1
EXHIBIT 10.45
UICI
--------------------------------------------------------------------------------
December 31, 2000
PERSONAL AND CONFIDENTIAL
Xx. Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Dear Xxxx:
This letter is submitted to acknowledge the substance of our recent
conversations concerning your transition as an Executive Vice President of UICI
("UICI" or the "Company") and your engagement as a consultant to The MEGA Life
and Health Insurance Company ("MEGA"), pursuant to which MEGA will engage your
services to serve as a consultant to MEGA from time to time as herein set forth.
For purposes of this agreement, you are sometimes herein referred to herein as
"Gedwed."
You currently serve as Executive Vice President and a Director of UICI.
You currently hold
(a) options ("Options") to purchase 6,640 shares of UICI
Common Stock at an exercise price of $15.00 per share, of which Options
to purchase 2,656 shares are currently vested and exercisable;
(b) Options to purchase 8,700 shares of UICI Common Stock at
an exercise price of $26.35 per share, of which 1,740 Options are
currently vested and exercisable;
(c) Options to purchase 49,950 shares of UICI Common Stock at
an exercise price of $6.625 per share, none of which Options are
currently vested and exercisable; and
(d) 6,740 restricted shares of UICI common stock granted with
respect to 1999 performance and up to 10,000 restricted shares proposed
to be granted with respect to 2000 performance ("Restricted Stock"),
all of which shares of Restricted Stock are subject to forfeiture.
In accordance with our recent conversations, you and UICI have mutually
agreed to terminate your current relationship with UICI and its affiliates, and
you have agreed, having gained considerable knowledge and experience relating to
the business of UICI and its affiliates as a result of your prior affiliation
with UICI as an officer, to assist MEGA and its affiliates as a consultant by
providing certain advisory services to MEGA and its affiliates. Accordingly,
UICI, MEGA and Gedwed hereby agree as follows:
2
1. SEPARATION.
1.1. At the close of business effective as of December 31,
2000 (the "Separation Date"), Gedwed agrees to resign as Executive Vice
President of UICI. Gedwed shall be entitled to his regular compensation
through December 31, 2000.
1.2. Notwithstanding the foregoing, Gedwed shall continue to
serve as a director of UICI until his successor shall have been elected
and duly qualified. Gedwed understands that the Company intends to
place his name in nomination to serve an additional term as a director
at the annual meeting of stockholders of UICI to be held in May 2001.
1.3. Effective February 1, 2001, Gedwed shall tender and UICI
shall accept his resignation from each other executive offices
committee and/or directorship of entities affiliated with UICI
designated on Exhibit A attached hereto.
1.4. Notwithstanding the foregoing, for purposes of the
Company's 1986 Amended and Restated Stock Option Plan, the Company's
1998 Stock Option Plan and the Options and the Restricted Stock, Gedwed
shall be deemed to be an "employee" of the Company commencing on the
Separation Date and for so long as he shall serve as a director of the
Company, and his Options shall become exercisable in accordance with
such plans and his shares of Restricted Stock shall become vested as if
he were such an employee of the Company at all times during such
period.
2. ACKNOWLEDGEMENT OF CERTAiN OBLIGATIONS.
2.1. Nothing hereunder shall be deemed to affect, impair or
diminish in any respect (i) any rights to which Gedwed may be entitled
in his capacity as a director or officer of UICI or any "affiliate" of
UICI (as such term is defined under regulations promulgated under the
Securities Act of 1933, as amended) (each of UICI and its affiliates is
herein sometimes referred to as a "UICI Company") to indemnification,
advancement of expenses and/or reimbursement under Delaware law (or the
corporate law of any other jurisdiction that may govern a UICI
Company), any UICI Company's Certificate or Articles of Incorporation
or bylaws, (ii) any rights Gedwed may have under that certain
Indemnification Agreement, dated as of September 1, 1999, between UICI
and Gedwed, (iii) any vested rights as of the Separation Date or
entitlement Gedwed may have under the UICI Employee Stock Ownership
Plan, or (iv) any other vested rights as of the Separation Date Gedwed
may have under any employee plan or program in which Gedwed has
participated in his capacity as an employee of any UICI Company.
