EMPLOYMENT AGREEMENT
Exhibit 10.3
[***] = Certain confidential information contained in this document, marked by brackets, has been
omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of
the Securities Exchange Act of 1934, as amended.
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of September 8, 2009
(the “Effective Date”), by and between HealthMarkets, Inc., a Delaware corporation (together with
its successors and assigns, the “Company”) and Xxxxxxx Xxxxxxxxxx (the “Executive”).
WHEREAS, the Company and the Executive are party to an Employment Agreement dated as of June
5, 2008 (the “Prior Agreement”);
WHEREAS, the Company and the Executive wish to modify the terms of the Executive’s employment;
WHEREAS, the Company desires to memorialize the terms of the Executive’s employment effective
as of the Effective Date under this Agreement;
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 Date, 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 of any Subsidiary, as may be requested from time to time by the Board and without any
additional compensation, unless otherwise determined by the Board. In addition, the Executive’s
service in such officer position with any Subsidiary will be encompassed within any reference made
in this Agreement to employment by the Company.
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 on the
Effective Date and ending on June 4, 2011 (the “Initial Employment Term”); provided,
however, that at the end of the Initial Employment Term and on each succeeding anniversary
thereof, 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, subject to Section 22 hereof, and the employment of
the
Executive at least 90 days prior to the end of such initial or extended term (in which event
the Executive’s employment shall be deemed to have terminated at the end of the Employment 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) During the Employment Term, the Executive shall serve as the Chief Executive Officer of
the Company and a member of the Board, reporting directly to the Board. The Executive shall have
such duties, responsibilities and authority commensurate with the Executive’s positions in a
company the size and nature of the Company and such related duties and responsibilities, as from
time to time may be assigned to the Executive by the Board, consistent with his position in the
Company. During the Employment Term, the Executive shall perform his duties in the Dallas/Ft.
Worth area, Texas.
(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
reasonable best efforts and energies to the business of the Company and the performance of the
Executive’s duties hereunder. Nothing herein shall preclude the Executive from (i) serving on the
boards of directors of two Blackstone-controlled entities or any other board of directors if such
service on such other boards is approved by the Board (which approval shall not be unreasonably
withheld), (ii) serving on the boards of, or advisory committees to, trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community affairs, or (iv)
managing his personal and family investments and affairs, provided that the activities in clauses
(i) through (iv) do not materially interfere with the effective discharge of the Executive’s duties
and responsibilities under this Agreement.
4. Compensation.
(a) Base Salary. During the Employment Term, the Company shall pay to the Executive
an annual base salary of $1,200,000 (the “Base Salary”) . The Executive’s Base Salary may be
increased (but not decreased) from time to time by the Committee in its sole discretion and shall
be payable in cash at the times consistent with the Company’s general policies regarding
compensation of executive employees, but in all events no less frequently than monthly. 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. For purposes of this Agreement,
after any such increase, “Base Salary” shall refer to such increased amount.
(b) Cash Incentive Compensation.
(i) With respect to the Company’s 2009 fiscal year and each fiscal year of the
Company thereafter, all or part of which is contained in the Employment Term, the
Executive shall 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
(ii) thereunder on terms and conditions no less favorable to the Executive than
those available to similarly situated executives of the Company, with a guaranteed
target bonus opportunity for 2009 of $2,400,000 and a target bonus opportunity
thereafter of $1,600,000 (as applicable, the “Target Bonus Amount”) and a maximum
bonus opportunity for 2009 of $4,000,000 and a maximum bonus opportunity thereafter
of $3,200,000 (with payment at no less than the Target Bonus Amount if the
applicable performance targets are met for the fiscal year); provided, that
in no event shall the Executive’s annual bonus for 2009 be less than the Executive’s
guaranteed Target Bonus Amount for 2009 of $2,400,000 and in all events the
Executive’s annual bonus payable for 2009 will be reduced by the amount of First
Year Guaranteed Annual Bonus (as defined in the Prior Agreement) paid to the
Executive in June 2009. The Board (or any authorized committee thereof) shall have
the authority to establish performance metrics of the annual management incentive
program pursuant to which such bonuses may be earned, provided that the Board (or
such authorized committee) shall establish such targets with respect to the
Executive in consultation with him, which shall be no less favorable to the
Executive than the annual performance targets established for the applicable
performance period for other senior executives of the Company generally and, in the
case of the performance metrics for fiscal year 2009, shall be the metrics attached
hereto as Schedule 1. Such annual bonuses shall be paid to the Executive 100% in
cash no later than the date such bonuses are generally paid to other senior
executives of the Company, but in all events by March 15 of the year following the
fiscal year for which such annual bonus was earned (unless the Executive has elected
to defer receipt of any such bonuses).
(iii) Transaction Bonus. In addition to the amounts described in
Section 4(b)(i) and 4(b)(iii), the Executive shall be paid a cash transaction bonus
of $3,000,000 as follows (the “Transaction Bonus”): (i) 50 percent of the
Transaction Bonus shall be paid to the Executive within five days following the date
on which an [***] occurs and the Company or one of its Affiliates executes a
National Carrier Marketing Distribution Agreement, (ii) 25 percent of the
Transaction Bonus shall be paid to the Executive within five days following the date
on which the [***] is achieved and (iii) 25 percent of the Transaction Bonus shall
be paid to the Executive within five days following the date on which the National
Carrier MDA Goal is achieved, subject, in each case, except as otherwise provided in
Section 10 hereof, to the Executive’s continued employment through the applicable
payment date. The Company acknowledges that the objectives to be accomplished by an
[***] and National Carrier Marketing Distribution Agreement might be accomplished
through a variety of transaction structures based on tax, accounting or other
considerations (an “Alternate Structure”). To the extent a Board-approved
transaction accomplishes such objectives pursuant to an Alternate Structure then the
Board may determine that the full amount of the Transaction Bonus or any portion
thereof shall be payable, with such payment to be made within five days following
the date of such Board
determination. Notwithstanding any of the foregoing, in the event that the
| [***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. | ||
applicable goal relating to the payment of the applicable portion of the Transaction
Bonus set forth above is not achieved, the Board of Directors shall have the
authority to award all, none, or a portion of the portion of the Transaction Bonus
tied to achievement of such goal at its sole discretion.
(iv) Retention Payment. In addition to the amounts described in
Sections 4(b)(i) and 4(b)(ii), the Executive shall be granted the right to receive a
retention bonus of $1,000,000 in cash (the “Retention Payment”) which bonus shall
vest on the earlier of (a) a Change of Control or (b) December 31, 2010, subject,
except as otherwise provided in Section 10 hereof, to the Executive’s continued
employment through such vesting date which Retention Payment shall be paid to the
Executive on the earlier of (a) a Change of Control which constitutes a “change in
control event” within the meaning of Section 409A of the Code or (b) December 31,
2010.
(c) Equity Compensation.
(i) General. During the Employment Term, the Executive shall be
entitled to participate in the Company’s MOP and Bonus Programs and any other
incentive, equity-based and deferred compensation plans and programs or arrangements
or any successor programs or plans thereto or thereunder (collectively, the
“Incentive Programs”), in each case, as may be in effect from time to time and as
may be determined by the Board.
(ii) Initial Grants. As soon as practicable (but in no event later
than five business days) after the Effective Date, the Committee will award 506,650
Option Rights and 506,650 Restricted Shares (together, the “Initial Grant”), which
Initial Grant will be subject to the provisions set forth in the Executive’s
Non-Qualified Stock Option Agreement and Restricted Share Agreement to be entered
into in the form of Exhibit A and Exhibit B, respectively;
provided, that, in the event that the Company’s stockholders shall fail to
approve the amendment to the MOP as set forth in Exhibit A (“Amendment”) or
fail to adopt a plan authorizing the issuance of restricted shares as set forth in
Exhibit B (“Restricted Share Plan”) prior to the earlier of a Change of Control or
the Amendment Approval Date, which the Blackstone Investor Group (as defined in the
Stockholders Agreement) (“Blackstone”) represents it has sufficient votes to approve
as of the Effective Date and which Blackstone shall vote for, the Initial Grant
relating to the amendment or plan which was not approved or adopted shall be void ab
initio and of no further force and effect. Failure to obtain such stockholder
approval for either the Amendment or adoption the Restricted Share Plan by the
earlier of a Change of Control or the Amendment Approval Date shall be a breach of
this Section 4(c) and Exhibits A and B, entitling the Executive to terminate
his employment for Good Reason.
