<PAGE>
EXHIBIT 10.12
HEALTHSPRING, INC.
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS
AGREEMENT is made as of _____________ 2006, between
HealthSpring,
Inc., a Delaware corporation (the "Company"), and Herbert A.
Fritch
("Executive"), and amends and restates in its entirety that certain
Employment
Agreement between NewQuest, Inc. and Executive dated March 1, 2005
(the
"Original Employment Agreement").
In
consideration of the mutual covenants contained herein and other
good
and valuable consideration, the receipt and sufficiency of which
are hereby
acknowledged, the parties hereto agree to amend and restate the
Original
Employment Agreement in its entirety as follows:
1.
Employment. The Company shall employ Executive, and Executive
hereby
accepts employment with the Company, upon the terms and conditions
set forth in
this Agreement for the period beginning on the date hereof and
ending as
provided in paragraph 4 hereof (the "Employment Period").
2.
Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Chief
Executive Officer of the Company and shall have the normal
duties,
responsibilities, functions and authority of the Chief Executive
Officer,
subject to the power and authority of the Company's Board of
Directors to expand
or limit such duties, responsibilities, functions and authority and
to overrule
actions of officers of the Company. During the Employment Period,
Executive
shall render such administrative, financial and other executive and
managerial
services to the Company and its Subsidiaries which are consistent
with
Executive's position as the Board may from time to time reasonably
direct.
(b) During the Employment Period, Executive shall report to the
Company's Board and shall devote his full business time and
attention (except
for permitted vacation periods and reasonable periods of illness or
other
incapacity) to the business and affairs of the Company and its
Subsidiaries.
Executive shall perform his duties, responsibilities and functions
to the
Company and its Subsidiaries hereunder in good faith in a diligent,
trustworthy
and professional manner and shall comply with the Company's and
its
Subsidiaries' policies and procedures in all material respects.
During the
Employment Period, Executive shall not serve as an officer or
director of, or
otherwise perform services for compensation for, any other entity
without the
prior written consent of the Board (which shall not be unreasonably
withheld,
conditioned or delayed); provided that Executive may participate on
boards of
charitable entities or other civic entities so long as such service
does not
materially interfere with Executive's duties under this
Agreement.
(c) For purposes of this Agreement, "Subsidiaries" shall mean
any
corporation or other entity of which the securities or other
ownership interests
having the voting power to
<PAGE>
elect a majority of the board of directors or other governing body
are, at the
time of determination, owned by the Company, directly or through
one or more
Subsidiaries.
3.
Compensation and Benefits.
(a) During the Employment Period, Executive's base salary shall
be
$525,000 per annum or such higher rate as the Board may determine
from time to
time (as adjusted from time to time, the "Base Salary"), which
salary shall be
payable by the Company or one of its Subsidiaries in regular
installments in
accordance with such entity's general payroll practices (in effect
from time to
time). In addition, during the Employment Period, Executive shall
be entitled to
participate in all of the Company's employee benefit programs for
which senior
executive employees of the Company and its Subsidiaries are
generally eligible.
During the Employment Period, Executive shall also be entitled to
five weeks of
paid vacation each calendar year in accordance with the Company's
policies,
which if not taken during any year may not be carried forward,
other than with
respect to one week per year, to any subsequent calendar year and
no
compensation shall be payable in lieu thereof. The Company or one
of its
affiliates or Subsidiaries shall obtain and maintain customary
directors and
officers' liability insurance coverage covering Executive on terms
reasonably
satisfactory to the Board.
(b) In addition to the Base Salary, Executive shall be eligible for
an
annual bonus in an amount up to 100% of the Base Salary then in
effect following
the end of each fiscal year of the Company (ending December 31)
based upon the
achievement by Executive and the Company and its Subsidiaries of
budgetary and
other objectives set by the Compensation Committee of the Board;
provided that
for the calendar year 2005, such bonus shall be paid on a pro rata
basis based
upon that portion of the year that remained after March 1, 2005.