2.2. Reference is made to that certain promissory note, dated
June 15, 1999, payable from Gedwed to UICI in the aggregate principal
amount of $203,154.57, which note matures in accordance with its terms
on the earlier of May 26, 2005 or upon the occurrence of certain events
as therein provided (the "Note"). The proceeds of the Note were used to
finance the purchase of 8,700 shares of UICI Common Stock. Gedwed
acknowledges and agrees that the Note remains in full force and effect
and is enforceable in accordance with its terms.
3. CONSULTING ARRANGEMENT. Effective upon the Separation Date, MEGA
hereby engages Gedwed on an independent contractor basis as a consultant to
MEGA, and Gedwed hereby accepts such engagement and agrees to perform his duties
and responsibilities hereunder in accordance with the terms and conditions
hereinafter set forth.
2
3
3.1. Consulting Term. The term of engagement shall commence
upon the Separation Date, and shall continue for a term ending on
December 31, 2002, unless earlier terminated pursuant to Section 3.5 of
this Agreement (the "Consulting Term").
3.2. Duties and Responsibilities. Gedwed's position shall be
as a consultant to MEGA, in which capacity he agrees to consult with
and assist senior management of MEGA in providing (a) assistance and
consultation with respect to MEGA's insurance and insurance agency
businesses, (b) advice with respect to insurance regulatory matters,
and (c) assistance with respect to any other matters as requested from
time to time by Xxxx Xxxx, Xxxxx Xxxx and/or Xxxx Xxxxx. As part of his
duties hereunder, Gedwed agrees to fully cooperate with MEGA in any and
all internal or external investigations, subpoenas, requests for
information, discovery requests, etc., and to make himself available
upon the request of the Company to appear in any and all administrative
or judicial proceedings with respect to activities or claims accruing
prior to the Separation Date. Gedwed shall report to the assigning
individual on a regular, periodic basis and keep such individual
reasonably informed as to the status and progress of each assignment.
MEGA acknowledges and agrees that the consulting relationship created
hereby is not exclusive, and Gedwed may perform similar services for
other clients so long as he is otherwise in compliance with Section 8.1
hereof.
3.3. Consulting Fee. For his services hereunder, MEGA agrees
to pay to Gedwed the amount of $120,000 annually (or such lesser
amount, as provided in Section 3.6), payable in equal monthly
installments in the amount of $10,000, payable on the first day of each
month, commencing February 1, 2001. In addition, MEGA will promptly
reimburse Gedwed for all reasonable out-of-pocket expenses incurred by
Gedwed in connection with his duties hereunder, and Gedwed agrees to
submit to MEGA written evidence of all expenses incurred on a monthly
basis. Monthly payments of consulting fees and expenses hereunder shall
be made by mail to the address set forth below.
3.4. Taxes. Gedwed is an independent contractor hereunder and
shall be responsible for payment of all federal and state taxes due on
amounts paid hereunder and MEGA shall not withhold any amounts for
federal, state or local income taxes or taxes or assessments that might
be payable or be required to be withheld if Gedwed were an employee of
MEGA. Gedwed shall indemnify MEGA for and hold MEGA harmless from and
against any costs, damages or liabilities relating to any such taxes or
assessments.
3.5. Termination of Consulting Arrangement. The consulting
arrangement created hereby may be terminated prior to the end of the
Consulting Term as follows:
(a) by MEGA at any time for "cause;"
(b) by MEGA at any time without cause, upon not less than 30
days' prior written notice to Gedwed; or
(c) upon the death of Gedwed.
For purposes of this Agreement, termination for "cause" shall mean
termination for reason of the failure of Gedwed to materially observe
the provisions of Section 4, 7 or 8 of this Agreement or termination
for reason of theft, proven dishonesty, gross misconduct, embezzlement,
fraud,
3
4
conviction of a felony involving fraud, theft, bodily harm or damage to
property (whether connected with the consulting relationship or not),
or use of the facilities or premises of MEGA or a subsidiary for the
conduct of unlawful or unauthorized activities or transactions.
