Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
April 4, 2006, by and between UICI, a Delaware corporation ("UICI" or the
"Company") and Xxxxxxx Xxxxxx (the "Executive") and shall be effective as of the
Effective Time (as defined below). If the Effective Time does not occur, this
Agreement shall be VOID AB INITIO and of no further force and effect. Certain
capitalized terms used herein are defined in Section 24.
WHEREAS, as of the date hereof, the Executive serves in the position set
forth on EXHIBIT A, attached hereto and made a part hereof;
WHEREAS, pursuant to the Agreement and Plan of Merger, dated September 15,
2005 (the "Merger Agreement") by and among Premium Finance LLC, a Delaware
limited liability company, Mulberry Finance Co., Inc., a Delaware corporation,
DLJMB IV First Merger LLC, a Delaware limited liability company, Premium
Acquisition, Inc., a Delaware corporation ("Merger Co 1"), Mulberry Acquisition,
Inc., a Delaware corporation ("Merger Co 2"), DLJMB IV First Merger Co
Acquisition Inc., a Delaware corporation ("Merger Co 3," and, together with
Merger Co 1 and Merger Co 2, the "Merger Cos") and the Company, pursuant to
which each of the Merger Cos will be merged into the Company (the "Merger") at
the effective time, as defined in Section 1.3 of the Merger Agreement (the
"Effective Time");
WHEREAS, the Executive is knowledgeable and experienced in certain aspects
of the Company's business and the Company believes that it benefits from the
application of the Executive's particular and unique skill, experience and
background to the management and operation of the Company and its Subsidiaries,
and that the Executive has made and will continue to make major contributions to
the short- and long-term profitability, growth and financial strength of the
Company and its Subsidiaries;
WHEREAS, the Executive has performed and continues to perform services for
the Company as an employee;
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company;
WHEREAS, the Company and the Executive desire to set forth in this
Agreement the terms and conditions of Executive's employment with the Company;
and
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT. Effective as of the Effective Time, the Company hereby
agrees to continue to employ the Executive, and the Executive hereby agrees to
continue to be employed by the Company, upon the terms and conditions set forth
herein. The employment relationship between the Company and the Executive shall
be governed by the general employment policies and practices of the Company,
including without limitation those relating to the Company's
Code of Professional Conduct, the treatment of confidential information and
avoidance of conflicts; PROVIDED, HOWEVER, that when the terms of this Agreement
differ from or are in conflict with the Company's general employment policies or
practices, the terms of this Agreement shall control. The Executive shall serve
as an officer and/or an employee of any Subsidiary, as may be requested from
time to time by the Reporting Person (as such term is defined in Section 3(a)
below) and without any additional compensation, unless otherwise determined by
the Reporting Person. In addition, the Executive's service as an officer and/or
an employee of any Subsidiary will be encompassed within any reference made in
this Agreement to employment by the Company. If the Executive serves as an
officer and/or an employee of any Subsidiary, any payment or provision of
benefits to the Executive by such Subsidiary shall fulfill the Company's
obligation to make such payment or provide such benefits pursuant to the terms
of this Agreement.
2. TERM. Subject to earlier termination of the Executive's employment as
provided under Section 9, the Executive's employment shall be for an initial
term commencing at the Effective Time (the "Commencement Date") and ending on
the second anniversary of the Effective Time (the "Initial Employment Term");
PROVIDED, HOWEVER, that at the end of the Initial Employment Term and on each
succeeding anniversary of the Commencement Date, the employment of the Executive
will be automatically continued upon the terms and conditions set forth herein
for one additional year (each, a "Renewal Term"), unless either party to this
Agreement gives the other party written notice (in accordance with Section 18)
of such party's intention to terminate this Agreement and the employment of the
Executive at least 90 days prior to the end of such initial or extended term.
For purposes of this Agreement, the Initial Employment Term and any Renewal Term
shall collectively be referred to as the "Employment Term."
3. POSITION AND DUTIES OF THE EXECUTIVE.
(a) The Executive shall serve in the position set forth on EXHIBIT A
and shall report directly to the position set forth on EXHIBIT A attached hereto
(the "Reporting Person"). The Executive shall have such duties, responsibilities
and authority commensurate with the Executive's position and such related duties
and responsibilities, as from time to time may be assigned to the Executive by
the Reporting Person. In addition, the Executive will be subject to, and will
act in substantial accordance with, all reasonable lawful instructions and
directions of the Board and all applicable reasonable policies and rules thereof
as are consistent with the above position, duties, responsibilities and
authority.
