Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this
“Agreement”) is made and entered into as of
October 29, 2007 (the “Effective Date”), by and
between HealthMarkets, Inc., a Delaware corporation
(“HealthMarkets” or the “Company”) and
David W. Fields (the “Executive”). Certain capitalized
terms used herein are defined in Section 24.
WHEREAS, the Company desires to
employ the Executive, and the Executive desires to be employed by
the Company;
WHEREAS, the Company and the
Executive desire to set forth in this Agreement the terms and
conditions of Executive’s employment with the Company;
and
NOW, THEREFORE, in consideration of
the premises and of the mutual covenants herein contained, it is
agreed as follows:
1. Employment .
Effective as of the Effective Date, the Company hereby agrees to
employ the Executive, and the Executive hereby agrees to be
employed by the Company, upon the terms and conditions set forth
herein. The employment relationship between the Company and the
Executive shall be governed by the general employment policies and
practices of the Company, including without limitation those
relating to the Company’s Code of Professional Conduct, the
treatment of confidential information and avoidance of conflicts;
provided , however , that when the terms of this
Agreement differ from or are in conflict with the Company’s
general employment policies or practices, the terms of this
Agreement shall control. The Executive shall serve as an officer
and/or an employee of any Subsidiary, as may be requested from time
to time by the Reporting Person (as such term is defined in Section
3(a) below) and without any additional compensation, unless
otherwise determined by the Reporting Person. In addition, the
Executive’s service as an officer and/or an employee of any
Subsidiary will be encompassed within any reference made in this
Agreement to employment by the Company. If the Executive serves as
an officer and/or an employee of any Subsidiary, any payment or
provision of benefits to the Executive by such Subsidiary shall
fulfill the Company’s obligation to make such payment or
provide such benefits pursuant to the terms of this
Agreement.
2. Term . Subject to
earlier termination of the Executive’s employment as provided
under Section 9, the Executive’s employment shall be for
an initial term commencing on the Effective Date (the
“Commencement Date”) and ending on the third
anniversary of the Effective Date (the “Initial Employment
Term”); provided , however , that at the end of
the Initial Employment Term and on each succeeding anniversary of
the Commencement Date, the employment of the Executive will be
automatically continued upon the terms and conditions set forth
herein for one additional year (each, a “Renewal
Term”), unless either party to this Agreement gives the other
party written notice (in accordance with Section 18) of such
party’s intention to terminate this Agreement and the
employment of the Executive at least ninety (90) days prior to
the end of such initial or extended term. For purposes of this
Agreement, the Initial
Employment Term and any Renewal Term shall collectively be referred
to as the “Employment Term.”
3. Position and Duties of
the Executive .
(a) The
Executive shall serve in the position set forth on
Exhibit A and shall report directly to the
position set forth on Exhibit A attached hereto
(the “Reporting Person”). The Executive shall have such
duties, responsibilities and authority commensurate with the
Executive’s position and such related duties and
responsibilities, as from time to time may be assigned to the
Executive by the Reporting Person. In addition, the Executive will
be subject to, and will act in substantial accordance with, all
reasonable lawful instructions and directions of the Board and all
applicable reasonable policies and rules thereof as are consistent
with the above position, duties, responsibilities and
authority.
(b) During
the Employment Term, the Executive shall, except as may from time
to time be otherwise agreed in writing by the Company and during
vacations (as set forth in Section 7 hereof) and authorized
leave, devote substantially all of his normal business working time
and his best efforts, full attention and energies to the business
of the Company, the performance of the Executive’s duties
hereunder and such other related duties and responsibilities as may
from time to time be reasonably prescribed by the Board or any
committee thereof, the Reporting Person or any committee or person
delegated by the Reporting Person, in each case, within the
framework of the Company’s policies and objectives.