3.6. Effect of Termination of Consulting Arrangement.
3.6.1. In the event the consulting arrangement provided
herein is terminated by MEGA prior to the end of the
Consulting Term as provided in Section 3.5(a), then
in such event Gedwed shall be entitled only to such
portion of the compensation set forth in Section 3.3
of this Agreement for the portion of the Consulting
Term that he continued as a consultant hereunder.
Upon termination pursuant to Section 3.5(a), Gedwed
shall have 30 days to exercise all or any portion of
Options otherwise vested on the date of termination.
3.6.2. In the event the consulting arrangement provided
herein is terminated by MEGA as provided in Section
3.5(b) or as provided in Section 3.5(c), then in such
event Gedwed shall be entitled to the balance of the
compensation set forth in Section 3.3 of this
Agreement, payable in monthly installments as
provided in Section 3.3 hereof. Upon termination
pursuant to Section 3.5(b), 50% of all Options which
are otherwise unvested shall vest, and Gedwed shall
thereafter have 30 days to exercise all vested
Options held by him. Upon termination pursuant to
Section 3.5(c), 100% of all Options which are
otherwise unvested shall vest, and the estate of, or
other successor to, Gedwed shall thereafter have 60
days to exercise all vested Options held by such
estate or successor.
3.7. Approval of Oklahoma Insurance Department.
Notwithstanding anything in the foregoing to the contrary, the
consulting arrangement contemplated hereby and the terms of this
Agreement are expressly made subject to the approval of the Oklahoma
Insurance Department, the receipt of which is a condition to the
effectiveness hereof.
4. CONFIDENTIALITY.
4.1. Confidential Information. Gedwed acknowledges that, by
reason of his employment by UICI and its affiliates and of his
engagement as a consultant to MEGA under this Agreement, he will or may
have access to confidential and proprietary information of the Company,
including, without limitation, client and customer lists, developments,
information pertaining to services and products, improvements of new or
existing services and products, know-how, specifications, profit and
other financial figures, and other information treated as proprietary
or confidential by MEGA which is not otherwise readily available from
public or published sources. Gedwed agrees that he will maintain in
confidence all such confidential or proprietary information and that he
will not, for any reason, during his engagement by MEGA or thereafter,
directly or indirectly, use for his benefit, or for any person, firm,
corporation, partnership, joint venture or other entity whatsoever, or
disclose to any person, firm, corporation, partnership, joint venture
or other entity whatsoever, any confidential or proprietary information
relating to the business or affairs of MEGA or any of MEGA's
affiliates without the prior written authorization of MEGA.
Notwithstanding the foregoing, nothing hereunder shall prohibit Gedwed
from disclosing (i) information that has become generally available to
the public other than as a result of disclosure by Gedwed or (ii)
information required to be disclosed by applicable law or legal
4
5
process, provided that MEGA shall have been afforded reasonable notice
in advance of such disclosure and had the opportunity to contest the
scope of any legal request to require such disclosure.
4.2. Return of Materials. Upon termination of Gedwed's
engagement as a consultant hereunder, for whatever reason, Gedwed
agrees promptly to surrender to MEGA all notes, memoranda, customer
lists, records, reports, computer programs and all other documents and
material, and all copies thereof, whether prepared by Gedwed or others,
which contain or relate to confidential or proprietary information of
MEGA of which the Gedwed has obtained possession during the course of
performing Gedwed's obligations hereunder.
5. REPRESENTATIONS AND WARRANTIES.
5.1. Representation of Gedwed. Gedwed hereby represents and
warrants to MEGA that he is not a party or otherwise subject to any
employment or other agreement or subject to any duty or duties to
another person or entity of which the subject matter hereof could be in
violation.
5.2. Representation of MEGA. MEGA hereby represents and
warrants to Gedwed that (a) neither it nor any affiliate of MEGA is a
party or otherwise subject to any agreement or subject to any duty or
duties to another person or entity of which the subject matter hereof
could be in violation, and (b) this Agreement has been duly authorized,
executed and delivered by MEGA.