Such bonus
shall be paid on or before March 15 of the following year.
(c) During the Employment Period, the Company or one of its
Subsidiaries shall reimburse Executive for all reasonable business
expenses
incurred by him in the course of performing his duties and
responsibilities
under this Agreement which are consistent with the Company's and
its
Subsidiaries' policies in effect from time to time with respect to
travel,
entertainment and other business expenses, subject to the Company's
and its
Subsidiaries' requirements with respect to reporting and
documentation of such
expenses.
(d) All amounts payable to Executive as compensation hereunder
shall
be subject to all required and customary withholding by the
Company.
4.
Term.
(a) The Employment Period will continue until (i) Executive's
resignation, Disability (as defined in paragraph 4(f) below) or
death, or (ii)
the Board decides to terminate Executive's employment with or
without Cause (as
defined in paragraph 4(e) below). Except as otherwise provided
herein, any
termination of the Employment Period by the Company shall be
effective as
specified in a written notice from the Company to Executive.
-2-
<PAGE>
(b) If the Employment Period is terminated by the Company
without
Cause or upon Executive's resignation with Good Reason, Executive
shall be
entitled to (x) continue to receive his Base Salary payable in
regular
installments and (y) continue to participate in employee benefit
programs for
senior executive employees (other than bonus and incentive
compensation plans),
at the Company's cost, to the extent permitted under the terms of
such programs
and under applicable law, as special severance payments from the
date of
termination for a period of twelve (12) months thereafter (the
"Severance
Period") if and only if Executive has executed and delivered to the
Company the
General Release substantially in form and substance as set forth in
Exhibit A
attached hereto and the General Release has become effective, and
only so long
as Executive has not revoked or breached the provisions of the
General Release
or breached the provisions of paragraphs 5, 6 or 7 hereof and does
not apply for
unemployment compensation chargeable to the Company or any
Subsidiary during the
Severance Period, and Executive shall not be entitled to any other
salary,
compensation or benefits after termination of the Employment
Period, except as
specifically provided for in the Company's employee benefit plans
or as
otherwise expressly required by applicable law. The amounts payable
pursuant to
this paragraph 4(b) shall be payable in regular monthly
installments; provided,
that, in the event the receipt of amounts payable pursuant to this
paragraph
4(b) within six (6) months of the date of the Executive's
termination would
cause the Executive to be subject to tax under Section 409A of the
Internal
Revenue Code of 1986, as amended, then payment of such amounts
shall be delayed
until the date that is six (6) months following Executive's
termination date.
Unless Executive is terminated by the Company or its successor
without Cause in
connection with a Sale of the Company (as defined below), the
amounts payable
pursuant to this paragraph 4(b) shall be reduced by the amount of
any
compensation Executive receives with respect to any other
employment during the
Severance Period; provided that Executive shall have no duty or
obligation to
seek other employment during the Severance Period or otherwise
mitigate damages
hereunder. Upon request from time to time, Executive shall furnish
the Company
with a true and complete certificate specifying any such
compensation earned or
received by him during the Severance Period. For purposes of this
Agreement,
"Sale of the Company" shall mean the sale of the Company to an
Independent Third
Party or group of Independent Third Parties pursuant to which such
party or
parties acquire (y) 50% or more of the common stock of the Company,
par value
$.01 per share ("Common Stock") outstanding at the time of such
transaction or
series of transactions or (z) all or substantially all of the
Company's assets
determined on a consolidated basis. For purposes of this Agreement,
"Independent
Third Party" shall mean any person who, immediately prior to the
contemplated
transaction, does not own in excess of 5% of the Common Stock on a
fully-diluted
basis (a "5% Owner"), who is not controlling, controlled by or
under common
control with any such 5% Owner and who is not the spouse or
descendant (by birth
or adoption) of any such 5% Owner or a trust for the benefit of
such 5% Owner
and/or such other persons.