(c) During
the Employment Term and provided that such activities do not either
(i) contravene the provisions of Section 3(a), 3(b), 12
or 13 hereof or (ii) materially interfere with the performance
of the Executive’s duties hereunder, the Executive may
continue to serve as a member of the governing board of the
governmental, educational, charitable or other community affairs
organizations set forth on Exhibit A attached
hereto. The Executive may retain all fees and other compensation
from any such service, and the Company shall not reduce his
compensation by the amount of such fees.
4. Compensation .
(a)
Base Salary . During the Employment Term, the Company shall
pay to the Executive a base salary of not less than the amount set
forth on Exhibit A attached hereto per annum
(the “Base Salary”). The Executive’s Base Salary
may be increased (but not decreased) from time to time by the
Committee in its sole discretion, payable at the times and in the
manner consistent with the Company’s general policies
regarding compensation of executive employees. Such Base Salary
shall be reviewed by the Board or an authorized committee of the
Board at least annually for purposes of evaluating an increase in
the Executive’s Base Salary.
(b)
Cash Incentive Compensation .
(i)
With respect to the Company’s fiscal year ending 2007, the
Executive will be eligible to receive an annual performance bonus
in the amount which represents a pro-rata portion of the
Executive’s Base Salary, set forth on
Exhibit A attached hereto, for each full
calendar day the Executive is employed by the Company during the
2007 fiscal year divided by 365. Subject to the
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Executive’s continued employment with the Company on the date
of payment, the Executive will be paid the annual performance bonus
pursuant to this Section 4(b)(i) on or about February 1,
2008.
(ii)
With respect to each fiscal year of the Company commencing with the
Company’s 2008 fiscal year, all or part of which is contained
in the Employment Term, the Executive will be eligible to
participate in the Company’s annual management incentive
program or arrangement approved by the Board (or any authorized
committee thereof) or any successor program or plan thereto or
thereunder on terms and conditions no less favorable to the
Executive than those available to similarly situated executives of
the Company, a target bonus opportunity of not less than the
percentage of the Base Salary set forth on
Exhibit A attached hereto (the “Target
Bonus Percentage”), and a maximum bonus opportunity of not
less than the percentage of the Base Salary set forth on
Exhibit A attached hereto (the “Annual
Bonus Percentage”). The Board (or any authorized committee
thereof) shall have the authority to establish performance metrics
and such other terms and conditions of the annual management
incentive program pursuant to which such bonuses may be
earned.
(c)
Equity Compensation . The Executive will be eligible to
participate in the Company’s MOP and any other incentive,
equity-based and deferred compensation plans and programs or
arrangements as may be determined by the Board or any successor
programs or plans thereto or thereunder. The Committee will,
effective as of the Commencement Date, award 165,000 Option Rights
(the “Initial Grant”), which Initial Grant will be
awarded in three (3) tranches, will vest and otherwise be
subject to the provisions set forth in the Executive’s
Non-Qualified Stock Option Agreement to be entered into pursuant to
the MOP.
(i)
Shares of the Company’s Class A-1 common stock acquired
on exercise of any Stock Option will be subject to the terms and
conditions of the Stockholders’ Agreement. The Company and
the Executive acknowledge that they will agree to provide the
Company with the right to require the Executive and other
executives of the Company to waive any registration rights with
regard to such shares upon an IPO, in which case the Company will
implement an IPO bonus plan in cash, stock or additional options to
compensate for the Executive’s and the other
executives’ loss of liquidity.
5. Employee Benefits .
In addition to the compensation described in Section 4, the
Executive shall be eligible to participate in the employee benefit
plans and programs, and to receive perquisites, provided from time
to time to similarly situated executives of the Company and its
Subsidiaries generally.
6. Expenses .
(a) During
the Employment Term, the Company shall pay or reimburse the
Executive for reasonable and necessary expenses incurred by the
Executive in connection with the Executive’s performance of
the Executive’s duties on behalf of the Company and its
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Subsidiaries in accordance with the expense policy of the Company
applicable to similarly situated executives of the Company and its
Subsidiaries generally.