(iii) Special Stock Grant. As soon as practicable (but in no event
later than five business days) after the Effective Date, the Committee will award
the
Executive 25,862 Restricted Shares (together, the “Special Restricted Shares”),
which will be subject to the provisions set forth in the Executive’s Special
Restricted Stock Agreement to be entered into in the form of Exhibit C;
provided, that, in the event that the Company’s stockholders shall fail to adopt
the Restricted Share Plan as set forth in Exhibit C prior to the earlier of
a Change of Control or the Amendment Approval Date, which Blackstone represents it
has sufficient votes to approve as of the Effective Date and which Blackstone shall
vote for, the Special Restricted Shares shall be void ab initio and of no further
force and effect; provided that the tax gross-up provision in Section 13 of Exhibit
C shall survive and continue to apply to the extent the Executive owes any Taxes (as
defined in such Section 13) with respect to such grant. Failure to adopt the
Restricted Share Plan by the earlier of a Change of Control or the Amendment
Approval Date shall be a breach of this Section 4(c) and Exhibit C,
entitling the Executive to terminate his employment for Good Reason.
(iv) Terms of Equity Awards. In all events, any equity award (or
portion thereof) granted to the Executive that vests solely upon the Executive’s
fulfillment of time and/or service requirements shall vest in full upon a “Change of
Control” (as such term is defined in the MOP in effect as of June 4, 2008, plus any
amendments to such definition after June 4, 2008 which would result in a transaction
not covered by the Change of Control definition in effect as of June 4, 2008
constituting a “Change of Control”); provided, however, that in no event shall
consummation of the transactions contemplated by an [***] or a National Carrier
Marketing Distribution Agreement constitute a Change of Control for any purpose of
this Agreement so long as the Permitted Holders (as defined in the MOP) beneficially
own, directly or indirectly, 50% or more of the then-outstanding combined voting
power of the then-outstanding securities entitled to vote generally in the election
of directors of the Company and/or its successor)). Except as otherwise set forth
in Section 8 hereof, Shares 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; provided that
if the Executive’s employment is terminated without Cause or for Good Reason, then
the Executive shall fully vest upon the date of termination in any grant made under
such IPO bonus plan.
(d) LTIP Awards.
(i) Initial LTIP Award. The Company has granted the Executive an LTIP
award in the form of a restricted stock grant consisting of 34,483 shares of A-1
common stock (together with any other equity received as proceeds thereon, “Shares”)
of the Company (the “Initial LTIP Award”) and the Executive shall be entitled to
dividends on the Initial LTIP Award from June 4, 2008, which dividends shall vest
and be paid at such time as the Shares underlying the Initial
| [***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. | ||
LTIP Award vest and the certificates are delivered as provided below. Except
as may otherwise be provided in Section 10 of this Agreement, the Initial LTIP
Award shall vest at the earlier of (x) a Change of Control or (y) in three equal
annual installments, on each of the first three anniversaries of June 4, 2008, in
both cases subject to the Executive’s continued employment with the Company through
each applicable vesting date; provided that certificates for any vested portion of
the Initial LTIP Award shall be delivered to the Executive on the earlier of
immediately prior to the Change of Control or upon the third anniversary of the
Effective Date. It is the intent of the parties that the vesting of the Shares
described in this paragraph shall constitute a transfer of property within the
meaning of Section 83 of the Code.
(ii) Cash LTIP Award. In addition to any other compensation granted or
paid hereunder, with respect to the Company’s 2009 fiscal year, the Executive shall
be entitled to receive a long-term incentive award, with a target value of no less
than $1,200,000 (the “2009 LTIP Award”) (and which shall be granted at no less than
target if the applicable performance targets have been met). Subject to the
Executive’s achievement of certain performance goals already established by the
Committee in consultation with the Executive, the 2009 LTIP Award shall be granted
to the Executive within the first 75 days of the year immediately following the end
of the applicable fiscal year to which such performance goals relate (the
“Performance Year”). Except as may otherwise be provided in Section 10 of this
Agreement, (i) any such granted 2009 LTIP Award shall vest in three equal annual
installments, on each of June 4, 2010, June 4, 2011 and June 4, 2012, subject to the
Executive’s continued employment with the Company through each applicable vesting
date and (ii) any vested portion of such 2009 LTIP Award shall be delivered to the
Executive, 100% in cash, on June 4, 2012. It is intent of the parties that there
shall be no transfer of property (within the meaning of Section 83 of the Code) with
respect to the 2009 LTIP Award prior to the payment date described in this Section
4.
(iii) Change of Control. In all events, the 2009 LTIP Award shall vest
in full upon a Change of Control and if such Change of Control constitutes a “change
in control event” within the meaning of Section 409A of the Code, shall be paid to
the Executive upon such Change of Control.
(iv) Termination of Employment. Except as may otherwise be provided in
Section 10 of this Agreement, any unvested LTIP award shall be forfeited upon
termination of the Executive’s employment. Any portion of the Initial LTIP Award or
the 2009 LTIP Award that has become vested shall be non-forfeitable.
5. Employee Benefits.
(a) General. In addition to the compensation described in Section 4, during the
Employment Term, the Executive shall be eligible to participate in the employee benefit plans,
programs and arrangements (including any equity plans and programs), and to receive
perquisites, provided from time to time to similarly situated executives of the Company and
its Subsidiaries generally on a basis no less favorable to the Executive than to other senior
executive of the Company or its Subsidiaries who participates in such plans, programs, arrangements
or benefits (not taking into account, for purposes of the foregoing, any sign-on or initial awards
made to other executives) generally.
(b) Club Membership. The Company has purchased a corporate membership in a club
designated by the Executive, which shall be owned by the Company, and the Executive shall be
permitted full use of such membership during the Employment Term; provided that in no event shall
the cost of such membership to the Company exceed $175,000 for the purchase amount/initiation fee
and $15,000 for the annual dues during the Employment Term for such club (as such amount may be
increased from time to time in the ordinary course by such club). Upon cancellation of such
membership, the Company shall be entitled to any reimbursements or refunds of any such purchase
amount/initiation fee or any such annual dues as provided by such club, which the Executive
represented as of June 4, 2008, with respect to the purchase amount/initiation fee, equaled 80
percent of the purchase amount/initiation fee.
(c) Car Allowance. During the Employment Term, the Company shall pay the Executive a
monthly car allowance in the amount of $1,000.
6. Expenses. The Company shall pay or reimburse the Executive for reasonable 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. The
Company shall pay the Executive’s legal counsel directly for the reasonable fees and expenses
incurred by the Executive in connection with the review, negotiation and drafting of this Agreement
and any other related documentation, subject to a cap of $25,000.
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; provided that in all
events he shall be entitled to no less than 4 weeks vacation per calendar year, pro-rated for any
partial year. 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; Stockholders Agreement.
(a) In connection with the Executive’s commencement of employment under the Prior Agreement,
the Executive invested cash in the amount of $2,000,000 in Shares, at a purchase price of $34.80
per share (such investment, the “Investment”), pursuant to the terms of a subscription agreement
between the Company and the Executive attached hereto as Exhibit D, and Executive
acknowledges that, except as otherwise provided in this Section 8, such Shares are subject to the
terms and conditions of the Stockholders Agreement.