(c) If the
Employment Period is terminated by the Company for Cause or
is terminated pursuant to clause (a)(i) above (other than
termination with Good
Reason), Executive shall only be entitled to receive his Base
Salary through the
date of termination and shall not be entitled to any other salary,
compensation
or benefits from the Company or any of its Subsidiaries thereafter,
except as
otherwise specifically provided for under the Company's employee
benefit plans
or as otherwise expressly required by applicable law.
-3-
<PAGE>
(d) Except as otherwise expressly provided herein, all of
Executive's
rights to salary, bonuses, employee benefits and other compensation
hereunder
which would have accrued or become payable after the termination of
the
Employment Period shall cease upon such termination, other than
those expressly
required under applicable law (such as COBRA). The Company may
offset any
amounts Executive owes the Company or any of its Subsidiaries
against any
amounts the Company or any of its Subsidiaries owes Executive
hereunder.
(e) For purposes of this Agreement, "Cause" shall mean with respect
to
Executive one or more of the following: (i) the conviction of a
felony or other
crime involving moral turpitude or the commission of any other act
or omission
involving material dishonesty or fraud with respect to the Company
or any of its
Subsidiaries, (ii) reporting to work under the influence of illegal
drugs, the
use of illegal drugs (whether or not at the workplace) or other
repeated conduct
causing the Company or any of its Subsidiaries substantial public
disgrace or
disrepute or substantial economic harm, which is not cured within
20 days
following written notice thereof to the Executive, (iii) material
and repeated
failure to perform his duties as reasonably directed by the Board,
which is not
cured within 20 days following written notice thereof to the
Executive, (iv)
breach of fiduciary duty or engaging in gross negligence or willful
misconduct
with respect to the Company or any of its Subsidiaries or (v) any
other material
breach of this Agreement which is not cured within 20 days after
written notice
thereof to Executive.
(f) For purposes of this Agreement, "Disability" shall mean the
disability of Executive caused by any physical or mental injury,
illness or
incapacity as a result of which Executive is unable to effectively
perform or
fails to perform the essential functions of Executive's duties for
90
consecutive days or 120 days during any 12-month period.
(g) For purposes of this Agreement, "Good Reason" shall mean if
Executive resigns from employment with the Company and its
Subsidiaries prior to
the end of the Employment Period as a result of one or more of the
following
reasons: (i) the Company reduces the amount of the Base Salary,
(ii) the Company
materially reduces his responsibilities, in each case which is not
cured within
20 days after written notice thereof to the Company, (iii) the
relocation of the
Company's principal executive offices and/or the location at which
Executive
provides services pursuant to this Agreement to a location outside
the
metropolitan Nashville, Tennessee area, or (iv) the Company's
material breach of
this Agreement; provided that written notice of Executive's
resignation for Good
Reason must be delivered to the Company within 45 days after the
occurrence of
any such event in order for Executive's resignation with Good
Reason to be
effective hereunder.
5.
Confidential Information.
(a) Executive acknowledges that the information, observations and
data
(including trade secrets) obtained by him while employed by the
Company and its
Subsidiaries (including those obtained by him while employed by
NewQuest, LLC
("NQLLC") or any of its subsidiaries prior to March 1, 2005)
concerning the
business or affairs of the Company or NQLLC or any other
Subsidiary
("Confidential Information") are the property of the Company or
such Subsidiary.
Therefore, Executive agrees that, except as set forth in, and
pursuant to, this
-4-
<PAGE>
paragraph 5(a), he shall not disclose to any unauthorized person or
entity or
use for his own purposes any Confidential Information or any
confidential or
proprietary information of other persons or entities in the
possession of the
Company and its Subsidiaries ("Third Party Information"), without
the prior
written consent of the Board, unless and to the extent that the
Confidential
Information or Third Party Information becomes generally known to
and available
for use by the public other than as a result of Executive's acts or
omissions.