(b) During the Employment Term, the Executive shall, except as may
from time to time be otherwise agreed in writing by the Company and during
vacations (as set forth in Section 7 hereof) and authorized leave, devote
substantially all of his normal business working time and his best efforts, full
attention and energies to the business of the Company, the performance of the
Executive's duties hereunder and such other related duties and responsibilities
as may from time to time be reasonably prescribed by the Board or any committee
thereof, the Reporting Person or any committee or person delegated by the
Reporting Person, in each case, within the framework of the Company's policies
and objectives.
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(c) During the Employment Term and provided that such activities do
not either (i) contravene the provisions of Section 3(a), 3(b), 12 or 13 hereof
or (ii) materially interfere with the performance of the Executive's duties
hereunder, the Executive may continue to serve as a member of the governing
board of the governmental, educational, charitable or other community affairs
organizations set forth on EXHIBIT A attached hereto. The Executive may retain
all fees and other compensation from any such service, and the Company shall not
reduce his compensation by the amount of such fees.
4. COMPENSATION.
(a) BASE SALARY. During the Employment Term, the Company shall pay to
the Executive a base salary of not less than the amount set forth on EXHIBIT A
attached hereto per annum (the "Base Salary"), which is an amount not less than
the Executive's Base Salary immediately prior to the Commencement Date. The
Executive's Base Salary may be increased (but not decreased) from time to time
by the Committee in its sole discretion, payable at the times and in the manner
consistent with the Company's general policies regarding compensation of
executive employees. Such Base Salary shall be reviewed by the Board or an
authorized committee of the Board at least annually for purposes of evaluating
an increase in Executive's Base Salary.
(b) CASH INCENTIVE COMPENSATION. With respect to each fiscal year of
the Company, all or part of which is contained in the Employment Term, the
Executive will be eligible to participate in the Company's annual management
incentive program or arrangement approved by the Board (or any authorized
committee thereof) or any successor program or plan thereto or thereunder on
terms and conditions no less favorable to the Executive than those available to
similarly situated executives of the Company, with a target bonus opportunity of
the percentage of the Base Salary set forth on EXHIBIT A attached hereto (the
"Target Bonus Percentage") and a maximum bonus opportunity of not less than the
percentage of the Base Salary set forth on EXHIBIT A attached hereto (the
"Annual Bonus Percentage"). The Board (or any authorized committee thereof)
shall have the authority to establish performance metrics and such other terms
and conditions of the annual management incentive program pursuant to which such
bonuses may be earned.
(c) EQUITY COMPENSATION. The Executive will be eligible to participate
in the Company's MOP and Bonus Programs and any other incentive, equity-based
and deferred compensation plans and programs or arrangements as may be
determined by the Board or any successor programs or plans thereto or
thereunder.
(i) Shares of the Company's Class A-1 common stock acquired on
exercise of any Stock Option will be subject to the terms and
conditions of the Stockholders' Agreement. The Company and the
Executive acknowledge that they will agree to provide the Company with
the right to require the Executive and other executives of the Company
to waive any registration rights with regard to such shares upon an
IPO, in which case the Company will implement an IPO bonus plan in
cash, stock or additional options to compensate for the Executive's
and the other executives' loss of liquidity.
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(d) SUCCESS BONUS AWARD PLAN. The Executive will be entitled to
receive the amount of $1,126,728 in accordance with the terms of the Company's
Success Bonus Plan, effective as of September 14, 2005, which will be paid at
the times and in the manner as provided in the Success Bonus Plan.
5. EMPLOYEE BENEFITS. In addition to the compensation described in Section
4, the Executive shall be eligible to participate in the employee benefit plans
and programs, and to receive perquisites, provided from time to time to
similarly situated executives of the Company and its Subsidiaries generally.
6. EXPENSES. The Company shall pay or reimburse the Executive for
reasonable and necessary expenses incurred by the Executive in connection with
the Executive's performance of the Executive's duties on behalf of the Company
and its Subsidiaries in accordance with the expense policy of the Company
applicable to similarly situated executives of the Company and its Subsidiaries
generally.
7. VACATION. The Executive shall be entitled to a number of days of
vacation per year in accordance with the Company's policies, whether written or
unwritten, regarding vacation for similarly situated executives of the Company
and its Subsidiaries generally. Subject to the Company's policies, the duration
of such vacations and the time or times when they shall be taken will be
determined by the Executive in consultation with the Company.