(b) Put Rights. Notwithstanding anything to the contrary in the Stockholders
Agreement, for the Investment and any shares granted to the Executive as part of the Initial LTIP
Award and the Special Restricted Shares, upon termination of the Executive’s employment with
the Company or any of its Subsidiaries (other than a termination by the Company for Cause or a
resignation by the Executive without Good Reason other than upon death or Disability) prior to an
IPO or a Change of Control, the Executive shall have the right to sell such shares to the Company
based on the Fair Market Value (as defined below) of such equity at any time during the six-month
period following the six-month anniversary of his termination of employment (provided that if the
Executive’s employment is terminated prior to the delivery of the shares for the Initial LTIP Award
under Section 4(d)(i), this right to sell shall apply whether or not the shares have been
delivered).
(c) Call Rights. Notwithstanding anything to the contrary in the Stockholders
Agreement or any other agreement, upon a termination of the Executive’s employment with the Company
or any of its Subsidiaries for any reason prior to an IPO or a Change of Control, the Company will
have the right to purchase (a “Call Right”) any Shares held by the Executive (whether
pursuant to the Investment, the Initial LTIP Award, upon the exercise of any stock option or
otherwise) at Fair Market Value as of the date the Company exercises its Call Right (except in the
event of a termination by the Company for Cause, in which case the Call Right will be at the lower
of the original cost of such Shares (which shall, for the avoidance of doubt, be the exercise price
of any stock option and for any Initial LTIP Award shall be the Fair Market Value on the applicable
vesting date) or Fair Market Value as of the date the Company exercises such Call Right). The Call
Right may be exercised at any time following the later of six months following (1) the Executive’s
receipt of any Shares, including pursuant to the exercise of stock options, including the Initial
Grant, or otherwise pursuant to the grant of compensatory awards, and (2) the termination of the
Executive’s employment. “Fair Market Value” shall be determined from time to time (but no less
frequently than quarterly) by the Board in good faith and shall in any event be determined
consistently with how “fair market value” is determined with respect to shares of Company stock
held by existing shareholders, including members of the Board, and how the exercise price for the
Initial Grant was determined (it being understood that no discount shall be taken due to lack of
marketability). In determining Fair Market Value, the Board will consider (among other factors it
deems appropriate) the valuation prepared by Blackstone in the ordinary course of business for
reporting to its advisory board and investors, which Blackstone will provide to the Board.
Notwithstanding the foregoing, in the event that either (i) within six months following a
termination of the Executive’s employment by the Company without Cause or by the Executive for Good
Reason or upon his death or Disability an IPO or Change of Control occurs or (ii) the Executive’s
employment is terminated by the Company without Cause or by the Executive for Good Reason or upon
his death or Disability after a definitive agreement is entered into which will result in a Change
of Control (provided that such agreement actually results in a Change of Control), for purposes of
the Call Right, Fair Market Value shall equal the consideration paid per Share pursuant to such
transaction.
(d) Tag-Along and Drag-Along Rights. Shares owned by the Executive shall be subject
to the applicable tag-along and drag-along provisions of the Stockholders Agreement, provided that
the applicable thresholds shall be reduced from 50% to 25%.
(e) Offset. Notwithstanding anything in this Agreement or the Stockholders Agreement
to the contrary, if the Executive (or his estate) has received a Transaction Bonus or a Retention
Payment then the Executive agrees that immediately upon receipt by the Executive (or
the Executive’s estate) of any cash or liquid securities from the disposition of the
Executive’s Shares (other than, (i) a disposition solely to pay taxes while the Shares are not
publicly traded or (ii) a disposition of the shares purchased by the Executive pursuant to the
Investment or any of the shares respecting the Initial LTIP Award or the Special Restricted
Shares), whether by reason of exercise by the Executive of the Executive’s Put Right, the exercise
by the Company of the Company’s Call Right, a Change of Control, an IPO or otherwise, the Executive
(or the Executive’s estate) shall pay to the Company or the Company’s stockholders, as directed by
the Board of Directors, the after-tax value of the cash or liquid securities so received by the
Executive (or his estate); provided that this payment obligation shall not exceed 50 percent of the
after-tax value of any Transaction Bonus and/or Retention Payment previously paid to the Executive
(or his estate).
(f) Effect on Stockholders Agreement. This Section 8 shall be deemed an amendment to
the Stockholders Agreement for all purposes under the Stockholders Agreement. By executing this
Agreement, the Executive agrees to be bound by the terms of the Stockholders Agreement and the
accepts the rights and obligations set forth therein, and each of Blackstone and the Company agree
that this Section 8 is effective as a joinder to the Stockholders Agreement for all purposes
thereunder (including with respect to Section 2.03 therein). In addition, if the Executive is
forced to withdraw from the Stockholders Agreement on or following a Change of Control, the
provisions of this Section 8 shall remain in effect with respect to the Executive’s equity
interests in the Company.
9. Termination.
(a) Termination of Employment by the Company. The Executive’s employment hereunder
may be terminated by the Company (or by the Board in the case of a termination with Cause) for any
reason or no reason (including with or without Cause or notification by the Company at any time
during the Employment Term pursuant to Section 2 that the Company 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 Board terminates the Executive’s employment
with Cause, all of the Executive’s Option Rights, whether or not vested, will be immediately
forfeited as of the date of termination and any unvested Restricted Shares shall be immediately
forfeited as of the date of termination.
(b) Termination of Employment by the Executive. The Executive may 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 (other than upon death or
Disability), (i) any unvested portions of the Initial Grant will be immediately forfeited and (ii)
all of the Executive’s vested Option Rights, if any, shall remain exercisable in accordance with
their terms, but in all events for at least 90 days following the date of termination.
(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) Resignation from All Positions. Notwithstanding any other provision of this
Agreement to the contrary, upon the termination of the Executive’s employment for any reason,
unless otherwise requested by the Board, the Executive shall immediately resign from all positions
that he holds with the Company, 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 (which shall, for all
purposes of this Agreement, including Exhibits A, B and C, and any other related definitive
document, include a termination of the Executive’s employment upon conclusion of the Employment
Term after the Company’s giving the Executive a notice of non-renewal of the Employment Term), by
reason of the Executive’s death or Disability, or the Executive terminates his employment for Good
Reason, subject to (i) the Executive’s execution and non-revocation of a release of claims against
the Company within 60 days following the date of the Executive’s termination of employment, in the
form attached hereto as Exhibit E, (ii) the terms of Section 14 and (iii) the Executive’s
continued compliance with the covenants of in Sections 12 and 13 (collectively, the “Restrictive
Covenants”) as set forth in Section 10(j), the Company shall pay to the Executive such payments and
make available to the Executive such benefits and entitlements as are described in this Section 10.
In addition, upon any termination of employment, the Executive shall be entitled to the payments,
benefits and entitlements as are described in Section 10(i).
(a) Cash Severance. Except in the event of a termination due to death or Disability,
the Executive will be entitled to receive an amount equal to the sum of: (i) one (1) times the
Executive’s Base Salary and (ii) one (1) times the Executive’s Target Bonus Amount for the year of
the Executive’s termination of employment (the sum of (i) and (ii), the “Termination Payments”),
such amount to be payable in equal installments over the one-year period following the Executive’s
termination of employment (the “Payment Period”) in accordance with the Company’s regular payroll
schedule as of the date hereof, but in all events no less frequently than monthly with all payments
paid to the Executive by the first anniversary of the termination date (except in the event where
payments need to be delayed in order to comply with Section 409A of the Code). Notwithstanding the
foregoing, if such termination occurs upon or during the two years after a Change of Control
(provided that such Change of Control constitutes a “change in control event” within the meaning of
Section 409A of the Code), subject to clauses (i), (ii) and (iii) of the lead-in paragraph of this
Section 10, the Termination Payments will be paid to the Executive in a lump-sum within 30 days
following the date of termination;
(b) Bonus Entitlement. Solely if 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 an amount equal to the product of (i) the bonus that would have been paid to
the Executive had the Executive remained employed through the date on which bonuses
are paid to senior executives of the Company generally based upon the achievement of the
applicable performance goals (and determined based on the exercise of negative discretion no less
favorable to the Executive than that exercised with respect to active senior executives of the
Company generally and, if the payment is not subject to Section 162(m) as of the date of
termination, as if the Executive had achieved any subjective performance targets at 100%) and (ii)
a fraction, the numerator of which is the number of days which have elapsed from the first day of
the fiscal year in which the date of termination occurs through the date of termination and the
denominator of which is 365 (such amount, if any, the “Pro-Rata Bonus”), which Pro-Rata Bonus shall
be paid within the first 75 days of the year immediately following the end of the year to which
such Pro-Rata Bonus relates (unless the Executive has deferred receipt of the applicable bonus).
