Document:

exv10w9

 

EXHIBIT 10.9

Term Sheet for New Employment

Agreements for Certain Executives of Maverick

	 	 	 
	Parties:

	 	Maverick (the “Company”) and the executive set forth on Exhibit A (the
“Executive”).
	 
	 	 
	Employment Period:

	 	Three years commencing at the Effective Time (as defined in the
Agreement and Plan of Merger among certain entities formed by The
Blackstone Group, DLJ Merchant Banking Partners IV, L.P. and Goldman,
Sachs & Co. and the Company (the “Merger Agreement”)) (the “Employment
Period”), subject to year-to-year evergreen extension upon expiration
of the Employment Period, unless the Company or the Executive provides
written notice of intent to terminate the Executive’s employment at
least 90 days prior to the expiration of the Employment Period.
	 
	 	 
	Position, Duties and
Reporting
Responsibilities:

	 	As set forth on Exhibit A with duties commensurate with such position.
Reporting to the position set forth on Exhibit A.
	 
	 	 
	Base Salary:

	 	During the Employment Period, the Executive will be paid an annual base
salary in the amount paid as of the date hereof (which will not be less
than the Executive’s base salary immediately prior to the Merger),
subject to review at least annually and may be increased (but not
decreased) by the Company Board or an authorized committee (together,
the “Board”).
	 
	 	 
	Annual Bonus:

	 	Target and Maximum bonus percentage in an amount set forth on Exhibit A.
	 
	 	 
	New Equity Awards:

	 	As set forth on Exhibit B.
	 
	 	 
	Employee Benefits and
Perquisites:

	 	During the Employment Period, the Executive will be eligible to
participate in employee benefit plans, and to receive perquisites,
provided from time to time to similarly situated executives of the
Company and its subsidiaries generally.
	 
	 	 
	Existing Equity
Awards/Holdings and
Transaction Bonus:

	 	Rollover will be determined as provided for on Exhibit A, which sets
forth the number and kind of shares and equity awards to be
purchased/rolled-over (or the amount of dollars to be reinvested) at
the Effective Time. Any options which remain outstanding and are
rolled over will be rolled over tax-free into options to purchase
common shares of the new entity on a basis that preserves the option
spread (based on the Merger consideration). To accomplish this, it is
intended that (to the extent possible) the strike price will be
decreased and will be done so as to comply with Section 409A and not
otherwise create current taxation.

ESOP shares will be converted to cash which will remain in the
plan or be paid out, as applicable.

Equity-linked shares (including share credits) will be converted into
cash and remain in the plan or be paid out, as applicable, in
accordance with their vesting schedules (after taking into account any
accelerated vesting in the UGA Employee Long Term Bonus Program).

 

 

	 	 	 
	 

	 	All equity rolled over or cash invested by the Executive in connection
with the merger transaction will be fully vested at time of
rollover/investment and will be subject to the terms and conditions of
the applicable Shareholders Agreement.
	 
	 	 
	Termination of
Employment:

	 	Upon termination without Cause or resignation for Good Reason, subject
to the Executive’s execution and non-revocation of a release in
substantially the form currently used by the Company (which is attached
as Exhibit C hereto and will be modified to include all shareholders
after Closing (as defined in the Merger Agreement), and to include
provisions regarding non-disparagement and cooperation with legal
claims)) and compliance with the Executive’s covenants, the Executive
will receive, in 24 equal monthly installments, an amount equal to the
sum of (i) two years’ base salary and (ii) two times the Executive’s
target bonus for the year of termination.

If the Executive’s employment is terminated without Cause or for Good
Reason after the last day of the first quarter of any fiscal year, the
Executive will be entitled to a pro-rata bonus, based upon the
Executive’s target bonus and the number of days the Executive was
employed in the applicable fiscal year, divided by 365.

The Executive will be entitled to continuation of welfare benefits for
the number of years equal to the severance payment multiple.

The foregoing will be reformed to the extent necessary to comply with
Section 409A of the Code.

The Executive will return all Company property effective upon
termination of the Executive’s employment and will resign from all
positions with the Company, its subsidiaries or affiliates.
	 
	 	 
	Executive’s Covenants:

	 	During the Executive’s employment and for the number of years equal to
the severance payment multiple, two years, following a termination of
the Executive’s employment for any reason (including a termination for
“Cause” or a voluntary resignation without “Good Reason”), the
Executive agrees not to compete with the Company, its subsidiaries or
affiliates (subject to customary exceptions) and not to solicit or hire
the employees or independent contractors of the Company, its
subsidiaries and affiliates (including any person who was an employee
or independent contractor during the six months prior to termination of
the Executive’s employment).

