Document:

exv10w11

 

EXHIBIT 10.11

UICI SUCCESS BONUS AWARD PLAN

(Effective                , 2005)

     1. Purpose. UICI (the “Company”) recognizes that the Participants will be involved in
evaluating and/or negotiating offers, proposals or other transactions which could result in a
Change of Control and, recognizing the fiduciary obligations of certain executives, believes that
it is in the best interests of the Company and the shareholders to provide additional assurance
that the Participants are better positioned to objectively assess and aggressively pursue the
interests of the Company and the stockholders. The Company also desires to reward Participants for
maximizing the total value of the Company in a Change of Control by providing meaningful cash-based
compensation incentives to such individuals in such an event.

     2. Definitions.

          (a) “Award” means a success bonus award granted to a Participant pursuant to this Plan.

          (b) “Award Notice” has the meaning set forth in Section 3.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Change of Control” means the completion, prior to the Cut-Off Date, of any (1) stock
purchase (whether by tender offer or otherwise), merger, consolidation, recapitalization or other
transaction immediately after which the Company’s shareholders immediately prior thereto do not
beneficially own at least 70% of the then-outstanding Voting Stock or (2) other event designated as
a change of control for purposes of this Plan by the Board.

          (e) “CEO” means the Company’s Chief Executive Officer.

          (f) “Code” means the Internal Revenue Code of 1986, as amended.

          (g) “Committee” means the Executive Compensation Committee of the Board. The Committee may
delegate any of its powers and duties and any of its discretionary authorities under the Plan to
any officer.

          (h) “Cut-Off Date” means June 30, 2006.

          (i) “Designated Beneficiary” means the beneficiary or beneficiaries designated in accordance
with Section 10 to receive the amount, if any, payable under the Plan upon the Participant’s death.

          (j) “Disability” or “Disabled” means permanent and total disability as a result of bodily
injury, disease or mental disorder which has resulted in the Participant’s becoming eligible for
long-term disability benefits under the Company’s long-term disability plan as then in effect.

          (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

 

          (l) “Guidance” has the meaning set forth in Section 19.

          (m) “Incumbent Board” means the individuals who, as of the date hereof, are members of the
Board and any individual becoming a member of the Board subsequent to the date hereof whose
election, nomination for election or appointment was approved by a vote of at least two-thirds of
the then-incumbent directors (either by a specific vote or by approval of the proxy statement of
the Company in which such person is named as a nominee for director, without objection to such
nomination), except that an individual will not be an incumbent director if his/her election or
appointment to the Board occurs as a result of an actual or threatened election contest (as
described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board.

          (n) “Participant” means any key employee of the Company designated by the Committee to
participate in the Plan.

          (o) “Plan” means this UICI Success Bonus Award Plan.

          (p) “Prorating Event” means a Participant’s termination of employment due to the Participant’s
death or Disability.

          (q) “Subsidiary” means an entity the results of operations of which are included in the
Company’s consolidated results of operations prepared in accordance with generally accepted
accounting principles.

          (r) “Success Bonus Pool” means the “Total Pool Amount” calculated in accordance with Annex I.

          (s) “Voting Stock” means stock of the Company generally entitled to vote on election of
directors of the Company.

     3. Eligibility. Participants in the Plan (other than the Company’s President and Chief
Executive Officer (the “CEO”)) will be designated by the CEO and the amount of Award to be made to
such participant shall be determined by the CEO, subject to review and approval by the Committee.
The amount of any Award to be made to the CEO shall be determined by the Committee. Each
Participant so designated shall be advised that he or she has been designated as a Participant by
an instrument in writing signed or specifically authorized to be signed by the chairman of the
Committee (such instrument, an “Award Notice”). Each Award Notice shall (a) so advise the
recipient that he or she has been designated as a Participant in the Plan eligible to receive an
Award and (b) designate the amount of the Award to be received by the Participant, which Award may
be expressed as a fixed dollar amount or as a percentage of the Success Bonus Pool as calculated in
accordance with Annex I hereto; except that in no event shall the aggregate of all Awards to be
made hereunder to all Participants hereunder exceed the amount of the Success Bonus Pool calculated
in accordance with Annex I hereto. No employee will at any time have the right to be selected as a
Participant. Awards made under the Plan are not in lieu of any other benefits a Participant may be
entitled to receive from the Company. Awards will not be considered compensation for purposes of
the Company’s pension and welfare benefit plans, programs and arrangements.

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     4. Administration.

