Exhibit 10.18
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT, dated as of
March 9, 2004 (this “Agreement”), by and among
Universal American Financial Corp. (“Universal”),
Heritage Health Systems, Inc. (the “Company”) and
Theodore Carpenter, Jr. (“Executive”).
WHEREAS, Universal, the Company and
Executive wish to enter into an agreement relating to the
employment of Executive by the Company;
NOW, THEREFORE, in consideration of
the premises and mutual covenants herein and for other good and
valuable consideration, the parties agree as follows:
1.
Term of Employment
. Subject to the provisions of
Section 8 of this Agreement, Executive shall be employed by
the Company for a period commencing (the “Commencement
Date”) on the closing of the transaction (the
“Transaction”) contemplated by the Agreement and Plan
of Merger, dated as of the date hereof (the “Merger
Agreement”), among Universal, HHS Acquisition Corp., the
Company and Carlyle Venture Partners, L.P., as the stockholders
representative, and ending on first anniversary of the
Commencement Date (such period, as extended pursuant to the
immediately following proviso, if applicable, the “Employment
Term”), on the terms and subject to the conditions set forth
in this Agreement; provided , however , the
Employment Term shall automatically be renewed for successive one
year periods unless the Company gives Executive ninety (90) days
prior notice of its intent not to renew this Agreement.
Notwithstanding anything to the contrary herein, this Agreement
shall automatically terminate concurrently with any termination of
the Merger Agreement.
2.
Position .
a.
During the Employment Term,
Executive shall serve as the Company’s Executive Vice
President and Chief Operating Officer and President and Chief
Executive Officer of SelectCare of Texas, LLC or (subject to
Section 8(a)(i)) such other title or position as may be
determined by the Board (as defined below).
b.
You will be based initially at the
Company’s offices at Nashville, Tennessee (and travel between
Nashville, Tennessee and Houston, Texas as necessary). Executive
agrees that he will relocate to the Company’s offices in
Houston, Texas at such time as reasonably agreed upon by the
Company and Executive. Executive shall be entitled to the standard
relocation benefits as are customarily accorded to similarly
situated employees of Universal in accordance with
Universal’s policies regarding payment of relocation benefits
then in effect. During the Employment Term, Executive will devote
his full business time to the performance of his duties hereunder
and will not engage in any other business, profession or occupation
for compensation or otherwise which would conflict with the
rendition of such services either directly or indirectly, without
the prior written consent of the Board of Directors of Universal
(the “Board”). Nothing contained herein shall preclude
Executive from (i) serving on corporate, civic and charitable
boards or committees and (ii) managing his personal
investments; provided that none of the activities set forth
in clauses (i) and (ii) interfere in any
material respect with the performance of
Executive’s employment hereunder or conflict in any material
respect with the business of the Company.
3.
Base Salary
. During the Employment Term, the
Company shall pay Executive a base salary (the “Base
Salary”) at the annual rate of $290,850, payable in regular
installments in accordance with the Company’s usual payment
practices. Executive shall be entitled to such annual increases in
his Base Salary, if any, as may be determined in the sole
discretion of the compensation committee of the Board.
4.
Bonus .
a.
For the fiscal year ended 2004,
Executive shall be eligible to earn an annual bonus (as may be
changed in accordance with the immediately following sentence, the
“Bonus”) equal to 33% of the Base Salary if the
Company’s 2004 net income, before interest expense, income
taxes, depreciation and amortization (each as determined in
accordance with generally accounting principles in the United
States, in each case consistently applied) is equal to or greater
than $14.7 million. For any period following December 31, 2004
during which this Agreement is in full force and effect, the Board
shall establish a target annual bonus based on the achievement of
goals established by the Board; provided , however ,
that if such goals are not established such amount shall be
determined by reference to the existing Universal executive bonus
plan.
b.