To “compete” shall mean to engage in any activity that can be
reasonably expected to result in a competitive harm to the Company, its
subsidiaries or affiliates.

While employed and thereafter, the Executive will not disclose or
otherwise use any confidential information or trade secrets of the
Company, its subsidiaries and affiliates.
	 
	 	 
	Definition of Cause:

	 	“Cause” means any of the following (i) Executive commits an act of
gross negligence, willful misconduct, fraud, embezzlement,
misappropriation or breach

 

 

	 	 	 
	 

	 	of fiduciary duty against the Company or any
of its affiliates or subsidiaries, or shall be convicted by a court of
competent jurisdiction of, or shall plead guilty or nolo contendere to,
any felony or any crime involving moral turpitude or any crime which
reasonably could affect the reputation of the Company or the
Executive’s ability to perform the duties required under the Employment
Agreement; (ii) Executive commits a material breach of any of the
covenants in the Employment Agreement or the Shareholder’s Agreement,
which breach has not been remedied within 30 days of the delivery to
Executive by the Board of Directors of written notice of the facts
constituting the breach, and which breach if not cured would have a
material adverse effect on the Company; or (iii) Executive habitually
and willfully neglects his obligations under the Employment Agreement
or the Executive’s duties as an employee of the Company.
	 
	 	 
	Definition of Good
Reason:

	 	A termination will be for “Good Reason” if Executive terminates
employment within 90 days following the occurrence, without Executive’s
written consent, of any of the following events: (i) the reduction of
the Executive’s position from that of a senior executive level position
with the Company; (ii) a decrease in Executive’s base salary or target
bonus, other than in the case of a decrease for a majority of similarly
situated executives; (iii) a reduction in Executive’s participation in
the Company’s benefit plans and policies to a level materially less
favorable to Executive unless such reduction applies to a majority of
senior level executives; or (iv) the announcement of the relocation of
the Executive’s primary place of employment to a location 50 or more
miles from the current headquarters).
	 
	 	 
	280G Gross Up

	 	The Executive will be entitled to a full 280G gross up on all payments
and benefits (whether or not payable or due under the Employment
Agreement) other than with respect to excise tax relating to the
transactions contemplated by the Merger Agreement; provided that the
Company shall be entitled to reduce payments to the Executive by not
more than 10% if doing so would allow for the avoidance of the
imposition of excise taxes.
	 
	 	 
	Prior Agreement (if any):

	 	Supersedes existing agreement effective upon Effective Time.
	 
	 	 
	Governing Law:

	 	Delaware

 

 

The foregoing represents a legally binding commitment of the parties hereto. The parties agree to
negotiate in good faith final documentation to reflect the above as soon as reasonably practicable
after the date hereof; provided, however, that if an employment agreement is not entered into
between the parties this term sheet shall continue in full force and effect; and provided further
that if the Merger Agreement is terminated this term sheet shall be void ab initio and shall have
no further force or effect.

Prior to the Effective Time, the Company and the Executive will not amend or modify this Term
Sheet, or enter into an employment agreement which amends or modifies the terms and conditions of
this Term Sheet, or waive any rights of any party hereunder, without the prior consent of SibCo I
(as defined in the Merger Agreement). SibCo I is intended to be, and shall be, a third-party
beneficiary of this provision, with full rights of enforcement.

Dated September 14, 2005

	 	 	 	 	 
	 	UICI

 	 
	 	By:  	/s/ William J. Gedwed
 	 
	 	 	Name:  	William J. Gedwed, President and CEO 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Troy A. McQuagge
 	 
	 	 	Name:  	Troy A. McQuagge 	 
	 	 	 	 

 

 

	 	 	 	 	 

Exhibit A

Certain Terms and Conditions of Employment

	 	 	 
	Name:
	 	Troy A. McQuagge
	 
	 	 
	Position:
	 	President, Agency Marketing Group
	 
	 	 
	Reporting Duties,
Responsibilities
and Authority:	 	Reports to Bill Gedwed, UICI UICI Chairman, President and CEO
	 
	 	 
	Annual Base Salary:
	 	$400,000
	 
	 	 
	Target Bonus:
	 	100% of Annual Base Salary
	 
	 	 
	Maximum Bonus:
	 	200% of Annual Base Salary
	 
	 	 
	Rollover/Investment:
	 	33,578 options

 

 

Exhibit B

Management Option Plan/Grant Term Sheet

	 	 	 
	General:

	 	The Company to establish option plan effective as of
the Effective Time of the merger pursuant to
which     
% of the Company’s total common shares will be
reserved for issuance as awards and 70% of awards
reserved for issuance will be granted to Company
executives as of the Effective Time (“Initial Grant”).
	 