          (a) The Plan will be administered by the Committee. Except as otherwise expressly provided
herein, full power and authority to construe, interpret and administer the Plan will be vested in
the Committee, including the power to amend or terminate the Plan as further described in Section
13.

          (b) Any determination by the Committee hereunder will be conclusive, but however, will not be
entitled to deference by a trier of fact.

     5. Vesting. A Participant will be entitled to the Award specified in an Award Notice
so long as he or she continues as a full-time employee of the Company or any of its Subsidiaries as
of the date of completion of a Change of Control. If any Participant ceases to be so employed
prior to such date, he or she will not be entitled to an Award or other benefit hereunder,
regardless of the circumstances, including any actual or alleged wrongful termination, unless the
Committee shall have determined, in light of all facts and circumstances, that it would be in the
interests of the Company to make such Award upon the terms and conditions otherwise provided for
herein. Notwithstanding any other provision hereof, if a Participant’s employment terminates by
reason of the occurrence of a Prorating Event, a Participant will be entitled to 75% of the amounts
to which he/she or his/her Designated Beneficiary otherwise would have been entitled hereunder,
payable on the dates specified below.

     6. Payment of Awards. Subject to Section 5, 60% of Awards will be payable on the date
of completion of a Change of Control and 40% of Awards will be payable on a date not later than the
180th day following the Change of Control.

     7. Non-Alienation of Benefits. A Participant may not assign, sell, encumber, transfer
or otherwise dispose of any rights or interests under the Plan except by will or the laws of
descent and distribution. Any attempted disposition in contravention of the preceding sentence
will be void.

     8. No Right to Employment. Neither the Plan nor any action taken pursuant to the Plan
will be construed as giving any employee any right to be retained in the employ of the Company.

     9. Taxes. The Company will deduct from all amounts paid under the Plan and any Award
Notice all federal, state, local and other taxes that the Company is required by law to withhold
with respect to such payments pursuant to applicable law.

     10. Designation and Change of Beneficiary. Each Participant may designate one or more
persons as the Designated Beneficiary who will be entitled to receive the amount, if any, payable
under the Plan upon the death of the Participant. Such designation must be in writing and actually
delivered to the chairman of the Committee. A Participant may, from time to time, revoke or change
his or her Designated Beneficiary without the consent of any prior Designated Beneficiary by filing
a subsequent written designation as aforesaid. The last such designation so received will be
controlling, except that no designation, or change or revocation thereof, will be effective unless
so received prior to the Participant’s death, and in no event will it be effective as of a date
prior to such receipt.

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     11. Payments to Persons Other Than the Participant. If the Committee finds that any
person to whom any amount is payable under the Plan is unable to care for his or her affairs
because of illness or accident or has died, then any payment due to such person or his or her
estate (unless a prior claim therefor has been made by a duly appointed legal representative) may,
if the Committee so directs, be paid to his or her spouse, a child, a relative, an institution
maintaining or having custody of such person, or any other person deemed by the Committee, in its
sole discretion, to be a proper recipient on behalf of such person otherwise entitled to payment.
Any such payment will be a complete discharge of the liability of the Company therefor.

     12. No Liability of Board or Committee Members or Officers. No member of the Board or
the Committee or any officer, or employee of the Company will be personally liable by reason of any
contract or other instrument, or any action or inaction, related to the Plan or any Award Notice
and the Company will indemnify and hold harmless each such person against any cost or expense
(including legal fees, disbursements and other related fraud charges) or liability (including any
sum paid in settlement) arising out of any of the foregoing.

     13. Termination or Amendment of the Plan. The Plan may only be amended, suspended or
terminated upon approval of a majority of the members of the Incumbent Board, except that the Plan
may not be amended in any way to reduce the benefits payable hereunder to a Participant or
otherwise to impair his or her ability to receive any amount due hereunder, without the prior
written consent of the Participant, except that, further, if there is no Change of Control, the
Plan will automatically terminate and any Awards made hereunder will terminate, be void and of no
force or effect, and a Participant will not be entitled to any benefits under this Plan.

     14. Successors and Binding Agreement. This Plan will be binding upon and inure to the
benefit of the Company and any successor to the Company, including 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 will thereafter be
deemed the “Company” for the purposes of this Plan), but will not otherwise be assignable,
transferable or delegatable by the Company.

     15. Notices. For all purposes of this Plan, all communications, including 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 orally confirmed), or three business days after having been sent
by a nationally recognized overnight courier service such as FedEx, UPS or Purolator, addressed to
the Company or the Committee (to the attention of the Corporate Secretary of the Company) at its
principal office and to the Participant at the Participant’s 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 will be effective only upon receipt.