Subject to
Section 4(a) above, as soon as practicable after the end
of the fiscal year (but in no event later than 45 days after the
end of the fiscal year), the Bonus shall be paid (i) seventy
percent (70%) in cash and (ii) thirty (30%) in shares of the
common stock, par value $1.00 per share, of Universal issued by
Universal (“Shares”) based on the Market Value (as
defined below) of the Shares on the date of issuance. For purposes
of this paragraph, “Market Value” means the 20-day
average of the closing price of the Shares on Nasdaq or, if the
Shares are not then-traded on Nasdaq, on such other national stock
exchange on which the Shares are principally traded.
5.
Equity Arrangements
. Executive shall be entitled to an
initial grant on the Commencement Date of stock options to purchase
60,000 Shares (the “Options”) under Universal’s
1998 Incentive Compensation Plan (the “1998 Plan”).
Options representing the right to purchase such 60,000 Shares shall
vest ratably over a four year period, subject to Executive’s
continued employment with the Company, with 1/5 of such Shares
initially granted vesting on the date of grant and each of the
first, second, third and fourth anniversaries of the date of grant;
provided , however , that the Options shall vest
immediately upon a “change in control” (as defined in
the 1998 Plan). Except as otherwise provided in this Agreement, all
unvested Options shall immediately terminate and expire upon
Executive’s termination of employment.
6.
Employee Benefits
. During the Employment Term,
Executive shall be provided, in accordance with the terms of
Universal’s employee benefit plans as in effect from time to
time, health insurance and short term and long term disability
insurance, retirement
2
benefits, vacation and fringe benefits
(collectively “Employee Benefits”) on the same basis as
those benefits are generally made available to other senior
executives of Universal.
7.
Business Expenses.
During the Employment Term,
reasonable business expenses incurred by Executive in the
performance of his duties hereunder shall be reimbursed by the
Company in accordance with Company policies.
8.
Termination
. Notwithstanding any other
provision of this Agreement:
a.
By the Company For Cause or By
Executive Resignation Without Good Reason .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by
the Company for Cause (as defined below) or by Executive’s
resignation without Good Reason. For purposes of this Agreement,
“Good Reason” shall mean (w) the Company’s
requiring Executive to be based at any office or location other
than in the greater metropolitan area of Houston, Texas or
Nashville, Tennessee; (x) a material diminution in
Executive’s responsibilities, authority or scope of duties is
effected by the Board (without regard to whether or not any change
is made to Executive’s title); (y) any reduction in
Executive’s Base Salary; or (z) failure of any successor to
all or substantially all of the business of the Company to assume
this Agreement.
(ii) For purposes of this
Agreement, “Cause” shall mean (a) Executive has
engaged in gross negligence, gross incompetence or willful
misconduct in the performance of, or Executive’s willful
refusal without proper reason to perform, the duties and services
required of Executive by the Board; (b) any willful act or
omission of Executive which is demonstrably and materially
injurious to the Company or any of its subsidiaries or affiliates;
(c) Executive’s conviction or plea of nolo contendere to
a felony or other crime of moral turpitude; or
(d) Executive’s material breach of any provision of this
Agreement which is not cured or capable of being cured within 30
days following the Company’s written notice of such breach to
Executive; provided , however , that a breach of
Section 9 hereof shall not be subject to such 30-day cure
period.
(iii) If Executive’s
employment is terminated by the Company for Cause, or if Executive
resigns without Good Reason, Executive shall be entitled to receive
(A) any accrued but unpaid Base Salary through the date of
termination and (B) such Employee Benefits, if any, as to
which Executive may be entitled under the employee benefit
plans of the Company. Following such termination of
Executive’s employment by the Company for Cause or
resignation by Executive without Good Reason, except as set forth
in this Section 8(a), Executive shall have no further rights
to any compensation or any other benefits under this
Agreement.
b.
Disability or Death
.
(i) The Employment Term and
Executive’s employment hereunder shall terminate
(A) upon his death or (B) if Executive becomes physically
or mentally incapacitated for a period of ninety (90) consecutive
days or for an aggregate of six (6) months in any
twelve
3
(12) consecutive month period during which he is
unable to perform his duties, with or without reasonable
accommodation, (such incapacity is hereinafter referred to as
“Disability”). Any question