	 	 
	Number of Shares
Subject to Initial
Grant:

	 	[TBD].
	 
	 	 
	Per Share Exercise
Price of Initial
Grant:

	 	$___.
	 
	 	 
	Option Term of
Initial Grant:

	 	10 years
	 
	 	 
	Vesting
Schedule of

Initial Grant:

	 	Subject to executive’s continued employment with the
Company through each applicable vesting date:

Time-Based Tranche: One-third of options in Initial
Grant will vest 20% on each anniversary of the
Effective Time beginning with the first anniversary of
such grant, based on continued employment. The
exercise price of these options will be the deal
price.

Performance-Based Tranche: One-third of options in
Initial Grant will vest 25% on each of the first and
second anniversaries of the Effective Time, 17% on the
third and fourth anniversaries of the Effective Time
and 16% on the fifth anniversary of the Effective Time
based upon continued employment and achievement of
performance targets (EBIT, net income, revenue growth,
etc.) set by the Compensation Committee (in some cases
individually) after consultation in good faith with
the CEO for such year. Failure to achieve goal in any
year will result in forfeiture of options subject to
the Initial Grant that would have vested in such year.
The exercise price of these options will be the deal
price.

Tranche C: One-third of options in Initial Grant will
vest 25% on each of the first and second anniversaries
of the Effective Time, 17% on the third and fourth
anniversaries of the Effective Time and 16% on the
fifth anniversary of the Effective Time based upon
continued employment. The initial exercise price of
these options will be the deal price and will accrete
at the rate of 10% per year from the Effective Time.
	 
	 	 
	Termination of
Employment:

	 	Except as provided below, if the Executive’s
employment terminates for any reason, the option, to
the extent not then vested, will be immediately
forfeited and all vested options will remain
exercisable for the shorter of (1) 90 days following
the date of termination and (2) the remainder of their
original scheduled term.

If the Executive’s employment is terminated by the
Company without Cause or by the Executive for Good
Reason (in each case, as defined in the Employment
Agreement)

 

 

	 	 	 
	 

	 	or by reason of the Executive’s death or
Disability (as defined in the Employment Agreement),
to the extent not previously cancelled or expired, the
next tranche of the Executive’s unvested Time-Based,
Performance-Based (provided that it is not apparent,
in the reasonable judgment of the Company, that the
Company will miss the applicable performance targets)
and Tranche C options will vest and all vested options
will remain exercisable for the shorter of (1) one
year following the date of termination and (2) the
remainder of their original scheduled term.

If the Executive’s employment is terminated by the
Company for Cause, all options, whether or not vested,
will be immediately forfeited.

Upon a termination of employment for any reason prior
to an Initial Public Offering, the Company will have
the right to purchase (a “Call Right”) any shares
received pursuant to the exercise of the option at
Fair Market Value (except in the event of a
termination for Cause, in which case the Call Right
will be at the lower of the exercise price or Fair
Market Value). The Call Right may be exercised at any
time following the later of six months following (1)
the Executive’s receipt of shares pursuant to the
exercise of the option and (2) the Executive’s
termination of employment.

“Fair Market Value” shall be determined from time to
time (but no less frequently than quarterly) by the
Board in good faith. 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
within 6 months of a termination of employment (except
in the case of a termination for Cause) an Initial
Public Offering or Change of Control occurs, for
purposes of the Call Right, Fair Market Value shall
equal the consideration paid per share pursuant to
such transaction.

Please note that other shares (other than existing
management shares rolled over) will be subject to a
similar call right upon termination (including any
applicable delay so that such shares shall have been
held by the Executive for at least six months), at
Fair Market Value or, in the case of a termination for
“Cause” at the lower of cost or Fair Market Value.
	 
	 	 
	Change of Control:

	 	Upon a Change of Control all options will vest in full.