In the event that Executive is requested or required (by oral
question or
request for information or documents in any legal proceeding,
interrogatory,
subpoena, civil investigative demand or similar process) to
disclose any
Confidential Information, such Executive shall notify the Company
promptly of
the request or requirement so that the Company may seek an
appropriate
protective order or waive compliance with the provisions of this
Section. If, in
the absence of a protective order or the receipt of a waiver
hereunder,
Executive is, on the advice of counsel, compelled to disclose any
Confidential
Information to any tribunal, such Executive may disclose the
Confidential
Information to the tribunal; provided that such disclosing
Executive shall use
its reasonable best efforts to assist the Company to obtain, at the
request of
the Company (and at the Company's sole expense), an order or other
assurance
that confidential treatment shall be accorded to such portion of
the
Confidential Information required to be disclosed as the Company
shall
designate. Executive shall deliver to the Company at the
termination of the
Employment Period, or at any other time the Company may request,
all memoranda,
notes, plans, records, reports, computer files, disks and tapes,
printouts and
software and other documents and data (and copies thereof)
embodying or relating
to Third Party Information, Confidential Information, Work Product
(as defined
below) or the business of the Company or any of its Subsidiaries
which he may
then possess or have under his control.
(b) Executive shall be prohibited from using or disclosing any
confidential information or trade secrets that Executive may have
learned
through any prior employment. If at any time during this employment
with the
Company or any Subsidiary, Executive believes he is being asked to
engage in
work that will, or will be likely to, jeopardize any
confidentiality or other
obligations Executive may have to former employers, Executive shall
immediately
advise the Board so that Executive's duties can be modified
appropriately.
Executive represents and warrants to the Company that Executive
took nothing
with him which belonged to any former employer when Executive left
his prior
position and that Executive has nothing that contains any
information which
belongs to any former employer. If at any time Executive discovers
this is
incorrect, Executive shall promptly return any such materials to
Executive's
former employer. The Company does not want any such materials, and
Executive
shall not be permitted to use or refer to any such materials in the
performance
of Executive's duties hereunder.
6.
Intellectual Property, Inventions and Patents. Executive
acknowledges
that all discoveries, concepts, ideas, inventions, innovations,
improvements,
developments, methods, designs, analyses, drawings, reports,
patent
applications, copyrightable work and mask work (whether or not
including any
Confidential Information) and all registrations or applications
related thereto,
all other proprietary information and all similar or related
information
(whether or not patentable) which relate to the Company's or any of
its
Subsidiaries' actual or anticipated business, research and
development or
existing or future products or services and which are conceived,
developed or
made by Executive (whether alone or jointly with others) while
employed by the
Company and its Subsidiaries, whether before or after the date of
this
-5-
<PAGE>
Agreement ("Work Product"), belong to the Company or such
Subsidiary. Executive
shall promptly disclose all patentable inventions and other
material Work
Product to the Board and, at the Company's expense, perform all
actions
reasonably requested by the Board (whether during or after the
Employment
Period) to establish and confirm such ownership (including, without
limitation,
assignments, consents, powers of attorney and other instruments).
Executive
acknowledges that all Work Product shall be deemed to constitute
"works made for
hire" under the U.S. Copyright Act of 1976, as amended.
In
accordance with Title 19, Section 805 of the Delaware Code,
Executive is
hereby advised that this paragraph 6 regarding the Company's and
its
Subsidiaries' ownership of Work Product does not apply to any
invention for
which no equipment, supplies, facilities or trade secret
information of the
Company or any Subsidiary was used and which was developed entirely
on
Executive's own time, unless (i) the invention relates to the
business of the
Company or any Subsidiary or to the Company's or any Subsidiaries'
actual or
demonstrably anticipated research or development or (ii) the
invention results
from any work performed by Executive for the Company or any
Subsidiary.
7.
Non-Compete, Non-Solicitation.
(a) In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that during the course
of his
employment with the Company and its Subsidiaries he shall become
familiar, and
during his employment with NQLLC or any of its subsidiaries he has
become
familiar with the Company's and its Subsidiaries' trade secrets and
with other
Confidential Information concerning the Company and its
predecessors and
Subsidiaries and that his services have been and shall continue to
be of
special, unique and extraordinary value to the Company and