8. INVESTMENT.
(a) The Executive agrees that at the Effective Time, any equity awards
granted to the Executive prior to the Effective Time, which continue to be
outstanding as of the Effective Time, will be treated in the manner set forth
herein:
(i) each Common Share that is issued and outstanding and
beneficially owned by the Executive immediately prior to the Effective
Time, as identified on EXHIBIT A attached hereto, if any, will remain
outstanding, will be renamed and redesignated as Class A-1 common
stock of the Company and will be subject to the terms and conditions
of the Stockholders Agreement; and
(ii) each outstanding stock option held by the Executive
immediately prior to the Effective Time, as identified on EXHIBIT A
attached hereto (a "Company Stock Option"), shall, as of the Effective
Time, vest in full (to the extent not vested as of the Effective Time)
and shall be converted, if necessary, into stock options of the
Company to purchase shares of the Company's Class A-1 Common Stock (a
"Rollover Option") in a manner that preserves the Spread, pursuant to
the rules promulgated under Treasury Regulation Section 1.424-1(a),
and to the extent possible, the per-share exercise price of each
Rollover Option will be decreased, and such decrease, if any, will be
done (A) in a manner to comply with Code Section 409A (and the
regulations thereunder), (B) to not otherwise create a current taxable
event for the Executive as a result of such conversion and (C) subject
to the terms and conditions of the Stockholders Agreement.
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(b) Notwithstanding anything herein to the contrary, all Company Stock
Options converted pursuant to Section 8(a)(ii) above and all investments made by
the Executive (as set forth on EXHIBIT A attached hereto, if any) in Class A-1
Common Stock in connection with the transactions contemplated by the Merger
Agreement ("Purchased Shares") will be fully vested at the Effective Time, and
all Purchased Shares and Class A-1 Common Stock of the Company held by the
Executive pursuant to the exercise of Company Stock Options will be subject to
the terms and conditions of the Stockholders Agreement.
(c) At the Effective Time, the Executive will invest cash in the
amount set forth on EXHIBIT A in shares of Class A-1 Common Stock of the
Company, at a purchase price of $37.00 per share, pursuant to the terms of a
Subscription Agreement between the Company and the Executive, and Executive
acknowledges that such shares of Class A-1 Common Stock will be subject to the
terms and conditions of the Stockholders Agreement.
9. TERMINATION.
(a) TERMINATION OF EMPLOYMENT BY UICI OR THE COMPANY. The Executive's
employment hereunder may be terminated by the Company, UICI or any of its
Subsidiaries that employ the Executive for any reason or no reason (including
with or without Cause or notification by the Company or UICI at any time during
the Employment Term pursuant to Section 2 that the Company or UICI intends to
terminate the Agreement and the Executive's employment, rather than allow the
Agreement to renew automatically) by written notice as provided in Section 18.
If the Company or UICI terminates the Executive's employment with Cause, all of
the Executive's Option Rights, whether or not vested, will be immediately
forfeited. Stock Options, if any, held by the Executive following termination of
the Executive's employment with the Company, UICI or any of its Subsidiaries,
shall remain exercisable in accordance with their terms.
(b) VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may
voluntarily terminate the Executive's employment with or without Good Reason at
any time by notice to the Company as provided in Section 18. Upon the
Executive's termination without Good Reason, all of the Executive's vested Stock
Options, if any, shall remain exercisable in accordance with their terms.
(c) BENEFITS PERIOD. Subject to Section 10 and any benefit
continuation requirements of applicable laws, in the event the Executive's
employment hereunder is terminated for any reason whatsoever, the compensation
and benefits obligations of the Company under Sections 4 and 5 shall cease as of
the effective date of such termination, except for any compensation and benefits
earned but unpaid through such date.
(d) CALL RIGHT. Upon termination of the Executive's employment with
the Company, UICI or any of its Subsidiaries for any reason prior to an IPO, the
Company or UICI will have the right to purchase (the "Call Right") any of the
Executive's shares of UICI's Class A-1 common stock in accordance with the terms
and conditions of the Stockholders Agreement.
(e) RESIGNATION FROM ALL POSITIONS. Notwithstanding any other
provision of this Agreement to the contrary, upon the termination of the
Executive's employment for any
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reason, unless otherwise requested by the Board,the Executive shall immediately
resign from all positions that he holds with the Company, UICI, its Subsidiaries
and any of their affiliates (and with any other entities with respect to which
the Company has requested the Executive to perform services), as applicable,
including, without limitation, the Board and all boards of directors of any
affiliates. The Executive hereby agrees to execute any and all documentation to
effectuate such resignations upon request by the Company, but he shall be
treated for all purposes as having so resigned upon termination of his
employment, regardless of when or whether he executes any such documentation.