A “Change of Control” will mean: (i) The acquisition
by any individual entity or group, within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
“Person”), other than The Blackstone Group, DLJ
Merchant Banking Partners IV, L.P. and Goldman, Sachs
& Co. and their respective affiliates (the “Permitted
Holders”), directly or indirectly, of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of equity
securities of the Company representing more than 50%
of the voting power of the then-outstanding equity
securities of the Company entitled to vote generally
in the election of directors (the “Outstanding Company
Voting Securities”); provided, however, that for
purposes of this subsection (i), the following
acquisitions will not constitute a Change of Control:
(1) any acquisition by the Company, (2) any
acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (3) any
acquisition by any Person pursuant to a transaction
which complies

 

 

	 	 	 
	 

	 	 with clauses (A) and (B) of subsection
(ii) below; or
	 
	 	 
	 

	 	(ii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
purchase of assets or stock of another entity (a
“Business Combination”), in each case, unless
immediately following such Business Combination, (A)
all or substantially all of the individuals and
entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the
then-outstanding combined voting power of the
then-outstanding securities entitled to vote generally
in the election of directors of the entity resulting
from such Business Combination (including an entity
which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries)
in substantially the same proportion as their
ownership immediately prior to such Business
Combination of the Outstanding Company Voting
Securities, and (B) no Person (excluding the Permitted
Holders) beneficially owns, directly or indirectly,
more than a majority of the combined voting power of
the then-outstanding voting securities of such entity
except to the extent that such ownership of the
Company existed prior to the Business Combination.

Notwithstanding paragraphs (i) and (ii) above, in no
event will a Change of Control be deemed to occur if
the Permitted Holders maintain a direct or indirect
Controlling Interest in the Company or in an entity
that maintains a direct or indirect Controlling
Interest in the Company. A “Controlling Interest” in
an entity will mean (x) beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the equity
securities representing more than 50% of the voting
power of the outstanding equity securities of the
entity.
	 
	 	 
	Adjustment:

	 	In the event of any change in the outstanding shares
after the Effective Time, the Board may make such
substitution or adjustment (including cash payments)
as it determines in good faith to be equitable.
	 
	 	 
	Withholding:

	 	The Company may withhold from any payment due to or
transfer made under any compensation or other amount
owing to the executive the amount of any applicable
withholding taxes in respect of the option, including
by having shares received upon exercise of the option
withheld by the Company with a fair market value equal
to the amount of the tax liability.
	 
	 	 
	Other:

	 	Shares acquired on exercise will be subject to
generally applicable Shareholders Agreement only until
there is a Change of Control or Initial Public
Offering pursuant to which the Company shares become
publicly traded. The Company has the option of
requiring management to waive their registration
rights with regard to such shares upon an Initial
Public Offering, in which case the Company will
implement an IPO Bonus Plan in cash, stock or
additional options to compensate for management’s loss
of liquidity.

 

 

Exhibit C

Form of UICI Employee Release

     1. In consideration of the payments and promises contained in this Agreement, and in full
compromise and settlement of any of your potential claims and causes of action relating to or
arising out of your employment relationship with UICI or the termination of that relationship, and
any and all other claims or causes of action that you have or may have against the UICI Affiliates
(as defined below) up to the date of execution of this Agreement, you hereby:

     1.1. Knowingly and voluntarily agree to irrevocably and unconditionally waive and
release UICI and any other entity controlled by, controlling or under common control with
the UICI, and their predecessors and successors and directors, officers, employees,
representatives, attorneys, including all persons acting by, through, under or in concert
with any of them (collectively, the “UICI Affiliates”), from any and all charges,
complaints, claims, liabilities, obligations, promises, sums of money, agreements,
controversies, damages, actions, lawsuits, rights, demands, sanctions, costs (including
attorneys’ fees), losses, debts and expenses of any nature whatsoever, existing on, or at
any time prior to, the date hereof in law, in equity or otherwise, which you, your
successors, heirs or assigns had or have upon or by reason of any fact, matter, cause, or
thing whatsoever, and specifically including any matter that may be based on the sole or
contributory negligence (whether active, passive or gross) of any UICI Affiliate. This
release includes, but is not limited to, a release of all claims or causes of action arising
out of or relating to your employer-employee relationship with UICI or the termination of
that relationship, and any other claim, including, without limitation, alleged breach of
express or implied written or oral contract, alleged breach of employee handbook, alleged
wrongful discharge, and tort claims, or claims or causes of action arising under any
federal, state, or local law, including, but not limited to, the Age Discrimination in
Employment Act, 29 U.S.C. § 621, et seq., the Reconstruction Era Civil Rights Act of 1866
and 1871, 42 U.S.C. §§ 1981 and 1983, the Civil Rights Act of 1964, Title VII, 42 U.S.C. §§
2000(e) et seq., The Civil Rights Act of 1991, 42 U.S.C. § 1981(a) et seq., the Equal Pay
Act of 1963, 29 U.S.C. § 206(d) et seq., the Americans with Disabilities Act of 1990, 42
U.S.C. §§ 12101 et seq. the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101-2109, the Sarbanes-Oxley Act
of 2002, as amended, [state-specific employee-employer laws] and any claim under any other
statutes of the State of ___, or other jurisdictions, and the facts, circumstances,
allegations, and controversies relating or giving rise thereto that have accrued to the date
of execution of this Agreement; and