(c) Initial LTIP Award and Transaction Bonus and Retention Payment. To the extent
then unvested and unpaid, the Executive’s Initial LTIP Award shall vest on the date of termination
but shall be paid at such time as such LTIP Award would otherwise have been paid to the Executive
had the Executive remained employed with the Company. In addition, to the extent then unpaid, the
Executive shall remain entitled to the Transaction Bonus as if he had remained employed with the
Company indefinitely, with such Transaction Bonus payable at such time(s) as set forth in Section
4(b)(ii) hereof and the Retention Payment shall vest on the date of termination and be paid within
30 days following the date of termination.
(d) Equity Compensation. To the extent not previously vested, the portion of any
outstanding equity, other than the Initial LTIP Award and the Special Restricted Shares, that vests
solely based on the Executive’s fulfillment of time and/or service conditions that would have
vested if the Executive had remained employed through the first anniversary of the date of
termination shall vest on the date of termination and, all vested options shall remain exercisable
until the earlier of the expiration of the original term or the first anniversary of the date of
termination; provided that if the Executive’s employment is terminated without Cause or for Good
Reason (i) after a definitive agreement is entered into which will result in a Change of Control
(provided such agreement results in a Change of Control) or (ii) within six months prior to a
Change of Control, any such equity shall be treated as if it had fully vested as of the date of the
Change of Control. In addition, the Special Restricted Shares shall fully vest as of the date of
termination.
(e) Welfare Benefits. During the Payment Period, the Company shall maintain in full
force and effect for the continued benefit of the Executive and his eligible dependents all health
and life insurance 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 (the “Welfare Benefits”). The 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.
(f) Relocation. If the Executive’s employment is terminated without Cause or for Good
Reason on or prior to June 4, 2011, the Executive will be entitled to relocation, at his choice, to
either Arizona or Utah on the same terms as he was relocated to Dallas.
(g) Section 409A of the Code; Specified Employee. Notwithstanding the preceding
provisions of this Section 10, in the event that the Executive is a “specified employee” (within
the meaning of Section 409A of the Code) on the date of termination of Executive’s employment with
the Company and the Termination Payments or any other payment which constitutes a “deferral of
compensation” within the meaning of Section 409A of the Code to be paid within the first six months
following such date (the “Initial Payment Period”) exceed the amount referenced in Treas. Regs.
Section 1.409A-1(b)(9)(iii)(A) (the “Limit”) and do not otherwise qualify under the short-term
deferral exemption, then (i) any portion of the Termination Payments or such other payment that is
payable during the Initial Payment Period that does not exceed the Limit or can be paid within the
short-term deferral exemption shall be paid at the times set forth in Section 10(a), (ii) any
portion of the Termination Payments or such other payment that exceeds the Limit and cannot be paid
within the short-term deferral exemption (and would have been payable during the Initial Payment
Period but for the Limit) shall be paid, with Interest, on the first business day of the first
calendar month that begins after the six-month anniversary of Executive’s “separation from service”
(within the meaning of Section 409A of the Code) and (iii) any portion of the Termination Payments
or such other payment that is payable after the Initial Payment Period shall be paid at the times
set forth in Section 10(a), respectively. For purposes of this paragraph, “Interest” shall mean
interest at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code, from the
date on which payment would otherwise have been made but for any required delay through the date of
payment. Notwithstanding the foregoing, 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.
(h) 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.
(i) Other/Vested Benefits. In the case of any termination, the Executive (or his
estate) shall be entitled to (i) any additional payments, benefits or entitlements to which he is
entitled in accordance with the applicable terms of any applicable plan, policy, program,
arrangement or other agreement of the Company or any Subsidiary or affiliate or, if applicable,
pursuant to Section 8, Section 11 and Section 20 hereof, (ii) payment of any amounts which are
vested or have been earned or are due and remain unpaid, including, without limitation, base salary
through the date of termination, any unreimbursed business expenses, any bonus payment for any
performance period which has ended prior to the date of termination for which the Executive has not
been paid, any vested portion of the Initial LTIP Award, any vested portion of the Special
Restricted Shares or any vested portion of the 2009 LTIP Award (with the 2009 LTIP Award payable at
such times as such LTIP Award would otherwise have been paid had he remained employed by the
Company) and any vested Retention Payment, and (iii) any rights the Executive has a shareholder in
the Company or pursuant to this Agreement with respect to the Investment, the shares payable in
connection with the Initial LTIP Award, the Special Restricted Shares and any other equity held by
the Executive.
(j) Return of Payments/Clawback. Not in any way in limitation of any right or remedy
otherwise available to the Company, if the Executive does not comply with any of the Restrictive
Covenants (subject to the Company providing the Executive with written notice of any such
non-compliance), (i) the Termination Payments, the Pro-Rata Bonus and the Welfare Benefits (but for
the avoidance of doubt excluding any LTIP Award or equity awards except in connection with a
termination for Cause as provided in this Agreement and Exhibit A) then or thereafter due
from the Company to the Executive shall be terminated immediately, (ii) the Company’s obligation to
pay or provide and the Executive’s right to receive such payments or benefits shall terminate and
be of no further force or effect and (iii) the Executive shall be required to pay back to the
Company any Termination Payments or amounts in respect of the Pro-Rata Bonus previously paid to
him, in each case without limiting or affecting the Executive’s obligations under the Restrictive
Covenants or the Company’s other rights and remedies available at law or equity. Notwithstanding
anything to the contrary in this Agreement or otherwise, there shall be no forfeiture, offset or
clawback with respect to the Initial LTIP Award, the 2009 LTIP Award, the Initial Grant or any
other equity awards for breach of any restrictive covenant except in connection with a termination
for Cause as provided in this Agreement and Exhibit A.
(k) 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 and, except with respect to the Welfare Benefits or as provided for in Sections 8(e) and
10(j) above, such amounts shall not be reduced whether or not the Executive obtains other
employment.
11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any Payment would be subject to the Excise Tax, then the
Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount
such that, after payment by the Executive of all taxes (and any interest or penalties imposed with
respect to such taxes), including, without limitation, any income and employment taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, but excluding any income taxes and penalties imposed pursuant to Section 409A of the Code,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 11(a), if it shall be
determined that the Executive is entitled to the Gross-Up Payment, but that the Parachute Value of
all Payments does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall be made
to the Executive and the amounts payable under this Agreement shall be reduced so that the
Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of
the amounts payable hereunder, if applicable, shall be made by reducing the payments and benefits
under the following sections in the following order: (i) Section 10(a), (ii) Section 10(b), (iii)
Section 10(c), (iv) any cash payments under Section 10(i), (v) any non-cash amounts under Section
10(i) and (vi) Section 10(d). For purposes of reducing the Payments to the Safe Harbor Amount,
only amounts payable under this Agreement (and no other Payments) shall be reduced. If the
reduction of the amount payable under this Agreement would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under the Agreement
shall be reduced
pursuant to this Section 11(a). The Company’s obligation to make Gross-Up Payments under this
Section 11 shall not be conditioned upon the Executive’s termination of employment.