10. TERMINATION PAYMENTS AND BENEFITS. If, during the Employment Term, the
Executive's employment hereunder is terminated by the Company without Cause (and
other than by reason of the Executive's death or Disability), or the Executive
terminates his employment for Good Reason, subject to (i) the Executive
execution and non-revocation of a release of claims against the Company,
substantially in the form attached hereto as EXHIBIT B attached hereto, (ii) the
terms of Section 14 and (iii) the Executive's continued compliance with the
covenants of Sections 12 and 13, during the Payment Period, then in such case
the Company shall be obligated to pay to the Executive such payments and make
available to the Executive such benefits as are set forth in this Section 10
during the Payment Period.
(a) SALARY CONTINUATION. The Executive will be entitled to receive an
amount equal to the sum of: (i) two (2) times the Executive's Base Salary in
effect at the time of termination of employment and (ii) two (2) times an amount
equal to the product of (A) the Executive's Base Salary in effect at the time of
termination of employment and (B) the Executive's Target Bonus Percentage for
the year of the Executive's termination of employment, or if the Target Bonus
Percentage has not been set for such year as of the date of termination of
employment, the Target Bonus Percentage for the immediately preceding year (the
sum of (i) and (ii), the "Termination Payments"), such amount to be payable in
equal installments payable over the Payment Period. Termination Payments shall
be paid to the Executive in accordance with the Company's regular payroll
schedule for the duration of the Payment Period. In the event that the Executive
dies while any Termination Payments are still payable to the Executive
hereunder, unless otherwise provided herein, all such unpaid amounts shall be
paid, not later than the tenth (10th) business day following the Executive's
death, to the Executive's beneficiary as named on the Executive's ESOP
beneficiary forms, or, if no such beneficiary is so named, then to the
Executive's estate, in the form of a lump sum cash payment equal to the
remaining Termination Payments.
(b) BONUS ENTITLEMENT. To the extent the Executive's termination of
employment occurs after the last day of the first quarter of an applicable
Company fiscal year, the Executive will be entitled to receive a pro rata
portion of the Executive's Target Bonus Percentage (based on the number of days
the Executive was employed with the Company during such fiscal year of
termination divided by 365), which amount shall be payable over the Payment
Period; PROVIDED, HOWEVER, that, if the Target Bonus Percentage has not been set
for the year in which the date of termination occurs, the Executive's Target
Bonus Percentage for purpose of this Section 10(b) shall be the Executive's
Target Bonus Percentage for the year immediately preceding the year in which the
Executive's employment is terminated hereunder.
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(c) EQUITY COMPENSATION. To the extent not previously vested,
cancelled or expired, the Executive will vest in any grants of Option Rights in
accordance with their terms, which, along with Executive's Rollover Options will
remain exercisable in accordance with their terms.
(d) WELFARE BENEFITS. During the Payment Period, the Company shall
maintain in full force and effect for the continued benefit of the Executive all
employee welfare benefit plans in which the Executive was entitled to
participate immediately prior to the Executive's termination or shall arrange to
make available to the Executive benefits substantially similar to those which
the Executive would otherwise have been entitled to receive if his employment
had not been terminated. Such welfare benefits shall be provided to the
Executive on the same terms and conditions under which the Executive was
entitled to participate immediately prior to his termination of employment,
including any applicable employee contributions.
(e) Any payments under this Section 10 to the Executive shall not be
taken into account for purposes of any retirement plan (including any
supplemental retirement plan or arrangement) or other benefit plan sponsored by
the Company, except as otherwise expressly required by such plans or applicable
law.
(f) NO OBLIGATION TO MITIGATE. The Executive is under no obligation to
mitigate damages or the amount of any payment provided for hereunder by seeking
other employment or otherwise.
11. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Anything in this Agreement
to the contrary notwithstanding, in the event that it is determined (as
hereafter provided) that any payment (other than the Gross-Up Payments provided
for in this Section 11 and EXHIBIT C attached hereto) or distribution by the
Company, its Subsidiaries or any of its affiliates to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including any stock option,
performance share, performance unit, stock appreciation right or similar right,
or the lapse or termination of any restriction on or the vesting or
exercisability of any of the foregoing (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision
thereto) by reason of being considered "contingent on a change in ownership or
control" of the Company, within the meaning of Section 280G of the Code (or any
successor provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such tax (such tax or taxes,
together with any such interest and penalties, being hereafter collectively
referred to as the "Excise Tax"), then the Executive will be entitled to receive
an additional payment or payments (collectively, a "Gross-Up Payment") (subject
to Paragraph 7 of EXHIBIT C attached hereto with respect to any transaction
other than Merger); provided, however, that no Gross-Up Payment will be made
with respect to the Excise Tax, if any, attributable to (i) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement, or (ii) any stock appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in clause (i).