(b) During
the Employment Term, the Company shall reimburse the Executive for
certain reasonable and documented expenses including the reasonable
living expenses in Texas, including weekly air fare from Chicago to
DFW, from the Effective Date through relocation of family to Texas,
which is expected to occur no later than July 1, 2008 or at
such other date agreed to by the parties to this Agreement. In
addition the Company shall reimburse the Executive for the
reasonable and customary closing costs associated with selling the
Illinois home and purchasing a residence in Texas and for the
movement of household goods and belongings in accordance with the
Company’s executive relocation policy. In addition, the
Company shall make an additional payment (the “Additional
Payment”) to the Executive in an amount equal to the total of
all income taxes imposed on the Executive as a result of
(i) the Company’s provision of any reimbursement
described in this Section 6(b) and (ii) the Additional
Payment. The Additional Payment will be an amount such that, after
payment by the Executive of all taxes, including any income tax
imposed upon the Additional Payment, the Executive retains an
amount of the Additional Payment equal to the income taxes imposed
upon the payments described in this Section 6(b).
7. Vacation . The
Executive shall be entitled to a number of days of vacation per
year in accordance with the Company’s policies, whether
written or unwritten, regarding vacation for similarly situated
executives of the Company and its Subsidiaries generally. Subject
to the Company’s policies, the duration of such vacations and
the time or times when they shall be taken will be determined by
the Executive in consultation with the Company.
8. Investment .
(a) At
the Effective Date, the Executive will be given the right (the
“Investment Right”) to invest cash in shares of
Class A-1 Common Stock of the Company, in the amount set forth
on Exhibit A attached hereto, at the then current
purchase price as of the date of this investment, pursuant to the
terms of a Subscription Agreement between the Company and the
Executive, and the Executive acknowledges that such shares of
Class A-1 Common Stock will be subject to the terms and
conditions of the Stockholders Agreement. The right pursuant to
this Section 8(a) must be exercised within thirty (30) days of
the Effective Date. The Executive shall make payment of the shares
purchased pursuant to this Section 8(a) by check or wire transfer
as directed by the Company. Upon receipt of the foregoing payment,
the Company will issue the Executive a share certificate evidencing
the number of shares of Class A-1 Common Stock
purchased.
9. Termination .
(a)
Termination of Employment by the Company . The
Executive’s employment hereunder may be terminated by the
Company or any of its Subsidiaries that employ the Executive for
any reason or no reason (including with or without Cause or
notification by the Company 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 Company
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terminates the Executive’s employment with Cause, all of the
Executive’s Option Rights, whether or not vested, will be
immediately forfeited. Stock Options, if any, held by the Executive
following termination of the Executive’s employment with the
Company or any of its Subsidiaries, shall remain exercisable in
accordance with their terms.
(b)
Voluntary Termination by the Executive . The Executive may
voluntarily terminate the Executive’s employment with or
without Good Reason at any time by notice to the Company as
provided in Section 18. Upon the Executive’s termination
without Good Reason, (i) any unvested portions of the Initial
Grant will be immediately forfeited and (ii) all of the
Executive’s vested Stock Options, if any, shall remain
exercisable in accordance with their terms.
(c)
Benefits Period . Subject to Section 10 and any benefit
continuation requirements of applicable laws, in the event the
Executive’s employment hereunder is terminated for any reason
whatsoever, the compensation and benefits obligations of the
Company under Sections 4 and 5 shall cease as of the effective
date of such termination, except for any compensation and benefits
earned but unpaid through such date.
(d)
Call Right . Upon termination of the Executive’s
employment with the Company or any of its Subsidiaries for any
reason prior to an IPO, the Company will have the right to purchase
(the “Call Right”) any of the Executive’s shares
of HealthMarkets’ Class A-1 common stock in accordance
with the terms and conditions of the Stockholders Agreement.