(b) Subject to the provisions of Section 11(c), all determinations required to be made under
this Section 11, including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm as may be designated by the
Company and acceptable to the Executive (which approval shall not be unreasonably withheld by the
Executive) (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any
determination by the Accounting Firm shall be binding upon the Company and the Executive (absent
manifest error). As a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been made (the
“Underpayment”), consistent with the calculations required to be made hereunder. In the event the
Company exhausts its remedies pursuant to Section 11(c) (or decides not to contest a claim) and the
Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable, but no later than 10 business days after
the Executive is informed in writing of such claim. The Executive shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period following the date on which the
Executive gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest
such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest,
and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of this Section
11(c), the Company shall control all proceedings taken in connection with such contest, and, at its
sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the applicable taxing authority in respect of such claim and may, at its sole
discretion, either pay the tax claimed to the appropriate taxing authority on behalf of the
Executive and direct the Executive to xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that, if the Company pays such
claim and directs the Executive to xxx for a refund, the Company shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties) imposed with respect to such payment or with respect to any imputed income in connection
with such payment; and provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues with respect to which
the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of a Gross-Up Payment or payment by the Company of
an amount on the Executive’s behalf pursuant to Section 11(c), the Executive becomes entitled to
receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 11(c), if applicable) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable thereto). If, after
payment by the Company of an amount on the Executive’s behalf pursuant to Section 11(c), a
determination is made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination, then the amount of such
payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
(e) Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the
Company to the Executive within five (5) days of the receipt of the Accounting Firm’s
determination; provided, however, that the Gross-Up Payment shall in all events be
paid no later than the end of the Executive’s taxable year next following the Executive’s taxable
year in which the Excise Tax (and any income or other related taxes or interest or penalties
thereon) on a Payment are remitted to the Internal Revenue Service or any other applicable taxing
authority; or, in the case of amounts relating to a claim described in Section 11(c) that does not
result in the remittance of any federal, state, local and foreign income, excise, social security
and other taxes, the calendar year in which the claim is finally settled or otherwise resolved.
Notwithstanding any other provision of this Section 11, the Company may, in its sole discretion,
withhold and pay over to the Internal Revenue Service or any other applicable taxing
authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.
(f) Definitions. The following terms shall have the following meanings for purposes
of this Section 11.
“Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code or other similar
tax (other than Section 409A of the Code) which may hereafter be imposed, together with any
interest or penalties imposed with respect to such excise tax.
“Parachute Value” of a Payment shall mean the present value as of the date of the change of
control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a
“parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm for purposes of
determining whether and to what extent the Excise Tax will apply to such Payment.
A “Payment” shall mean any payment, benefit, entitlement or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the
Executive, whether paid or payable pursuant to this Agreement or otherwise (including, without
limitation, any payment, benefit, entitlement or distribution paid or provided by the person or
entity effecting the change in control).
The “Safe Harbor Amount” means 2.99 times the Executive’s “base amount,” within the meaning of
Section 280G(b)(3) of the Code.
12. Confidentiality; Return of Property.
(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 (x) any such Confidential Information
shall have become, through no fault of the Executive, generally known to the public or within the
relevant trade or industry 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 or, (y) the Executive brings a
claim or action to enforce any of his rights with respect to any performance-based
compensation, including, without limitation, any annual bonus or the 2009 LTIP Award (provided such
disclosure is only to the extent reasonable necessary with respect to enforcement of such right and
the Executive takes appropriate steps to have such Confidential Information entered into any
proceeding under seal), provided that in the case of clause (y), the Executive has provided to the
Company, unless prohibited by law or regulation, a copy of the documents seeking disclosure of such
information and given 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, except to the extent the Executive is permitted to retain such
information or property as set forth in Section 12(b). 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 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.
Notwithstanding the foregoing, the Executive shall be permitted to retain his personal papers
(provided that such papers do not contain any Confidential Information related to the Company), any
information relating to his compensation, other entitlements or obligations, any information he
reasonably believes is necessary for tax purposes and his personal rolodex.
(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 (except as otherwise permitted in Section 12(a)).
13. Covenant Not to Compete; Covenant Not to Solicit. For a period commencing on the
Effective Date and for a period ending one (1) year after the termination of the Executive’s
employment with the Company for any reason or no reason (the “Restricted Period”), including
termination for Cause or the Executive’s voluntary resignation without Good Reason, the Executive
shall not, directly or indirectly, individually or on behalf of any other person or entity:
(a) engage in any business which directly competes with the business in which the Company or
any of the Company’s Subsidiaries or affiliates (collectively, the “Company Group”) were engaged at
the time of breach or the date of termination (or had taken substantial steps to so engage in),
whichever is earlier.
(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 and, notwithstanding
the foregoing, it shall not be a violation of this Section 13 for the Executive (i) to join a
division, business line, subsidiary or affiliate of a commercial enterprise with multiple divisions
or business lines if such division, business line, subsidiary or affiliate is not competitive with
the businesses of the Company Group, provided that the Executive performs services solely for such
non-competitive division, business line, subsidiary or affiliate, and performs no functions on
behalf of (and has no involvement with or direct or indirect responsibilities with respect to)
businesses competitive with the businesses of the Company Group, with competitiveness determined
for these purposes as set forth in Section 13(a) or (ii) to provide services to a private equity
firm or hedge fund, in either case, that holds investments in a business which directly competes
with the business in which the Company Group is engaged so long as the Executive has no involvement
with or direct or indirect responsibilities with respect to (A) the management, operations or
supervision of such investments or (B) advising such firm with respect to such investments. In
addition, it shall not be a violation of this Section 13 for the Executive to remain as a board
member of the entities for which he was serving as a board member on the date of his termination of
employment, provided such membership is consistent with Section 3(b) hereof.
(d) Upon a Change of Control, the definition of the Company Group and their respective
employees and independent contractors for the purpose of this Section 13 shall refer only to the
Company, its Subsidiaries and its affiliates (and the businesses in which they were engaged) as of
immediately prior to such Change of Control.
(e) 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 and 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.
(f) Except as otherwise set forth in Section 12 and this Section 13, there shall be no other
restrictions on the Executive’s rights to compete, solicit or hire or use or disclose confidential
information following the Executive’s termination of employment other than those under applicable
law.
14. Compliance with Section 409A of the Code.
(a) The Agreement is intended to comply with the requirements of Section 409A of the Code or
an exemption. Notwithstanding anything in the Agreement to the contrary, distributions upon
termination of employment may only be made upon a “separation from service” as determined under
Section 409A. Each payment under this Agreement, including each installment of the Termination
Payment, shall be treated as a separate payment for purposes of Section 409A. In no event may the
Executive, directly or indirectly, designate the calendar year of any payment to be made under this
Agreement. In the event the parties determine that the terms of this Agreement do not comply with
Section 409A, they will negotiate reasonably and in good faith to amend the terms of this Agreement
such that it complies (in a manner that attempts to minimize the economic impact of such amendment
on the Executive and the Company) within the time period permitted by the applicable Department of
Treasury Regulations.
(b) All reimbursements and in-kind benefits provided under this Agreement shall be made or
provided in accordance with the requirements of Section 409A of the Code. In order to comply with
Section 409A of the Code, in no event shall the payments by the Company under Sections 5(b) or 6 be
made later than the end of the calendar year next following the calendar year in which such fees
and expenses were incurred, provided, that the Executive shall have submitted an invoice for such
fees and expenses at least 10 days before the end of the calendar year next following the calendar
year in which such fees and expenses were incurred. The amount of any such fees and expenses that
the Company is obligated to pay in any given calendar year shall not affect the fees and expenses
that the Company is obligated to pay in any other calendar year, and the Executive’s right to have
the Company pay such fees and expenses may not be liquidated or exchanged for any other benefit.
(c) The Company and the Executive shall take all steps necessary (including with regard to any
post-termination services the Executive provides) to ensure that any termination of employment
described in this Agreement constitutes a “separation from service” within the meaning of Section
409A of the Code, and notwithstanding anything contained in this Agreement to the contrary, the
date on which such “separation from service” takes place shall be the date of the termination of
the Executive’s employment.
15. Prior Agreement. As of the Effective Date, this Agreement, including its
Exhibits, 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 Prior
Agreement and any term sheets relating thereto. 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. In the event of any conflict between any
provision of this Agreement, including Exhibits A, B or C, and any other provision of any
plan, policy, program, arrangement or other agreement of the Company or any Subsidiary or any
affiliate of the Company, this Agreement (or such Exhibit) shall control.