The Gross-Up Payment will be in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the
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Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment. For purposes of determining the
amount of the Gross-Up Payment, the Executive will be considered to pay (1)
federal income taxes at the highest rate in effect in the year in which the
Gross-Up Payment will be made and (2) state and local income taxes at the
highest rate in effect in the state or locality in which the Gross-Up Payment
would be subject to state or local tax, net of the maximum reduction in federal
income tax that could be obtained from deduction of such state and local taxes.
The obligations set forth in this Section 11 will be subject to the procedural
provisions described in EXHIBIT C attached hereto.
12. CONFIDENTIALITY.
(a) The Executive acknowledges that in the course of his employment by
the Company, he will or may have access to and become informed of confidential
or proprietary information of the Company and its Subsidiaries ("Confidential
Information"), which is a competitive asset, including, without limitation, (i)
the terms of any agreement between the Company and any employee, customer or
supplier, (ii) pricing strategy, (iii) merchandising and marketing methods, (iv)
product development ideas and strategies, (v) personnel training and development
programs, (vi) financial results, (vii) strategic plans and demographic
analyses, (viii) proprietary computer and systems software, and (ix) any
non-public information concerning the Company, its employees, suppliers or
customers. The Executive agrees that he will keep all Confidential Information
in strict confidence during the term of his employment by the Company and
thereafter, and will never directly or indirectly make known, divulge, reveal,
furnish, make available, or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company). The Executive
agrees that the obligations of confidentiality under this Section 12 shall
survive termination of the Executive's employment with the Company regardless of
any actual or alleged breach by the Company of this Agreement, until and unless
any such Confidential Information shall have become, through no fault of the
Executive, generally known to the public or the Executive is required by lawful
service of process, subpoena, court order, law or the rules of regulations of
any regulatory body to which he is subject to make disclosure (after providing
to the Company a copy of the documents seeking disclosure of such information
and giving the Company prompt notice upon receipt of such documents and prior to
their disclosure). All records, files, memoranda, reports, customer lists,
drawings, plans, documents and the like relating to the Company's business that
the Executive uses, prepares or comes into contact with during the course of the
Executive's employment shall remain the sole property of the Company and/or its
affiliates, as applicable, and shall be turned over to the Company upon
termination of the Executive's employment. The Executive's obligations under
this Section 12 are in addition to, and not in limitation of or preemption of,
all other obligations of confidentiality which the Executive may have to the
Company under general legal or equitable principles.
(b) Except in the ordinary course of the Company's business, the
Executive has not made, nor shall at any time following the date of this
Agreement, make or cause to be made, any copies, pictures, duplicates,
facsimiles or other reproductions or recordings or any abstracts or summaries
including or reflecting Confidential Information. All such documents and other
property furnished to the Executive by the Company or any of its Subsidiaries or
affiliates or otherwise acquired or developed by the Company any of its
Subsidiaries or affiliates shall at all times be the property of the Company.
Upon termination of the Executive's
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employment with the Company, the Executive will return to the Company any such
documents or other property of the Company any of its Subsidiaries or affiliates
which are in the possession, custody or control of the Executive.
(c) Without the prior written consent of the Company (which may be
withheld for any reason or no reason), except in the ordinary course of the
Company's business, the Executive shall not at any time following the date of
this Agreement use for the benefit or purposes of the Executive or for the
benefit or purposes of any other person, firm, partnership, association, trust,
venture, corporation or business organization, entity or enterprise or disclose
in any manner to any person, firm, partnership, association, trust, venture,
corporation or business organization, entity or enterprise any Confidential
Information.
13. COVENANT NOT TO COMPETE; COVENANT NOT TO SOLICIT. For a period
commencing on the Commencement Date and for a period ending two (2) years after
the termination of the Executive's employment with the Company for any reason
(the "Restricted Period"), including termination for Cause or the Executive's
voluntary resignation without Good Reason, the Executive acknowledges and agrees
that he will not, directly or indirectly, individually or on behalf of any other
person or entity:
(a) engage in any activity that can be reasonably expected to result
in a competitive harm to the Company or any of the Company's Subsidiaries or
affiliates (collectively, the "Company Group") in any region of the United
States in which the business of the Company Group is being conducted; or
(b) solicit for hire, hire or employ (whether as an officer, director
or insurance agent) any person who is an employee or independent contractor of
any member of the Company Group or has been an employee or independent
contractor of any member of the Company Group at any time during the six-month
period prior to the Executive's termination of employment or solicit, aid or
induce any such person to leave his or her employment with any member of the
Company Group to accept employment with any other person or entity.
