written notice before the expiration of any 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.
14. Position.
(a) During the Employment Term, Executive shall serve
as the Company's [ ], consistent with his [her] current position.
(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 of Directors (the "Board"). Nothing contained
herein shall preclude Executive from (i) serving on 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.
2
15. Base Salary. During the Employment Term, the Company shall
pay Executive a base salary (the "Base Salary") at the annual rate of $[ ],
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.
16. Bonus.
(a) Executive shall be eligible to earn a target
annual bonus ("Bonus") based on the achievement of goals established in
good faith by the Board; provided, however, that if such goals are not
established such amount shall be determined by reference to the
existing Universal executive bonus plan.
(b) Subject to Section 4(a) 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), 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 Universal issued by Universal ("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.
17. Equity Arrangements.
(a) Executive shall be entitled to an initial grant
on the Commencement Date (the "Initial Grant") of stock options to
purchase [ ] Shares (the "Options") under Universal's 1998
Incentive Compensation Plan. The Options shall be granted at $3.15
adjusted, if applicable, pursuant to Section 1.6 of the Share Purchase
Agreement between Universal and Capital Z Financial Services Fund II,
L.P. and shall have a 10 year term. Options representing the right to
purchase [ ] Shares shall vest ratably over a four 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. In
addition, options representing the right to purchase [ ] Shares
shall vest on the seventh anniversary of the grant date but shall
become immediately vested and exercisable if Capital Z Financial
Services Fund II, L.P. ("Cap. Z") has achieved an internal rate of
return on its equity interest in Universal as of the Commencement Date
greater than 30% (i) as a result of transactions in which Cap. Z
disposes of at least 50% of its holdings in Universal or (ii) on the
fifth anniversary of the Transaction determined based on the Fair
Market Value of the Shares. Except as otherwise provided in this
Agreement, all unvested Options shall immediately terminate and expire
upon Executive's termination of employment. For purposes of this
section, "Fair Market Value" shall mean the thirty day average closing
prices on the NASDAQ Market (or, if Universal's shares are then traded
on another market, on the principal market on which it is traded)
during the thirty calendar days ending on the day before such fifth
anniversary.
3
(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.
18. 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.
19. 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.
20. 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
4
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 or Death.
(i) The Employment Term and Executive's
employment hereunder shall terminate (A) upon his death and
(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"). Any question as to the existence
of the Disability of 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.
(ii) Upon termination of Executive's
employment hereunder for death or Disability, 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
for one year 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 or
Disability, 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:
5
(A) assignment of duties to Executive
materially inconsistent with his status as [ ];
(B) any reduction in Executive's Base
Salary;
(C) any material breach of the Agreement by
the Company;
(D) failure of any successor to all or
substantially all of the business of the Company to
assume the Agreement; or
(E) 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 (v) within 30
business days after such termination, any accrued but unpaid
Base Salary through the date of termination, (w) within 30
business days after such termination, unpaid Bonus for the
fiscal year prior to termination, (x) within 30 business days
after such termination, a lump sum payment equal to the
Executive's Base Salary, (y) continued coverage under the
[Company] welfare benefit plans available to senior executives
for a period of 18 months or comparable coverage for such
period 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 one-half the Executive's Base Salary and (y) continued
coverage under the [Company] welfare benefit plans available
to senior executives for an additional 6 month period and (z)
the value of full vesting of the unvested portion of
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 Universal, any
trustee or other fiduciary holding securities under
any employee benefit plan of Universal, or any
company owned, directly or indirectly, by the
stockholders of Universal
6
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 Universal 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
Universal or any Significant Subsidiary (as defined
below), representing 40% or more of the combined
voting power of Universal's or such Significant
Subsidiary's then-outstanding securities and is the
largest shareholder of Universal;
(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 Universal to effect a
transaction described in clause (i), (iii), or (iv)
of this paragraph) whose election by the Board or
nomination for election by Universal'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;
(C) the consummation of a merger or
consolidation of Universal or any subsidiary owning
directly or indirectly all or substantially all of
the consolidated assets of Universal (a "Significant
Subsidiary") with any other entity, other than a
merger or consolidation which would result in the
voting securities of Universal 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) Universal disposes of all or
substantially all of the consolidated assets of
Universal (other than such a sale or disposition
immediately after
7
which such assets will be owned directly or
indirectly by the shareholders of Universal in
substantially the same proportions as their ownership
of the common stock of Universal 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.
21. Non-Competition.
(a) Executive acknowledges and recognizes the highly
competitive nature of the businesses of and its subsidiaries and
accordingly agrees as follows:
(i) During the Employment Term and for a
period of one year 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 Universal or its subsidiaries
(including, without limitation, businesses which Universal 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 Universal or its
subsidiaries, (iii) acquire a financial interest in any person
engaged in any business that is in Competition with the
business of Universal 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 Universal or any of its
8
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 Universal or its
subsidiaries if such business substantially involves (i) the
provision of any services or financial products provided by
Universal or its subsidiaries as a material part of the
business of Universal or subsidiary or (ii) the purchase or
sale of any property (other than securities purchased for
investment) purchased or sold by Universal or subsidiary as a
material part of the business of Universal 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 Universal or any of its subsidiaries) if such
services relate to a business of the company that is not in
Competition with the business of Universal 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 Universal.
(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 Universal 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 Universal or its subsidiaries to
leave the employment of Universal 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.
22. 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 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 Universal 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 Universal generally, or
of any subsidiary or affiliate of , provided that the foregoing shall not apply
to information which is not unique to Universal or which is generally known to
the industry or the public other than as a result of Executive's breach of this
covenant.
23. Excise Tax.
(a) In the event it shall be determined that any
payment, benefit or distribution, or any acceleration of vesting (or
combination thereof) by the Company or
9
one or more trusts established by the Company or Universal 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) the
amounts payable under this Agreement shall be reduced (but not below
zero) if and to the extent that such reduction would result in
Executive retaining a larger amount on an after-tax basis (taking into
account all federal, state and local income taxes and the imposition of
the excise tax imposed by Section 4999 of the Code) than if Executive
had received all of the Payments.
(b) All determinations required to be made under this
Section 11 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.
24. 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.
(i) 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.
(b) Entire Agreement/Amendments. This Agreement
contains the entire understanding of the parties with respect to the
employment of Executive by Universal and 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.
(c) 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
10
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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
11
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
---------------------------
[ ]
---------------------------
Address
COMPANY
By:________________________
Title:
Address
UNIVERSAL AMERICAN FINANCIAL CORP.
By:________________________
Title:
Address
12
COMPOSITE CONFORMED COPY
Xxxxxx Xxxxxxxxx
Senior Vice President & Chief Financial Officer
$200,000
225,000
150,000
75,000
Senior Vice President & Chief Financial Officer
Xxxx Xxxxxx
Senior Vice President
$250,000
262,500
175,000
87,500
Xxxxxxx Xxxxxx
Senior Vice President, Marketing
$175,000
187,500
125,00
62,500
Senior Vice President, Marketing
Xxxx Xxxxxxxxx
President
$175,000
210,000
140,000
70,000
President