     1.2. Agree that you will not commence, maintain, initiate, or prosecute, or cause,
encourage, assist, volunteer, advise or cooperate with any other person to commence,
maintain, initiate or prosecute, any action, lawsuit, proceeding, investigation, or claim
before any court, legislative body or committee, or administrative agency (whether state,
federal or otherwise) against the UICI Affiliates relating to any claims, liabilities,
obligations, promises, sums of money, agreements, controversies, damages, actions, lawsuits,
rights, demands, sanctions, costs (including attorneys’ fees), losses, debts and expenses
described in the foregoing subparagraph 1.1; provided, however, that, notwithstanding
anything to the contrary in the foregoing, nothing hereunder shall be deemed to affect,
impair or diminish in any respect (i) any vested rights as of the Termination Date or
entitlement you may have under the UICI Employee Savings and Stock Ownership Plan; (ii) any
other vested rights as of the Termination Date you may have under any employee plan or
program in which you have participated in your capacity as an employee of the Company or any
other UICI Affiliate; (iii) your right to seek to collect unemployment benefits that you may
be entitled to as a result of your employment with the Company or your right to seek
benefits un-

 

 

der workers’ compensation insurance, if applicable; (iv) your rights under this
Agreement; including but not limited to your right to bring a claim for breach of this
Agreement; (v) [any rights you may have under that certain Indemnification Agreement, dated
as of     ,      between you and UICI (which Indemnification Agreement UICI, by its signature
hereto, confirms shall remain in full force and effect in accordance with the terms
thereof)]; (vi) any rights to indemnification that you have or may have under the terms of
the UICI Amended and Restated Bylaws; or (vii) your right to bring a claim under the Age
Discrimination in Employment Act to challenge the validity of this Agreement, to file a
charge under the civil rights statutes, or to otherwise participate in an investigation or
proceeding conducted by the Equal Employment Opportunity Commission or other investigative
agency.exv10w10

 

EXHIBIT 10.10

Term Sheet for New Employment

Agreements for Certain Executives of Maverick

	 	 	 
	Parties:

	 	Maverick (the “Company”)
and the executive set forth on Exhibit A (the
“Executive”).
	 
	 	 
	Employment Period:

	 	Three years commencing at the Effective Time (as defined in the
Agreement and Plan of Merger among certain entities formed by The
Blackstone Group, DLJ Merchant Banking Partners IV, L.P. and Goldman,
Sachs & Co. and the Company (the “Merger Agreement”)) (the “Employment
Period”), subject to year-to-year evergreen extension upon expiration
of the Employment Period, unless the Company or the Executive provides
written notice of intent to terminate the Executive’s employment at
least 90 days prior to the expiration of the Employment Period.
	 
	 	 
	Position, Duties and
Reporting
Responsibilities:

	 	As set forth on
Exhibit A with duties commensurate with such position.
Reporting to the position set forth on Exhibit A.
	 
	 	 
	Base Salary:

	 	During the Employment Period, the Executive will be paid an annual base
salary in the amount paid as of the date hereof (which will not be less
than the Executive’s base salary immediately prior to the Merger),
subject to review at least annually and may be increased (but not
decreased) by the Company Board or an authorized committee (together,
the “Board”).
	 
	 	 
	Annual Bonus:

	 	Target and Maximum bonus percentage
in an amount set forth on Exhibit A.
	 
	 	 
	New Equity Awards:

	 	As set forth on
Exhibit B.
	 
	 	 
	Employee Benefits and
Perquisites:

	 	During the Employment Period, the Executive will be eligible to
participate in employee benefit plans, and to receive perquisites,
provided from time to time to similarly situated executives of the
Company and its subsidiaries generally.
	 
