THIS EMPLOYMENT
AGREEMENT (this “Agreement”) is made and entered into
as of September 30, 2008 (the “Effective Date”),
by and between HealthMarkets, Inc., a Delaware corporation
(together with its successors and assigns,
“HealthMarkets” or the “Company”) and
Steven P. Erwin (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.
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 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 Effective 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, subject to
Section 22 hereof, and the employment of the Executive at
least ninety (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 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, consistent with the
Executive’s 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.
(c) During
the Employment Term and provided that such activities do not either
(i) contravene this Agreement (including, without limitation,
the provisions of Section 3(a), 3(b), 12 or 13 of this
Agreement) or (ii) materially interfere with the performance
of the Executive’s duties hereunder, the Executive may
(a) engage in charitable activities and community affairs,
(b) serve on the boards of, or advisory committees to, trade
associations or charitable organizations, (c) manage his personal
and family investments and affairs, and (d) serve on boards or
advisory committees of (1) public or private companies set
forth on Exhibit A attached hereto, (2) professional
associations approved by the Board or (3) as otherwise may be
approved by the Board. 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.
(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, and shall be payable in cash 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. For purposes of
this Agreement, after any such increase, “Base Salary”
shall refer to such increased amount.
(b)
Cash Incentive Compensation .
(i) First Year
Guaranteed Bonus . With respect to the first twelve (12) months
of the Employment Term, the Executive shall be entitled to a
guaranteed bonus of $500,000 (the “First Year Guaranteed
Annual Bonus”). Subject to his continued employment with the
Company through each applicable payment date, the Executive shall
be paid in December 2008 $166,666.67 of such First Year
Guaranteed Annual Bonus (the “First Installment”) and
shall be paid
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the remaining
$333,333.33 of the First Year Guaranteed Annual Bonus in
September 2009 (the “Second Installment”). The
First Year Guaranteed Annual Bonus shall be delivered to the
Executive in shares of Class A-1 Common Stock of the Company
(“Shares”) and cash, less applicable withholding taxes,
as follows: (i) the First Installment after deduction of
applicable withholding taxes, shall be paid to the Company in the
amount of $83,333.34 in consideration for Shares with the balance
of the First Installment paid in cash to the Executive, and
(ii) the Second Installment, after deductions of applicable
withholding taxes, shall be paid to the Company in the amount of
$166,666.66 in consideration for Shares with the balance of the
Second Installment paid in cash to the Executive. Shares purchased
with the First Installment and Second Installment payments shall be
valued at the Fair Market Value prevailing at the time of purchase
as determined in accordance with Section 8(b) of this Agreement.
The Executive may satisfy his withholding obligations under this
Section 4(b)(i) by tendering the minimum number of Shares to
satisfy any withholding obligation. The Executive acknowledges that
any Shares so delivered to the Executive will be subject to the
terms and conditions of the Stockholders Agreement, as modified by
Section 8 of this Agreement.
(ii) With respect
to the Company’s 2009 fiscal year and each fiscal year of the
Company thereafter, all or part of which occurs during the
Employment Term, the Executive will be eligible to participate in
the Company’s annual management incentive program or
arrangement approved by the Board (or any authorized committee
thereof) or any successor program or plan thereto or thereunder on
terms and conditions no less favorable to the Executive than those
available to similarly situated executives of the Company, with a
target bonus opportunity of the percentage of the Base Salary set
forth on Exhibit A attached hereto (the
“Target Bonus Percentage”) and a maximum bonus
opportunity of not less than the percentage of the Base Salary set
forth on Exhibit A attached hereto (the
“Annual Bonus Percentage”); provided ,
however , that with respect to the Company’s 2009
fiscal year, the Executive’s actual annual bonus earned for
such fiscal year, if any, shall be reduced by the $333,333.33 that
constitutes the Second Installment of the First Year Guaranteed
Annual Bonus. In no event shall the Executive be required to return
any portion of the First Year Guaranteed Annual Bonus if
Executive’s 2009 fiscal year actual bonus is calculated to be
less than $333,333.33. 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,
provided that any such performance targets for a fiscal year shall
be no less favorable to the Executive than the annual performance
targets established for such fiscal year for other senior
executives of the Company (other than (i) annual performance
targets established for the Chief Executive Officer of the Company
and (ii) any performance targets established in connection
with an executive’s commencement of employment with, or
promotion within, the Company) generally. 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
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for which such
annual bonus was earned (unless the Executive has elected to defer
receipt of any such bonuses).