6. DISCLOSURE. Gedwed acknowledges that the principal terms of the
arrangement contemplated by this Agreement may be subject to disclosure under
the rules and regulations of the Securities and Exchange Commission promulgated
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended. Gedwed further acknowledges and understands that the terms of
this Agreement constitute a "material transaction" with a "related party" in
accordance with the policies and procedures respecting related party
transactions adopted by the UICI Board of Directors and, as a result, this
Agreement is subject to the approval by the Outside Disinterested Directors of
UICI.
7. NON-COMPETITION AGREEMENT.
7.1.Non-Competition. Gedwed acknowledges that he has and may
through this consulting engagement develop significant skills in or
knowledge of MEGA's insurance and other businesses, and that the future
application and engagement of those skills and that knowledge by him
are a valid concern of MEGA. Gedwed agrees that, until expiration or
earlier termination of the Term in accordance with Section 3.5 hereof,
he will not, directly or indirectly, for himself or others, or as
owner, stockholder, partner, officer, director, employee, consultant,
joint venturer, independent contractor, advisor, agent, or otherwise,
without the prior written consent of MEGA:
(a) contact or seek to do business with any
competitor of MEGA with which he may have contact during his
engagement hereunder, or who is known to him to be a
competitor of MEGA, for the purpose of interfering with,
diverting or acquiring any portion of the business of MEGA,
or use the information, material or strategies generated or
produced by MEGA for the benefit of such other competitor of
MEGA; or
(b) directly or indirectly, or for or with any other
person, firm, corporation, partnership, joint venture or other
entity whatsoever, knowingly solicit or endeavor to
5
6
entice away from MEGA any person employed by MEGA, or with
whom MEGA has a business relationship, in order to accept
employment or establish an association with him, or any other
person, firm, corporation, partnership, joint venture or
entity whatsoever, and approach any such person for any such
purpose or authorize or knowingly cooperate with the taking of
any such action by any other person, firm, corporation,
partnership, joint venture or entity whatsoever.
7.2. Sole Remedy for Breach. MEGA acknowledges that its sole
remedy for any breach of the foregoing restriction contained in this
Section 7 shall be its right to terminate the consulting arrangement
created hereby in accordance with Section 3.5.
8. INDEMNIFICATION.
8.1. Indemnification by Gedwed. Gedwed hereby agrees to
indemnify and hold MEGA harmless from and against any claim, cost,
expense, damage, liability, loss or deficiency suffered or incurred by
MEGA (including, without limitation, reasonable attorneys' fees and
other reasonable costs and expenses incident to any suit, action,
proceeding or claim) arising out of or resulting from, and will pay
MEGA on written demand the full amount of any sum which MEGA may pay or
may become obligated to pay in respect of, (i) any material inaccuracy
in any representation or the breach of any warranty made by Gedwed
pursuant to this Agreement or (ii) any failure by Gedwed duly to
perform or observe any term, provision, covenant, agreement or
condition in this Agreement to be performed or observed by Gedwed.
8.2. Indemnification by MEGA. MEGA hereby agrees to indemnify
and hold Gedwed harmless from and against any claim, cost, expense,
damage, liability, loss or deficiency suffered or incurred by Gedwed
(including, without limitation, reasonable attorneys' fees and other
reasonable costs and expenses incident to any suit, action, proceeding
or claim) arising out of or resulting from, and will pay Gedwed on
written demand the full amount of any sum which Gedwed may pay or may
become obligated to pay in respect of, (i) any material inaccuracy in
any representation or the breach of any warranty made by MEGA pursuant
to this Agreement, (ii) any failure by MEGA duly to perform or observe
in any material respect any term, provision, covenant, agreement or
condition in this Agreement to be performed or observed by MEGA or
(iii) any other such claim, cost, expense, damage, liability, loss or
deficiency arising out of Gedwed's services to be provided to MEGA as a
consultant hereunder (except, and only to the extent, that such other
claim, cost, expense, damage, liability, loss or deficiency arises
primarily from Gedwed's gross negligence, IT BEING EXPRESSLY UNDERSTOOD
THAT THE INDEMNITY SET FORTH IN THIS CLAUSE (iii) INCLUDES MATTERS
BASED ON GEDWED'S ORDINARY NEGLIGENCE).