(c) Executive's ownership of less than one percent (1%) of any class
of stock in a publicly-traded corporation shall not be deemed a breach of this
Section 13.
(d) The Executive acknowledges and agrees that a violation of the
foregoing provisions of Section 12 or Section 13 would result in material
detriment to the Company would cause irreparable harm to the Company, and that
the Company's remedy at law for any such violation would be inadequate. In
recognition of the foregoing, the Executive agrees that, in addition to any
other relief afforded by law or this Agreement, including damages sustained by a
breach of this Agreement and without the necessity or proof of actual damages,
the Company shall have the right to enforce this Agreement by specific remedies,
which shall include, among other things, temporary and permanent injunctions, it
being the understanding of the undersigned parties hereto that damages and
injunctions all shall be proper modes of relief and are not to be considered as
alternative remedies.
14. COMPLIANCE WITH SECTION 409A OF THE CODE. This Agreement is intended to
comply and shall be administered in a manner that is intended to comply with
Section 409A of
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the Code and shall be construed and interpreted in accordance with such intent.
To the extent that a payment and/or benefit owed or due to the Executive under
this Agreement is subject to Section 409A of the Code, it shall be paid in a
manner that complies with Section 409A of the Code, including proposed,
temporary or final regulations or any other guidance issued by the Secretary of
the Treasury and the Internal Revenue Service with respect thereto (the "409A
Guidance"). Any provision of this Agreement that would cause a payment and/or
benefit to fail to satisfy Section 409A of the Code shall have no force and
effect until amended to comply with Code Section 409A (which amendment may be
retroactive to the extent permitted by the 409A Guidance).
15. PRIOR AGREEMENT. As of the Effective Time, this Agreement supersedes
any and all prior and/or contemporaneous agreements, either oral or in writing,
between the parties hereto, or between either or both of the parties hereto and
the Company, with respect to the subject matter hereof including, without
limitation, the Term Sheet dated as of September 14, 2005. Each party to this
Agreement acknowledges that no representations, inducements, promises, or other
agreements, orally or otherwise, have been made by any party, or anyone acting
on behalf of any party, pertaining to the subject matter hereof, which are not
embodied herein, and that no prior and/or contemporaneous agreement, statement
or promise pertaining to the subject matter hereof that is not contained in this
Agreement shall be valid or binding on either party.
16. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable
or transfer made under any compensation or other amount owing to the Executive
under this Agreement all applicable federal, state, city or other withholding
taxes as the Company is required to withhold pursuant to any law or government
regulation or ruling.
17. SUCCESSORS AND BINDING AGREEMENT.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company or of any
Subsidiary or any division or business unit thereof for which the Executive
performs services, by agreement in form and substance satisfactory to the
Executive (and any such successor, the "Successor"), expressly to assume and
agree to perform this Agreement in the same manner and to the same extent the
Company would be required to perform if no such succession had taken place.
Notwithstanding anything in this Agreement to the contrary, the Executive
acknowledges and agrees that to the extent the Executive is offered and accepts
comparable employment with such Successor, the Executive will not be entitled to
receive any severance/termination compensation payments and benefits, as
provided pursuant to the terms and conditions of Section 10 or otherwise under
this Agreement, from UICI in connection with such acquisition/transaction with
the Successor. To the extent the Executive does not accept an offer of
comparable employment from such Successor on terms and conditions set forth in
this Agreement, any non-acceptance of employment will be treated as a voluntary
termination of employment without Good Reason by the Executive in accordance
with the provisions of this Agreement. This Agreement will be binding upon and
inure to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company or of any Subsidiary
or any division or business unit thereof for which the Executive performs
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services whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Sections 17(a) and 17(b). Without limiting the generality or effect
of the foregoing, the Executive's right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a
security interest, or otherwise, other than by a transfer by the Executive's
will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 17(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
18. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
19. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
20. INDEMNIFICATION. The Company will indemnify the Executive (and his
legal representative or other successors) to the fullest extent permitted
(including a payment of expenses in advance of final disposition of a
proceeding) by applicable law, and the Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain generally
for the benefit of its directors and officers, against all costs, charges and
expenses whatsoever incurred or sustained by him or his legal representatives
(including but not limited to any judgment entered by a court of law) at the
time such costs, charges and expenses are incurred or sustained, in connection
with any action, suit or proceeding to which the Executive (or his legal
representatives or other successors) may be made a party by reason of his having
accepted employment with the Company or by reason of his being or having been a
director, officer or employee of the Company, or any Subsidiary of the Company,
or his serving or having served any other enterprise as a director, officer or
employee at the request of the Company, and to the extent the Company maintains
such an insurance policy or policies, the Executive shall be
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covered by such policy or policies, in accordance with its or their terms to the
maximum extent of the coverage available for any Company officer or director.