     16. Governing Law. The validity, interpretation, construction and performance of this
Plan 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,
except as expressly provided herein.

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     17. Validity/Severability. If any provision of this Plan or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable or otherwise illegal,
the remainder of this Plan and the application of such provision to any other person or
circumstance will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal. To the extent any provisions held to be invalid, unenforceable or
otherwise illegal cannot be reformed, such provisions are to be stricken herefrom and the remainder
of this Plan will be binding on the parties and their successors and assigns as if such invalid or
illegal provisions were never included in this Plan from the first instance.

     18. Dispute Resolution. Any dispute between the parties under this Plan will be
resolved (except as provided below) through informal arbitration by an arbitrator selected under
the rules of the American Arbitration Association for arbitration of employment disputes located in
Tarrant County, Texas, and the arbitration will be conducted in that location under the rules of
said Association. Each party will be entitled to present evidence and argument to the arbitrator.
The arbitrator will have the right only to interpret and apply the provisions of this Plan and may
not change any of its provisions, except as expressly provided in Section 17.

     19. Compliance with Section 409A of the Code. This Plan is intended to comply and shall be
administered in a manner that is intended to comply with Section 409A of the Code and shall be
construed and interpreted in accordance with such intent. To the extent that an Award and/or
payment is subject to Section 409A of the Code, it shall be awarded and/or paid in a manner that
will comply with Section 409A of the Code, including proposed, temporary or final regulations or
any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with
respect thereto (the “Guidance”). Any provision of this Plan that would cause an award and/or
payment to fail to satisfy Section 409A of the Code shall have no force and effect until amended to
comply with Code Section 409A (which amendment may be retroactive to the extent permitted by the
Guidance).

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ANNEX I

SUCCESS BONUS POOL

          The Success Bonus Pool will be calculated as an amount equal to the sum of the following:

     1.0% times the product of (i) the total number of outstanding shares of UICI utilized
in the calculation of fully diluted earnings per share and (ii) the price per share of UICI
common stock paid in any transaction resulting in a Change of Control up to $35 per share;
and

     4.0% times the product of (i) the total number of outstanding shares of UICI utilized
in the calculation of fully diluted earnings per share and (ii) the price per share of UICI
common stock in excess of $35 per share paid in any transaction resulting in a Change of
Control.AMENDMENT NO. 5

                                       TO

                               FINANCING AGREEMENT

     AMENDMENT NO. 5 TO FINANCING AGREEMENT (this "Amendment") is entered into
as of May 12, 2005, by and among CYNTHIA STEFFE ACQUISITION, LLC, a New York
limited liability company ("CS Acquisition"), S.L. DANIELLE ACQUISITION, LLC, a
New York limited liability company ("Danielle Acquisition"), BERNARD CHAUS, INC.
a New York corporation ("Chaus" and together with CS Acquisition and Danielle
Acquisition, collectively, the "Company") and THE CIT GROUP/COMMERCIAL SERVICES,
INC. ("CIT") as agent (in such capacity, "Agent") for itself and the various
other financial institutions (together with CIT, collectively, the "Lenders")
named in or which hereafter become a party to the Financing Agreement (as
hereafter defined).

                                   BACKGROUND
                                   ----------

     The Company, Agent and Lenders are parties to a Financing Agreement dated
as of September 27, 2002 (as amended, modified, restated or supplemented from
time to time, the "Financing Agreement") pursuant to which Agent and Lenders
provide financial accommodations to Company.

     The Company has requested that Agent and Lenders amend the Financing
Agreement as hereinafter provided, and Agent on behalf of Lenders is willing to
do so on the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Company by Agent and
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Financing Agreement.

     2. Amendments to Financing Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Financing Agreement is
hereby amended as follows:

     (a) Sub-clause (a) of Paragraph 7.10 of Section 7 of the Financing
Agreement is hereby amended by deleting the amount "$15,500,000" set forth in
the table appearing said sub-clause for the fiscal quarter ending June 30, 2005
and inserting the amount "$12,400,000" in said table in lieu thereof.

     (b) Sub-clause (b) of Paragraph 7.10 of Section 7 of the Financing
Agreement is hereby amended by deleting the ratio "1.25 to 1.0" set forth in the
table appearing in

said sub-clause for the fiscal quarter ending June 30, 2005 and inserting "0.35
to 1.0" in said table in lieu thereof

     (c) Sub-clause (e) of Paragraph 7.10 of Section 7 of the Financing
Agreement is hereby amended by deleting the amount "$9,500,000" set forth in the
table appearing in said sub-clause for the calendar months ending May 31, 2005
and June 30, 2005 and inserting the amount (x) "$8,000,000" in said table for
the calendar month ending May 31, 2005 and (y) "$9,000,000" in said table for
the calendar month ending June 30, 2005.