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 applicable law or government regulation or ruling. In addition, in the
event that the Shares are not listed for trading on an established securities exchange on the date
that an applicable portion of the Initial LTIP Award or any restricted share grant vests, then (i)
the Company shall, at the request of the Executive, deduct or withhold Shares having a Fair Market
Value equal to the minimum amount required to be withheld to satisfy any federal, state, local and
foreign taxes of any kind (including, but not limited to, the Executive’s FICA and SDI obligations)
which the Company, in its sole discretion, deems necessary to comply with the Code and/or any other
applicable law, rule or regulation with respect to such portion of the Initial LTIP Award or
restricted share grant and remit the cash value of such Shares to the appropriate tax authorities
and (ii) notwithstanding anything to the contrary in the Stockholders Agreement, the Executive
shall be permitted to sell such number of Shares to the Company having a fair market value
(determined at the time of sale) equal to the additional taxes due from the Executive on the
vesting or delivery, as applicable, of such Shares (after taking into account the withholding in
clause (i)).
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 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. 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 whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the
“Company” for the purposes of this Agreement except as otherwise provided in Section 13(d)), 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. In the event of the Executive’s death while any payment, benefit or
entitlement is due to the Executive under this Agreement, such payment, benefit or entitlement
shall be paid or provided to the Executive’s designated beneficiary (or if the Executive has not
designated a beneficiary, to his estate).
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 (5)
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three (3) 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, heirs or other successors) to the fullest extent permitted (including a payment of
expenses in advance of final disposition of a proceeding) by the Company’s certificate of
incorporation, or if greater, 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/or officers, against all costs, charges and expenses whatsoever incurred or
sustained by him or his legal representatives, heirs or other successors (including but not limited
to any judgment entered by a court of law or any costs, including reasonable attorneys’ fees, the
Executive incurs to enforce the terms of this Section 20) 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 or affiliate of the Company, or his serving
or having served any other enterprise as a director, officer or employee at the request of the
Company (including any acts or omissions which are alleged to have occurred in such service), and
to the extent the Company maintains such an insurance policy or policies, the Executive shall be
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 4(c)(iv) (but only with respect to
the last sentence of such clause), 8, 10, 11, 12, 13, 14, 15, 16, 20, 22, 23 and 25 and
Exhibits A, B, C and D will survive any termination or expiration of this Agreement or the
termination of the Executive’s employment for any reason whatsoever.
23. Arbitration of Disputes.
(a) Except as provided in Section 13 of this Agreement, any and all controversies, disputes or
claims arising between the parties to this Agreement, including any purported controversies,
disputes or claims not arising under contract, that have not been resolved within twenty (20) days
after notice is given in writing of the controversy, dispute or claim may be submitted for
arbitration, at the election of either party, in accordance with the rules of the American
Arbitration Association in effect as of the date hereof. Arbitration shall take place at an
appointed time and place in Dallas, Texas. Each party hereto shall select one arbitrator, and the
two so designated shall select a third arbitrator. If either party shall fail to designate an
arbitrator within fifteen (15) calendar days after arbitration is requested, or if the two
arbitrators shall fail to select a third arbitrator within thirty (30) calendar days after
arbitration is requested, then such arbitrator shall be selected by the American Arbitration
Association, or any successor thereto, upon application of either party. The arbitration shall be
instead of any civil litigation; this means that the Executive and the Company are each waiving any
rights to a jury trial.
(b) Except as provided in Section 13 of this Agreement, arbitration under this provision shall
be the sole and exclusive forum and remedy for resolution of controversies, disputes and claims of
any kind or nature, whether or not presently known or anticipated, including any purported
controversies, disputes or claims not arising under contract, between the parties to this
Agreement, and no recourse shall be had to any other judicial or other forum for any such
resolution. The award of the arbitrators may grant any relief that a court of general jurisdiction
has authority to grant, including, without limitation, an award of damages and/or injunctive
relief. All costs and expenses of arbitration shall be borne by the Company. Any award of the
majority of arbitrators shall be binding and not subject to judicial appeal or review of the award,
including without limitation any proceedings under sections 9 and 10 of the Federal Arbitration
Act, 9 U.S.C. § 1 et seq., or any comparable provision for review of an arbitral award under any
comparable statute or law of any jurisdiction, all rights to which are hereby expressly waived by
the parties. The Executive and the Company knowingly and voluntarily agree to this arbitration
provision. Subject to the preceding sentence, the United States District Court for the District of
Texas and the courts of the State of Texas shall have sole and exclusive jurisdiction solely for
the purpose of entering judgment upon any award by the majority of arbitrators.
(c) Nothing herein shall bar the right of either party to this Agreement to seek and obtain
injunctive relief from a court of competent jurisdiction in accordance with Section 13 above.
24. 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 specifically referencing such provision being so modified, waived or
discharged (provided that in the case of any waiver or discharge such waiver or discharge shall
only need to be in a writing signed by the party against whom the waiver or discharge is being
enforced). 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. For the avoidance
of doubt, any reference to an “affiliate” of the Company or any Subsidiary shall not include any
investor in the Company or any entity in which such investor owns or holds an equity position
(other than the Company or any Subsidiary of the Company).
25. Defined Terms.
(a) “2009 LTIP Award” has the meaning specified in Section 4(d)(ii).
(b) “Accounting Firm” has the meaning specified in Section 11(b).
(c) “Agreement” has the meaning specified in the introductory paragraph herein.
(d) “Amendment Approval Date” means December 31, 2009; provided, however, if
the Company’s provision of documentation that is required to be provided to the Company’s
stockholders in connection with the approval of the Amendment or the Restricted Share Plan is
delayed beyond the time-frame previously communicated to the Company as a result of management’s
inability to finalize such documentation due to time constraints, the “Amendment Approval Date”
shall be the later of (i) December 31, 2009 and (ii) 60 days following the date on which such
documentation is provided to the Company’s stockholders.
(e) “Base Salary” has the meaning specified in Section 4(a).
(f) “Board” means the Board of Directors of the Company.
(g) “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 or
any successor plans or programs.
(h) “Call Right” has the meaning specified in Section 8(c).
(i) “Cause” means the occurrence of any of the following:
(i) the Executive engages in fraudulent activity, embezzlement or
misappropriation relating to the business of the Company or any of its affiliates or
Subsidiaries;
(ii) the Executive is convicted by a court of competent jurisdiction of, or
pleads guilty or nolo contendere to, any felony (other than a traffic violation) or
any crime involving moral turpitude;
(iii) the Executive commits a breach of the Restrictive Covenants, which breach
has not been remedied within 30 days of the delivery to 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;
(iv) the Executive’s willful and continued failure after written notice from
the Board to perform his material duties for the Company or its Subsidiaries (other
than on account of approved leave of absence and/or Disability); or
(v) the Executive engages in (x) gross neglect or (y) willful misconduct, in
both cases relating to the Executive’s performance of his duties for the Company.
The cessation of the Executive’s employment shall not be deemed to be for Cause
pursuant to clauses (i), (iii), (iv) or (v) hereof unless and until the Board has
provided the Executive with written notice of the acts or omissions giving rise to
Cause and an opportunity to be heard before the full Board (represented by counsel),
and after such hearing there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of no less than 51% of the entire
membership of the Board (excluding the Executive) at a meeting of the Board called
and held for such purpose, finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in clauses (i), (iii), (iv) or (v)
above.
(j) “Code” means the Internal Revenue Code of 1986, as amended.
(k) “Change of Control” has the meaning specified in Section 4(c).
(l) “Committee” means the Executive Compensation Committee of the Board or any successor
thereto.
(m) “Company” has the meaning specified in the introductory paragraph of this Agreement.
(n) “Company Affiliates” has the meaning specified in paragraph 1 of Exhibit E attached
hereto.
(o) “Company Group” has the meaning specified in Section 13(a) and Section 13(d).