9. GENERAL PROVISIONS.
9.1. Survival. Notwithstanding the termination of the
consulting arrangement hereby created upon or prior to expiration of
the Consulting Term for any reason, the covenants contained in Sections
3, 4 and 7 hereof shall survive and remain in full force and effect.
9.2. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of Gedwed, the Company and MEGA
and their respective heirs, executors, administrators, successors and
assigns.
6
7
9.3. Entire Agreement; Amendments. This Agreement contains the
entire agreement and understanding between the Company, MEGA and Gedwed
relating to the termination of Gedwed's employment and the engagement
of Gedwed by MEGA as a consultant and supersedes all prior agreements
between the Company, MEGA and Gedwed relating to the subject matter
hereof. This Agreement may not be amended, modified or supplemented in
any respect except by a subsequent written agreement executed by the
party affected thereby.
9.4. Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be by
hand-delivery, certified or registered mail; return receipt requested,
telex, telecopier, or air courier to the parties set forth below. Such
notices shall be deemed given: at the time delivered by hand, if
personally delivered; at the time received if sent certified or
registered mail; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the third business day after timely
delivery to the courier, if sent by air courier.
If to the Company:
UICI
0000 XxXxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn.: Xx. Xxxxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to MEGA:
The MEGA Life and Health Insurance Company
X/x XXXX
0000 XxXxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn.: Xx. Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Gedwed:
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
9.5. Execution in Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be
deemed an original agreement, but all of which together shall
constitute one and the same instrument.
7
8
9.6. Titles and Headings. Titles and headings to sections
herein are for purposes of reference only, and shall in no way limit,
define, or otherwise affect the provisions herein.
9.7. Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the
laws of the State of Texas. Each of Gedwed, the Company and each UICI
Company hereby submits to the exclusive jurisdiction of the United
States District Court for the Northern District of Texas and of any
Texas state court sitting in Dallas, Texas for the purposes of all
legal proceedings arising out of or relating to the Agreement or the
transactions contemplated hereby. Each of Gedwed, the Company and each
UICI Company irrevocably waives, to the fullest extent permitted by
law, any objection which any of such parties may now or hereafter have
to the laying of the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
9.8. Severability. If any provision of this Agreement or
application thereof to anyone or under any circumstances is adjudicated
to be invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision or application of this Agreement
which can be given effect without the invalid or unenforceable
provision or application.
8
9
Please acknowledge your agreement to the foregoing by signing and
returning to the undersigned the enclosed copy of this letter.
UICI
By:
---------------------------------
Name: Xxxxx X. Xxxx
Its: Executive Vice President and
General Counsel
The MEGA Life and Health Insurance
Company
By:
---------------------------------
Name: Xxxxx X. Xxxx
Its: Vice President
Agreed and acknowledged as of this 31st day of December 2000.
----------------------------------
Xxxxxxx X. Xxxxxx
9
10
EXHIBIT A
CORPORATION POSITION
----------- --------
The Chesapeake Life Insurance Company Director, Chairman of the Board
Executive Committee
Investment/Finance Committee
The MEGA Life and Health Insurance Director, Chairman of the Board
Company Executive Committee
Investment/Finance Committee
Mid-West National Life Insurance Director, Chairman of the Board
Company of Tennessee Executive Committee
Investment/Finance Committee
Fidelity First Insurance Company Director, Chairman of the Board
Executive Committee
Investment/Finance Committee
UICI Marketing, Inc. Director, Chairman of the Board
and Chief Executive Officer
Benefit Administration for the Self Board of Managers
Employed, L.L.C.
WinterBrook Holdings, Inc. Director, Secretary
UICI Funding Corp. 2 Director
Impact Productions, Inc. Director
10