(e)
Resignation from All Positions . Notwithstanding any other
provision of this Agreement to the contrary, upon the termination
of the Executive’s employment for any 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 (and other than by reason of the Executive’s
death or Disability), or the Executive terminates his employment
for Good Reason, subject to (i) the Executive execution and
non-revocation of a release of claims against the Company,
substantially in the form attached hereto as
Exhibit B , (ii) the terms of
Section 14 and (iii) the Executive’s continued
compliance with the covenants of Sections 12 and 13, during
the Payment Period, then in such case the Company shall be
obligated to pay to the Executive such payments and make available
to the Executive such benefits as are set forth in this
Section 10 during the Payment Period.
(a)
Salary Continuation . The Executive will be entitled to
receive an amount equal to the sum of: (i) two (2) times
the Executive’s Base Salary in effect at the time of
termination of employment and (ii) two (2) times an
amount equal to the product of (A) the
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Executive’s Base Salary in effect at the time of termination
of employment and (B) the Executive’s Target Bonus
Percentage for the year of the Executive’s termination of
employment, or if the Target Bonus Percentage has not been set for
such year as of the date of termination of employment, the Target
Bonus Percentage for the immediately preceding year (the sum of
(i) and (ii), the “Termination Payments”), such
amount to be payable in equal installments payable over the Payment
Period. Termination Payments shall be paid to the Executive in
accordance with the Company’s regular payroll schedule for
the duration of the Payment Period. In the event that the Executive
dies while any Termination Payments are still payable to the
Executive hereunder, unless otherwise provided herein, all such
unpaid amounts shall be paid, not later than the tenth (10
th )
business day following the Executive’s death, to the
Executive’s beneficiary as named on the Executive’s
401(k) Plan beneficiary forms, or, if no such beneficiary is so
named, then to the Executive’s estate, in the form of a lump
sum cash payment equal to the remaining Termination Payments.
(b)
Bonus Entitlement . To the extent the Executive’s
termination of employment occurs after the last day of the first
quarter of an applicable Company fiscal year, the Executive will be
entitled to receive a pro rata portion of the Executive’s
Target Bonus Percentage (based on the number of days the Executive
was employed with the Company during such fiscal year of
termination divided by 365), which amount shall be payable over the
Payment Period; provided , however , that, if the
Target Bonus Percentage has not been set for the year in which the
date of termination occurs, the Executive’s Target Bonus
Percentage for purpose of this Section 10(b) shall be the
Executive’s Target Bonus Percentage for the year immediately
preceding the year in which the Executive’s employment is
terminated hereunder.
(c)
Equity Compensation . To the extent not previously vested,
cancelled or expired, the Executive will vest in the
Executive’s Initial Grant and any other grant of Option
Rights in accordance with their terms, which will remain
exercisable in accordance with their terms.
(d)
Welfare Benefits . During the Payment Period, the Company
shall maintain in full force and effect for the continued benefit
of the Executive all employee welfare benefit plans in which the
Executive was entitled to participate immediately prior to the
Executive’s termination or shall arrange to make available to
the Executive benefits substantially similar to those which the
Executive would otherwise have been entitled to receive if his
employment had not been terminated. Such welfare benefits shall be
provided to the Executive on the same terms and conditions under
which the Executive was entitled to participate immediately prior
to his termination of employment, including any applicable employee
contributions.
(e) Any
payments under this Section 10 to the Executive shall not be
taken into account for purposes of any retirement plan (including
any supplemental retirement plan or arrangement) or other benefit
plan sponsored by the Company, except as otherwise expressly
required by such plans or applicable law.
(f)
No Obligation to Mitigate . The Executive is under no
obligation to mitigate damages or the amount of any payment
provided for hereunder by seeking other employment or
otherwise.