(c)
Equity Compensation . During the Employment Term, 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
(collectively, the “Incentive Programs”), in each case,
as may be in effect from time to time and as may be determined by
the Board, on a basis no less favorable to the Executive than to
other senior executives who participate in such Incentive Programs
(other than with respect to the Chief Executive Officer of the
Company or an executive’s commencement of employment with, or
promotion within, the Company) generally. Subject to the
Executive’s making the Investment in the Company contemplated
by Section 8 of this Agreement, the Committee will, as soon as
practicable after the Executive makes such Investment (but in no
event later than five business days thereafter), award 175,000
Option Rights (the “Initial Grant”), which Initial
Grant will be awarded in two (2) 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 in the form of Exhibit C attached hereto;
provided, that the Company’s stockholders shall approve an
amendment to the MOP as set forth in Exhibit C prior to the
earlier of a Change of Control (as defined in the MOP) or
January 1, 2009, 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
“Amendment”). In the event the Amendment is not
approved by June 30, 2009, the Initial Grant shall be void ab
initio and of no further force and effect. Failure to obtain
stockholder approval for the Amendment by the earlier of a Change
of Control or January 1, 2009 shall be a breach of this
Section 4(c) and Exhibit C, entitling the Executive to
terminate his employment for Good Reason. 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
the Effective Date, plus any amendments to such definition after
the Effective Date which would result in a transaction not covered
by the Change of Control definition in effect as of the Effective
Date constituting a “Change of Control”). 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.
(i) Initial
LTIP Award . As soon as practicable after the Effective Date,
but in all events within 30 days following such date, the
Company shall grant the Executive a cash-based LTIP award with a
target value of $133,000 (the “Initial LTIP Award”).
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
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installments,
on each of the first three anniversaries of the Effective Date, in
both cases subject to the Executive’s continued employment
with the Company through the applicable vesting date and, with
respect to (y), subject to the Executive’s achievement of
certain performance goals to be established by the Board (or any
authorized committee thereof). Any vested portion of such Initial
LTIP Award shall be delivered to the Executive, 100% in cash, on
the earlier of immediately prior to a Change of Control or upon the
third anniversary of the Effective Date.
(ii) Annual
LTIP Awards . In addition to any other compensation granted or
paid hereunder, with respect to the Company’s 2010 fiscal
year and each fiscal year of the Company thereafter, all or part of
which occurs during the Employment Term, the Executive shall be
entitled to receive a long-term incentive award, with a target
value of no less than $100,000 (the “Annual 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 to be
established by the Board (or any authorized committee thereof), the
Annual 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 Annual LTIP Award shall vest in three equal installments,
on each of the first three anniversaries of the Effective Date
occurring after the conclusion of the applicable Performance Year
for which it was granted, subject to the Executive’s
continued employment with the Company through each applicable
vesting date and (ii) any vested portion of such Annual LTIP
Award shall be delivered to the Executive, 100% in cash, on the
third anniversary of the Effective Date occurring after the
conclusion of the applicable Performance Year for which it was
granted. 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 Annual LTIP Award prior to the payment
date as described in this Section 4. The Board (or any authorized
committee thereof) shall have the authority to establish
performance metrics pursuant to which such Annual LTIP Awards may
be earned, provided that any such performance targets shall be no
less favorable to the Executive than the performance targets
established for the applicable performance period for other senior
executives of the Company (other than (i) annual performance
targets established for the Chief Executive Officer of the Company
and (ii) any performance targets established in connection
with an executive’s commencement of employment with, or
promotion within, the Company) generally.
(iii) Change of
Control . In all events, all outstanding Annual LTIP Awards
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 Annual
LTIP Award that has become vested shall be
non-forfeitable.