The Executive's rights under this Section 20 shall continue without time limit
for so long as he may be subject to any such liability, whether or not the
Employment Term may have ended.
21. VALIDITY. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to any other person or circumstances will not be affected, and the
provision so held to be invalid or unenforceable will be reformed to the extent
(and only to the extent) necessary to make it enforceable or valid.
22. SURVIVAL OF PROVISIONS. Notwithstanding any other provision of this
Agreement, the parties' respective rights and obligations under Sections 10, 11,
12, 13, 14, 15, 16 and 22 will survive any termination or expiration of this
Agreement or the termination of the Executive's employment for any reason
whatsoever.
23. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. Unless otherwise noted, references to
"Sections" are to sections of this Agreement. The captions used in this
Agreement are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Agreement.
24. DEFINED TERMS.
(a) "409A Guidance" has the meaning specified in Section 14.
(b) "Agreement" has the meaning specified in the introductory
paragraph herein.
(c) "Annual Bonus Percentage" has the meaning specified in Section
4(b).
(d) "Base Salary" has the meaning specified in Section 4(a).
(e) "Board" means the Board of Directors of the Company.
(f) "Bonus Programs" means the Company's "XXX XX" Big Opportunity Bash
Bonus Program, adopted August 15, 2002; the Company's Special Total Ownership
Plan 2004, effective February 20, 2004; the HMI Employee Bonus Program,
effective October 8, 2004; the Company's Special Total Ownership Plan, effective
March 3, 2006; and the UGA Employee Long Term Bonus Program effective June 25,
2004.
(g) "Call Right" has the meaning specified in Section 9(d).
(h) "Cause" means the occurrence of any of the following:
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(i) the Executive commits an act of gross negligence, willful
misconduct, fraud, embezzlement, misappropriation or breach of
fiduciary duty against the Company or any of its affiliates or
Subsidiaries, or shall be convicted by a court of competent
jurisdiction of, or shall plead guilty or NOLO CONTENDERE to, any
felony or any crime involving moral turpitude or any crime which
reasonably could affect the reputation of the Company or the
Executive's ability to perform the duties required under this
Agreement;
(ii) the Executive commits a material breach of any of the
covenants in this Agreement or the Stockholders Agreement, which
breach has not been remedied within 30 days of the delivery to the
Executive by the Board of written notice of the facts constituting the
breach, and which breach if not cured, would have a material adverse
effect on the Company; or
(iii) the Executive habitually and willfully neglects his
obligations under this Agreement or the Executive's duties as an
employee of the Company.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Commencement Date" has the meaning specified in Section 2.
(k) "Committee" means the Executive Compensation Committee of the
Board.
(l) "Common Shares" means shares of common stock of the Company, par
value $.01 per share.
(m) "Company" has the meaning specified in the introductory paragraph
of this Agreement.
(n) "Company Group" has the meaning specified in Section 13(a).
(o) "Company Stock Option" has the meaning specified in Section
8(a)(ii).
(p) "Confidential Information" has the meaning specified in Section
12.
(q) "Controlling Interest" in an entity will mean (x) beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of more than 50% of the equity securities representing more than 50% of the
voting power of the outstanding equity securities of the entity.
(r) "Disability" shall mean the Executive's incapacity due to physical
or mental illness to substantially perform his duties on a full-time basis for
at least 26 consecutive weeks or an aggregate period in excess of 26 weeks in
any one fiscal year, and within 30 days after a notice of termination is
thereafter given by the Company, the Executive shall not have returned to the
full-time performance of the Executive's duties; PROVIDED, HOWEVER, if the
Executive shall not agree with a determination to terminate his employment
because of Disability, the question of the Executive's Disability shall be
subject to the certification of a
13
qualified medical doctor selected by the Company or its insurers and acceptable
to the Executive or, in the event of the Executive's incapacity to accept a
doctor, the Executive's legal representative.
(s) "Effective Time" has the meaning specified in the second recital
of this Agreement.
(t) "Employment Term" has the meaning specified in Section 2.
(u) "ESOP" means the Company's Amended and Restated Employee Stock
Ownership Plan.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(w) "Excise Tax" has the meaning specified in Section 11.