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11. Certain Additional
Payments by the Company . Anything in this Agreement to the
contrary notwithstanding, in the event that it is determined (as
hereafter provided) that any payment (other than the Gross-Up
Payments provided for in this Section 11 and
Exhibit C attached hereto) or distribution by
the Company, its Subsidiaries or any of its affiliates to or for
the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including any
stock option, performance share, performance unit, stock
appreciation right or similar right, or the lapse or termination of
any restriction on or the vesting or exercisability of any of the
foregoing (a “Payment”), would be subject to the excise
tax imposed by Section 4999 of the Code (or any successor
provision thereto) by reason of being considered “contingent
on a change in ownership or control” of the Company, within
the meaning of Section 280G of the Code (or any successor
provision thereto) or to any similar tax imposed by state or local
law, or any interest or penalties with respect to such tax (such
tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the “Excise
Tax”), then the Executive will be entitled to receive an
additional payment or payments (collectively, a “Gross-Up
Payment”) (subject to Paragraph 7 of
Exhibit C attached hereto. The Gross-Up Payment
will be in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment. For purposes of
determining the amount of the Gross-Up Payment, the Executive will
be considered to pay (1) federal income taxes at the highest
rate in effect in the year in which the Gross-Up Payment will be
made and (2) state and local income taxes at the highest rate
in effect in the state or locality in which the Gross-Up Payment
would be subject to state or local tax, net of the maximum
reduction in federal income tax that could be obtained from
deduction of such state and local taxes. The obligations set forth
in this Section 11 will be subject to the procedural provisions
described in Exhibit C attached hereto.
12. Confidentiality
.
(a) The
Executive acknowledges that in the course of his employment by the
Company, he will or may have access to and become informed of
confidential or proprietary information of the Company and its
Subsidiaries (“Confidential Information”), which is a
competitive asset, including, without limitation, (i) the
terms of any agreement between the Company and any employee,
customer or supplier, (ii) pricing strategy,
(iii) merchandising and marketing methods, (iv) product
development ideas and strategies, (v) personnel training and
development programs, (vi) financial results,
(vii) strategic plans and demographic analyses,
(viii) proprietary computer and systems software, and
(ix) any non-public information concerning the Company, its
employees, suppliers or customers. The Executive agrees that he
will keep all Confidential Information in strict confidence during
the term of his employment by the Company and thereafter, and will
never directly or indirectly make known, divulge, reveal, furnish,
make available, or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company).
The Executive agrees that the obligations of confidentiality under
this Section 12 shall survive termination of the
Executive’s employment with the Company regardless of any
actual or alleged breach by the Company of this Agreement, until
and unless any such Confidential Information shall have become,
through no fault of the Executive, generally known to the public or
the Executive is required by lawful service of
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process,
subpoena, court order, law or the rules or regulations of any
regulatory body to which he is subject to make disclosure (after
providing to the Company a copy of the documents seeking disclosure
of such information and giving the Company prompt notice upon
receipt of such documents and prior to their disclosure). All
records, files, memoranda, reports, customer lists, drawings,
plans, documents and the like relating to the Company’s
business that the Executive uses, prepares or comes into contact
with during the course of the Executive’s employment shall
remain the sole property of the Company and/or its affiliates, as
applicable, and shall be turned over to the Company upon
termination of the Executive’s employment. The
Executive’s obligations under this Section 12 are in
addition to, and not in limitation of or preemption of, all other
obligations of confidentiality which the Executive may have to the
Company under general legal or equitable principles.
(b) Except
in the ordinary course of the Company’s business, the
Executive has not made, nor shall at any time following the date of
this Agreement, make or cause to be made, any copies, pictures,
duplicates, facsimiles or other reproductions or recordings or any
abstracts or summaries including or reflecting Confidential
Information. All such documents and other property furnished to the
Executive by the Company or any of its Subsidiaries or affiliates
or otherwise acquired or developed by the Company or 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 or any of its
Subsidiaries or affiliates which are in the possession, custody or
control of the Executive.
(c) Without
the prior written consent of the Company (which may b
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