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(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
executives of the Company or its Subsidiaries (other than the Chief
Executive Officer of the Company) who participate 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 or any benefits or perquisites provided to
executives in connection with commencement of their employment
with, or promotion within, the Company) generally.
(b)
Relocation Allowance . In connection with the
Executive’s commencement of employment with the Company, in
lieu of any relocation benefits that would otherwise be provided to
the Executive under any relocation policy of the Company, the
Company will pay the Executive a relocation sign-on amount of
$75,000, which is to be paid in cash as soon as practicable
following the Effective Date and up to six months of temporary
living expenses in the Dallas/Ft. Worth area, Texas, in each case,
less applicable tax withholding.
(c)
Automobile Allowance . During the Employment Term, the
Executive will be entitled to an automobile allowance of $600.00
per month.
6.
Expenses . 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 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 the Agreement and any other
related documentation, subject to a cap of $17,500.
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 of vacation per calendar year, pro-rated for
any partial year. 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.
(a) By
no later than September 30, 2008, the Executive will invest
cash in the amount of $250,000 in Shares, at a purchase price of
$24.00 per Share (such investment, the “Investment”),
pursuant to the terms of a Subscription Agreement between the
Company and the Executive, and the Executive acknowledges that such
Shares will be subject to the terms and conditions of the
Stockholders Agreement. The Executive shall make payment for the
Shares
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purchased
pursuant to this Section 8 by check or wire transfer and, upon
receipt of the foregoing payment, the Company will issue the
Executive a share certificate evidencing the number of Shares
purchased.
(b)
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 First Year Guaranteed Annual Bonus,
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) 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.
(c)
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%.
(d)
Put Right . Notwithstanding anything to the contrary in the
Stockholders Agreement, if, prior to an IPO or a Change of Control,
the Executive’s employment with the Company or any of its
Subsidiaries terminates (other than a termination by the Company
for Cause or a resignation by the Executive without Good Reason),
the Executive shall have the right, exercisable at any time during
the six-month period following the six-month anniversary of his
termination of employment, to sell to the Company Shares acquired
by the Executive pursuant to the Investment and any Shares
delivered as part of the First Year Guaranteed Annual Bonus at the
Fair Market Value of such Shares at the time of such
sale.
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(e)
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.
(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 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 (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 stock options, if any, shall remain exercisable in
accordance with their terms, but in all events for at least
90 days following the date of termination (but no later than
the original term of such stock options).
(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.
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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 Exhibit 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 B , (ii) the
terms of Section 14 and (iii) the Executive’s
continued compliance with the covenants of Sections 12 and 13
(collectively, the “Restrictive Covenants”) as set
forth in Section 10(h), the Company shall pay to the Executive
such payments and make available to the Executive such benefits as
are set forth in this Section 10. In addition, upon any
termination of employment, the Executive shall be entitled to the
payments and benefits and entitlements as are described in
Section 10(g).
(a)
Salary Continuation . The Executive will be entitled to
receive an amount equal to the sum of: (i) one (1) times
the Executive’s Base Salary in effect at the time of
termination of employment and (ii) one (1) times an
amount equal to the product of (A) the Executive’s Base
Salary in effect at the time of termination of employment and
(B) the Executive’s Target Bonus Percentage for the year
of the Executive’s termination of employment, or if the
Target Bonus Percentage has not been set for such year as of the
date of termination of employment, the Target Bonus Percentage for
the immediately preceding year (the sum of (i) and (ii), the
“Termination Payments”), such amount to be payable in
equal installments payable over the Payment Period. Termination
Payments shall be paid to the Executive in accordance with the
Company’s payroll schedule as in effect on the Effective Date
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. Notwithstanding the foregoing, if such
termination occurs upon or within the two-year period 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
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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)
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 and his eligible dependents all health care
benefit plans, except disability coverage, in which the Executive
was entitled to participate immediately prior to the
Executive’s termination or shall arrange to make available to
the Executive health care benefits (except disability coverage)
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.
(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)
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 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 that is payable
during the Initial Payment Period that does not exceed the Limit or
can 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 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 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,
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