(x) "Executive" has the meaning specified in the introductory
paragraph of this Agreement.
(y) "Good Reason" means termination of employment by the Executive
with written notice to the Company within 90 days following the occurrence,
without the Executive's consent, of any the following events (after failure of
the Company to cure in thirty (30) days):
(i) the reduction of the Executive's position from that of a
senior executive level position with the Company;
(ii) a decrease in the Executive's Base Salary or Target Bonus
Percentage, other than in the case of a decrease for a majority of
similarly situated executives of the Company;
(iii) a reduction in the Executive's participation in the
Company's benefit plans and policies to a level materially less
favorable to the Executive unless such reduction applies to a majority
of the senior level executives of the Company; or
(iv) the announcement of the relocation of the Executive's
primary place of employment to a location 50 or more miles from the
current headquarters.
(z) "Gross-Up Payment" has the meaning specified in Section 11.
(aa) "Initial Employment Term" has the meaning specified in Section 2.
(bb) "IPO" has the meaning specified in the Stockholders Agreement.
(cc) "ISO" has the meaning specified in Section 11.
(dd) "Merger" has the meaning specified in the second recital of this
Agreement.
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(ee) "Merger Agreement" has the meaning specified in the second
recital of this Agreement.
(ff) "Merger Cos" has the meaning specified in the second recital of
this Agreement.
(gg) "Merger Co 1" has the meaning specified in the second recital of
this Agreement.
(hh) "Merger Co 2" has the meaning specified in the second recital of
this Agreement.
(ii) "Merger Co 3" has the meaning specified in the second recital of
this Agreement.
(jj) "MOP" means the Company's 2006 Management Option Plan, as may be
amended from time to time.
(kk) "National Firm" has the meaning specified in paragraph 1 of
EXHIBIT C attached hereto.
(ll) "Option Rights" has the meaning specified in the MOP.
(mm) "Payment" has the meaning specified in Section 11.
(nn) "Payment Period" means the two-year period following the later of
(i) the Executive's date of termination of employment with the Company or (ii)
the first business day after the date that is six (6) months following the date
of the Executive's separation from service with the Company to the extent
required in order to avoid the imposition of taxes or penalties under Code
Section 409A.
(oo) "Purchased Shares" has the meaning specified in Section 8(b).
(pp) "Release" has the meaning specified in the introductory paragraph
of EXHIBIT B attached hereto.
(qq) "Renewal Term" has the meaning specified in Section 2.
(rr) "Reporting Person" has the meaning specified in Section 3(a).
(ss) "Restricted Period" has the meaning specified in Section 13.
(tt) "Revocation Date" has the meaning specified in paragraph 3 of
EXHIBIT B attached hereto.
(uu) "Rollover Option" has the meaning specified in Section 8(a)(ii).
15
(vv) "Spread" means the difference, if any, between (i) $37.000 and
(ii) the per-share exercise price of a Company Stock Option (taking into account
any reduction as provided in Section 8(a)(ii)).
(ww) "Stockholders Agreement" means the Stockholders Agreement by and
among investment funds affiliated with The Blackstone Group, L.P., Xxxxxxx Xxxxx
& Co. and DLJ Merchant Banking Partners IV, L.P., the Company, the Executive,
and other signatories thereto executed in connection with the Merger, as may be
amended from time to time.
(xx) "Stock Option" means an Option Right or a Rollover Option.
(yy) "Subsidiary" shall mean any entity, corporation, partnership
(general or limited), limited liability company, firm, business organization,
enterprise, association or joint venture in which the Company directly or
indirectly controls ten percent (10%) or more of the voting interest.
(zz) "Successor" has the meaning specified in Section 17(a).
(aaa) "Target Bonus Percentage" has the meaning specified in Section
4(b).
(bbb) "Termination Payments" has the meaning specified in Section
10(a).
(ccc) "UICI Affiliates" has the meaning specified in paragraph 1 of
EXHIBIT B attached hereto.
(ddd) "Underpayment" has the meaning specified in paragraph 1 of
EXHIBIT C attached hereto.
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
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IN WITNESS WHEREOF, with the Company signatory listed below having been
duly authorized by the Company to enter into this Agreement by the Company, the
parties hereto have executed this Agreement as of the day and year first
written.
/s/ Xxxxxxx Xxxxxx
______________________________________
Xxxxxxx Xxxxxx
UICI
By: /s/ Xxxxx X. Xxxx
___________________________________
Xxxxx X. Xxxx
Executive Vice President
and General Counsel
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