     3. Conditions of Effectiveness. This Amendment shall become effective as of
the date hereof upon satisfaction of the following conditions:

          (a) Agent's receipt of five (5) copies of this Amendment No. 5 duly
executed by the Company and Agent; and

          (b) Agent shall have received such other certificates, instruments,
documents and agreements as may reasonably be required by Agent or its counsel,
each of which shall be in form and substance satisfactory to Agent and its
counsel.

     4. Representations and Warranties. Company hereby represents and warrants
as follows:

          (a) This Amendment No. 5 and the Financing Agreement, as modified
hereby, constitute legal, valid and binding obligations of Company and are
enforceable against Company in accordance with their respective terms.

          (b) Company hereby reaffirms all covenants, representations and
warranties made in the Financing Agreement as amended herein are true and
correct in all material respects and agrees that all such covenants,
representations and warranties, as applicable, shall be deemed to have been
remade as of the effective date of this Amendment No. 5 (except to the extent of
changes resulting from transactions contemplated or permitted by the Financing
Agreement and the other Loan Documents and except to the extent that such
representations and warranties relate expressly to an earlier date).

          (c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Amendment No. 5.

          (d) As of the date hereof, Company has no defense, counterclaim or
offset with respect to the Financing Agreement.

     5. Governing Law. This Amendment No. 5 shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York without regard to any conflicts of laws principles thereto that
would call for the application of the laws of any other jurisdiction.

                                        2

     6. Headings. Section headings in this Amendment No. 5 are included herein
for convenience of reference only and shall not constitute a part of this
Amendment No. 5 for any other purpose.

     7. Counterparts, Facsimile Signatures. This Amendment No. 5 may be executed
by the parties hereto in one or more counterparts, each of which shall be deemed
an original and all of which taken together shall be deemed to constitute one
and the same agreement. Any signature delivered by a party by facsimile
transmission shall be deemed to be an original signature hereto.

     8. Effect on the Financing Agreement.

          (a) Upon the effectiveness of this Amendment No. 5, each reference in
the Financing Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Financing Agreement as
modified hereby.

          (b) Except as specifically modified hereby, the Financing Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.

          (c) The execution, delivery and effectiveness of this Amendment No. 5
shall not operate as a waiver of any right, power or remedy of Agent or any
Lender, nor constitute a waiver of any provision of the Financing Agreement, or
any other documents, instruments or agreements executed and/or delivered under
or in connection therewith.

          (d) The security interests and liens and rights securing payment of
the Obligations are hereby ratified and confirmed by the Company in all
respects.

                            [Signature page follows]

                                       3

     IN WITNESS WHEREOF, this Amendment No. 5 has been duly executed as of the
day and year first written above.

                                             CYNTHIA STEFFE ACQUISITION, LLC

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

                                             S.L. DANIELLE ACQUISITION, LLC

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

                                             BERNARD CHAUS, INC.

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

                                             THE CIT GROUP/COMMERCIAL SERVICES,
                                             INC., as Agent and a Lender

                                             By: /s/ Charles M. Carbone
                                                 -------------------------------
                                                 Name: Charles M. Carbone
                                                 Title: Vice President

                            GUARANTOR ACKNOWLEDGEMENT

     Each of the undersigned hereby acknowledges and agrees that,
notwithstanding the execution of the foregoing Amendment No. 5, the consummation
of the amendments and transactions contemplated thereby, (i) all of the terms
and conditions, representations and covenants contained in the undersigned's
respective Guaranties and Security Agreements are and shall remain in full force
and effect in accordance with their respective terms and (ii) the security
interests and liens theretofore granted, pledged and/or assigned under the
Security Agreements as security for the Obligations shall not be impaired,
limited or affected in any manner whatsoever by reason of Amendment No. 5.

                                             BERNARD CHAUS INTERNATIONAL
                                             (HONG KONG), INC.

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

                                             BERNARD CHAUS INTERNATIONAL
                                             (KOREA), INC.

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

                                             CHAUS RETAIL, INC.

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

                                             BERNARD CHAUS INTERNATIONAL
                                             (TAIWAN), INC.

                                             By: /s/ Barton Heminover
                                                 -------------------------------
                                                 Name: Barton Heminover
                                                 Title: Chief Financial Officer

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