(p) “Confidential Information” has the meaning specified in Section 12(a).
(q) “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 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.
(r) “Effective Date” has the meaning specified in the introductory paragraph of this
Agreement.
(s) “Employment Term” has the meaning specified in Section 2.
(t) “ESOP” means the Company’s Amended and Restated Employee Stock Ownership Plan.
(u) “Excise Tax” has the meaning specified in Section 11(f).
(v) “Executive” has the meaning specified in the introductory paragraph of this Agreement.
(w) “Fair Market Value” has the meaning specified in Section 8(c).
(x) “Good Reason” means the occurrence, without the Executive’s written consent, of any the
following events:
(i) a material diminution in the Executive’s authorities, titles, reporting
responsibilities or offices (excluding for this purpose (x) an isolated,
insubstantial and inadvertent action not taken in bad faith which is promptly
remedied after notice by the Executive to the Company or (y) any diminution in the
Executive’s authorities, titles, reporting responsibilities or offices resulting
from consummation of a transaction or transactions contemplated by an [***] or
National Carrier Marketing Distribution Agreement; provided that in all events the
Executive shall retain the right to resign for Good Reason in connection with such
transactions as provided in clauses (iv), (v), (vi) or (vii) of this Good Reason
definition);
(ii) a material decrease in Executive’s Base Salary or Target Bonus Amount,
which for this purpose shall mean one or more reductions that, individually or in
the aggregate, exceed 5% of the Executive’s Target Bonus
| [***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. | ||
Amount or highest Base Salary (excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith which is promptly
remedied after notice by the Executive to the Company);
(iii) a material reduction in Executive’s participation in the Company’s
benefit plans and policies to a level materially less favorable to Executive unless
such reduction applies to a majority of senior level executives;
(iv) the relocation of the Executive’s primary place of employment to a
location 50 or more miles from the current headquarters;
(v) any change in reporting structure so that the Executive reports to someone
other than the Board (or, following a Change of Control or reorganization, the board
of directors of any successor entity or the ultimate parent entity);
(vi) failure to appoint or elect (or reelect) the Executive as a member of the
Board and as Chief Executive Officer of the Company or removal of the Executive from
any such position;
(vii) following a Change of Control, failure of the Executive to be a member of
the board of directors and chief executive officer of the successor entity
(including the ultimate parent of such entity);
(viii) failure of the Company’s stockholders to approve the Amendment or adopt
the Restricted Share Plan by the Amendment Approval Date; or
(ix) any failure of the Company to obtain within 30 days following a
transaction the assumption in writing by any successor to all or substantially all
of the business or assets of the Company to perform this Agreement, except where
such assumption occurs by operation of law.
Notwithstanding the foregoing, the Executive shall only be entitled to provide a
notice of his intent to resign for Good Reason if he provides such notice within 120
days following the date he first learns of the event(s) giving rise to Good Reason
and shall only be entitled to resign for “Good Reason” thereafter if the Company
fails to cure such events within 30 days following such notice and if he terminates
his employment within two years following the event(s) on which the Good Reason
termination is based.
(y) “Gross-Up Payment” has the meaning specified in Section 11(a).
(z) [***]
(aa) [***]
(bb) [***]
| [***] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. | ||
(cc) “Incentive Programs” has the meaning specified in Section 4(c).
(dd) “Initial Employment Term” has the meaning specified in Section 2.
(ee) “Initial Grant” has the meaning set forth in Section 4(c).
(ff) “Initial LTIP Award” has the meaning set forth in Section 4(d)(i).
(gg) “Initial Payment Period” has the meaning specified in Section 10(g).
(hh) “Interest” has the meaning set forth in Section 10(g).
(ii) “Investment” has the meaning set forth in Section 8(a).
(jj) “IPO” has the meaning specified in the Stockholders Agreement.
(kk) “Limit” has the meaning set forth in Section 10(g).
(ll) “MOP” means the Company’s 2006 Management Option Plan as in effect as of the Effective
Date and as may be amended from time to time.
(mm) “National Carrier Marketing Distribution Agreement” means a Board-approved agreement
entered into by August 1, 2010 between the Company Group (or a member thereof) and a National Payor
pursuant to which insurance sales agents contracted with the Company Group are authorized by a
National Payor to sell individual health insurance products issued by the National Payor.
(nn) “National Carrier MDA Goal” means commencement of sales through the Company Group’s
contracted sales agent force of a National Payor’s health insurance products pursuant to a National
Carrier Marketing Distribution Agreement
(oo) “National Payor” means Aetna, Inc., CIGNA Corporation, Assurant Health Insurance,
Coventry Healthcare Inc., Humana Inc. or UnitedHealth Group, Inc. (and their affiliates or
subsidiaries and their respective successors and assigns).
(pp) “Option Rights” has the meaning specified in the MOP.
(qq) “Parachute Value” has the meaning specified in Section 11(f).
(rr) “Payment” has the meaning specified in Section 11(f).
(ss) “Payment Period” has the meaning specified in Section 10(a).
(tt) “Pro-Rata Bonus” has the meaning specified in Section 10(b).
(uu) “Regional Payor” means an organization that underwrites and issues health insurance on a
regional basis.
(vv) “Release” has the meaning specified in the introductory paragraph of Exhibit E attached
hereto.
(ww) “Renewal Term” has the meaning specified in Section 2.
(xx) “Restricted Period” has the meaning specified in Section 13.
(yy) “Restrictive Covenants” has the meaning specified in Section 10.
(zz) “Restricted Shares” shall mean a grant of restricted stock consisting of shares of A-1
common stock of the Company.
(aaa) “Revocation Date” has the meaning specified in paragraph 3 of Exhibit E attached hereto.
(bbb) “Safe Harbor Amount” has the meaning set forth in Section 11(f).
(ccc) “Shares” has the meaning set forth in Section 4(d)(i).
(ddd) “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.
(eee) “Subsidiary” or “Subsidiaries” 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; provided that such controlling interest shall be fifty percent (50%) or more for
purposes of Sections 1 and 25(h)(iv) of this Agreement.
(fff) “Successor” has the meaning specified in Section 17(a).
(ggg) “Target Bonus Amount” has the meaning specified in Section 4(b)(i).
(hhh) “Termination Payments” has the meaning specified in Section 10(a).
(iii) “Underpayment” has the meaning specified in Section 11(b).
(jjj) “Welfare Benefits” has the meaning specified in Section 10(e).
26. Counterparts. This Agreement may be executed in one or more counterparts,
including by facsimile signature, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
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.
| Xxxxxxx Xxxxxxxxxx | ||||
| HealthMarkets, Inc. |
||||
| By: | ||||
| Xxxxx Xxxxxxx | ||||
| Corporate Secretary | ||||
Solely with respect to Sections 4(c), 8 and 16 of this Agreement and Exhibit A
Accepted and Agreed to as of the day and
year first written above on behalf of the Blackstone
by Blackstone Management Associates IV L.L.C.
Accepted and Agreed to as of the day and
year first written above on behalf of the Blackstone
by Blackstone Management Associates IV L.L.C.
Title: Senior Managing Director |
Schedule 1
Performance Metrics for 2009 Bonus
| Senior Executive - Metrics | ||||||||||||
| ($ in thousands) | Target (1) | Stretch | Weight | |||||||||
Adjusted EBITDA |
$ | 122,789 | $ | 130,073 | 40% | (3) | ||||||
Health and Ancillary AV Submitted |
$ | 465,280 | $ | 511,807 | 20% | (2) | ||||||
MSE Deliverables |
14 | 14 | 20% | (4) | ||||||||
Form Insphere |
(5 | ) | (5 | ) | 20 | % | ||||||
| Notes: | ||
| (1) | Minimum established at 150%; scalable to stretch targets. | |
| (2) | Includes third party A/V (e.g., life, health, associations, etc.), and to be adjusted to reflect exit from Massachusetts and other affected states. | |
| (3) | Adjusted EBITDA to be determined consistent with past practices and to be based on being fully accrued for Senior Executive amounts. Adjusted EBITDA excludes all transaction amounts and awards, special Board directed programs and actions, Insphere formation and transformation expenses and related balance sheet adjustments. To be adjusted to reflect exit from Massachusetts and other affected states. Board has discretion over quality of earnings (e.g., Board may not give full credit to the DAC benefit). | |
| (4) | Attainment of audit reports from Schact Group and Internal Audit that conclude the Company is in substantial compliance with all MSE on or before 12/31/09. | |
| (5) | Formation of Insphere Insurance Solutions, Inc. and completion of the following implementation activities: | |
- Identification of organizational structure and key continuing executives;
- Substantial completion of agency licensing requirements;
- Substantial completion of agency force contracting with Insphere;
- Substantial development of technology platform; and
- Execution and initial implementation of a marketing agreement with one major life insurer.
Exhibit A
Form of Option Agreement
Exhibit B
Form of Restricted Share Agreement
Exhibit C
Form of Special Restricted Share Agreement
Exhibit D
Form of Subscription Agreement
Exhibit E
Form of Release
In consideration of the payments and promises contained in your Employment Agreement with
HealthMarkets, Inc. (the “Company”) dated as of September ___, 2009 (the “Employment Agreement”),
and in full compromise and settlement of any of your potential claims and causes of action relating
to or arising out of your employment relationship with the Company or the termination of that
relationship, and any and all other claims or causes of action that you have or may have against
the Company Affiliates (as defined below) up to the date of execution of this release, except to
the extent such claims or causes of action are not released by you in Paragraph 2 hereof (the
“Release”), you hereby:
1. knowingly and voluntarily agree to irrevocably and unconditionally waive and release the
Company and any other entity controlled by, controlling or under common control with the Company,
and their respective predecessors and successors and their respective directors, officers,
employees, representatives, attorneys, including all persons acting by, through, under or in
concert with any of them (collectively, the “Company Affiliates”), from any and all charges,
complaints, claims, liabilities, obligations, promises, sums of money, agreements, controversies,
damages, actions, lawsuits, rights, demands, sanctions, costs (including attorneys’ fees), losses,
debts and expenses of any nature whatsoever, existing on, or at any time prior to, the date hereof
in law, in equity or otherwise, which you, your successors, heirs or assigns had or have upon or by
reason of any fact, matter, cause, or thing whatsoever, and specifically including any matter that
may be based on the sole or contributory negligence (whether active, passive or gross) of any
Company Affiliate. This Release includes, but is not limited to, a release of all claims or causes
of action arising out of or relating to your employer-employee relationship with the Company or the
termination of that relationship, and any other claim, including, without limitation, alleged
breach of express or implied written or oral contract, alleged breach of employee handbook, alleged
wrongful discharge, and tort claims, or claims or causes of action arising under any federal,
state, or local law, including, but not limited to, the Age Discrimination in Employment Act, 29
U.S.C. § 621, et seq., the Reconstruction Era Civil Rights Act of 1866 and 1871, 42 U.S.C. §§ 1981
and 1983, the Civil Rights Act of 1964, Title VII, 42 U.S.C. §§ 2000(e) et seq., The Civil Rights
Act of 1991, 42 U.S.C. § 1981(a) et seq., the Equal Pay Act of 1963, 29 U.S.C. § 206(d) et seq.,
the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101 et seq. the Rehabilitation Act of
1973, 29 U.S.C. § 701 et seq., the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§
2101-2109, the Xxxxxxxx-Xxxxx Act of 2002, as amended, [state-specific employee-employer laws] and
any claim under any other statutes of the State of ___, or other jurisdictions, and the facts,
circumstances, allegations, and controversies relating or giving rise thereto that have accrued to
the date of execution of this Release;
2. agree that you will not commence, maintain, initiate, or prosecute, or cause, encourage,
assist, volunteer, advise or cooperate with any other person to commence, maintain, initiate or
prosecute, any action, lawsuit, proceeding, investigation, or claim before any court, legislative
body or committee, or administrative agency (whether state, federal or otherwise) against the
Company Affiliates relating to any claims, liabilities, obligations, promises, sums of money,
agreements, controversies, damages, actions, lawsuits, rights, demands, sanctions, costs
(including attorneys’ fees), losses, debts and expenses described in the foregoing Paragraph
1; provided, however, that, notwithstanding anything to the contrary in the
foregoing, nothing hereunder (including Paragraph 1 hereof) shall be deemed to affect, impair or
diminish in any respect (or deemed to be a release by you of any claims or an agreement not to xxx
or bring an action with respect to): (i) any vested rights as of the date of termination or
entitlement you may have under the ESOP; (ii) any other vested rights as of the date of termination
you may have under any plan or program in which you have participated in your capacity as an
employee and/or director of the Company or any other Company Affiliate; (iii) your right to seek to
collect unemployment benefits that you may be entitled to as a result of your employment with the
Company or your right to seek benefits under workers’ compensation insurance, if applicable; (iv)
your rights to enforce this Release and/or the Employment Agreement, including Exhibits A, B, C or
D, including but not limited to your right to bring a claim for breach of this Release or the
Employment Agreement, including Exhibits A, B, C or D; (v) any rights you may have under that
Section 8 (Investment; Stockholders Agreement), Section 11 (Certain Additional Payments by the
Company) or Section 20 (Indemnification) of the Employment Agreement; (vi) any rights to
indemnification and/or advancement of expenses that you have or may have under the terms of the
Company’s Amended and Restated Bylaws and/or the Company’s Certificate of Incorporation or any
rights you have pursuant to any applicable directors’ and officers’ liability insurance policies;
(vii) your rights as a shareholder of the Company; or (viii) your right to bring a claim under the
Age Discrimination in Employment Act to challenge the validity of this Release, to file a charge
under the civil rights statutes, or to otherwise participate in an investigation or proceeding
conducted by the Equal Employment Opportunity Commission or other investigative agency;
3. acknowledge that: (i) this entire Release is written in a manner calculated to be
understood by you; (ii) you have been advised to consult with an attorney before executing this
Release; (iii) you were given a period of at least twenty-one days within which to consider this
Release; and (iv) to the extent you execute this Release before the expiration of the
twenty-one-day period, you do so knowingly and voluntarily and only after consulting your attorney.
You shall have the right to cancel and revoke this Release during a period of seven days following
the date on which you execute it, and this Release shall not become effective, and no money will be
paid to you in respect of severance, until the day after the expiration of such seven-day period
(the “Revocation Date”). In order to revoke this Release, you shall deliver to the Company, prior
to the expiration of said seven-day period, a written notice of revocation. Upon such revocation,
this Release shall be null and void and of no further force or effect;
4. agree to make yourself reasonably available to the Company following the date of your
termination to assist the Company and its subsidiaries and affiliates and their respective
predecessors and successors, as may be requested by the Company at mutually convenient times and
places taking into account your other business and personal commitments, with respect to the
business of the Company and pending and future litigations, arbitrations, governmental
investigations or other dispute resolutions relating to or in connection with the Company with
respect to matters of which you have relevant knowledge. Notwithstanding the foregoing, you shall
not be required to cooperate if such cooperation is adverse to your legal interests. In addition,
the Company agrees to pay promptly any reasonable expenses incurred by you in connection with such
cooperation, including, without limitation, business class airfare, reasonable meals, reasonable
hotels and reasonable legal fees to the extent the Company and you
B-4
agree (the Company’s agreement not to be unreasonably withheld) separate representation is
warranted by the circumstances.
5. agree not to, either in writing or by any other medium, make any disparaging or derogatory
statement about the Company and its affiliates and subsidiaries and their respective predecessors
and successors or any of their respective officers, directors, employees, affiliates, subsidiaries,
successors, assigns or businesses, as the case may be; provided, however, that you may make such
statements as are necessary to comply with law and the foregoing shall not prohibit you from making
any truthful statements that are necessary to defend yourself in an arbitration or judicial
proceeding.
B-5