	 	 
	Existing Equity
Awards/Holdings and
Transaction Bonus:

	 	Rollover will be determined as
provided for on Exhibit A, which sets
forth the number and kind of shares and equity awards to be
purchased/rolled-over (or the amount of dollars to be reinvested) at
the Effective Time. Any options which remain outstanding and are
rolled over will be rolled over tax-free into options to purchase
common shares of the new entity on a basis that preserves the option
spread (based on the Merger consideration). To accomplish this, it is
intended that (to the extent possible) the strike price will be
decreased and will be done so as to comply with Section 409A and not
otherwise create current taxation.
	 
	 	 
	 

	 	ESOP shares will be converted to cash which will remain in the
plan or be paid out, as applicable.
	 
	 	 
	 

	 	Equity-linked shares (including share credits) will be converted into
cash and remain in the plan or be paid out, as applicable, in
accordance with their vesting schedules (after taking into account any
accelerated vesting in the UGA Employee Long Term Bonus Program).

 

 

	 	 	 
	 

	 	All equity rolled over or cash invested by the Executive in connection
with the merger transaction will be fully vested at time of
rollover/investment and will be subject to the terms and conditions of
the applicable Shareholders Agreement.
	 
	 	 
	Termination of
Employment:

	 	Upon termination without Cause or resignation for Good Reason, subject
to the Executive’s execution and non-revocation of a release in
substantially the form currently used by the Company (which is attached
as Exhibit C hereto and will be modified to include all shareholders
after Closing (as defined in the Merger Agreement), and to include
provisions regarding non-disparagement and cooperation with legal
claims)) and compliance with the Executive’s covenants, the Executive
will receive, in 24 equal monthly installments, an amount equal to the
sum of (i) two years’ base salary and (ii) two times the Executive’s
target bonus for the year of termination.
	 
	 	 
	 

	 	If the Executive’s employment is terminated without Cause or for Good
Reason after the last day of the first quarter of any fiscal year, the
Executive will be entitled to a pro-rata bonus, based upon the
Executive’s target bonus and the number of days the Executive was
employed in the applicable fiscal year, divided by 365.
	 
	 	 
	 

	 	The Executive will be entitled to continuation of welfare benefits for
the number of years equal to the severance payment multiple.
	 
	 	 
	 

	 	The foregoing will be reformed to the extent necessary to comply with
Section 409A of the Code.
	 
	 	 
	 

	 	The Executive will return all Company property effective upon
termination of the Executive’s employment and will resign from all
positions with the Company, its subsidiaries or affiliates.
	 
	 	 
	Executive’s Covenants:

	 	During the Executive’s employment and for the number of years equal to
the severance payment multiple, two years, following a termination of
the Executive’s employment for any reason (including a termination for
“Cause” or a voluntary resignation without “Good Reason”), the
Executive agrees not to compete with the Company, its subsidiaries or
affiliates (subject to customary exceptions) and not to solicit or hire
the employees or independent contractors of the Company, its
subsidiaries and affiliates (including any person who was an employee
or independent contractor during the six months prior to termination of
the Executive’s employment).
	 
	 	 
	 

	 	To “compete” shall mean to engage in any activity that can be
reasonably expected to result in a competitive harm to the Company, its
subsidiaries or affiliates.
	 
	 	 
	 

	 	While employed and thereafter, the Executive will not disclose or
otherwise use any confidential information or trade secrets of the
Company, its subsidiaries and affiliates.
	 
	 	 
	Definition of Cause:

	 	“Cause” means any of the following (i) Executive commits an act of
gross negligence, willful misconduct, fraud, embezzlement,
misappropriation or breach

 

 

	 	 	 
	 

	 	of fiduciary duty against the Company or any
of its affiliates or subsidiaries, or shall be convicted by a court of
competent jurisdiction of, or shall plead guilty or nolo contendere to,
any felony or any crime involving moral turpitude or any crime which
reasonably could affect the reputation of the Company or the
Executive’s ability to perform the duties required under the Employment
Agreement; (ii) Executive commits a material breach of any of the
covenants in the Employment Agreement or the Shareholder’s Agreement,
which breach has not been remedied within 30 days of the delivery to
Executive by the Board of Directors of written notice of the facts
constituting the breach, and which breach if not cured would have a
material adverse effect on the Company; or (iii) Executive habitually
and willfully neglects his obligations under the Employment Agreement
or the Executive’s duties as an employee of the Company.
	 
	 	 
	Definition of Good
Reason:

	 	A termination will be for “Good Reason” if Executive terminates
employment within 90 days following the occurrence, without Executive’s
written consent, of any of the following events: (i) the reduction of
the Executive’s position from that of a senior executive level position
with the Company; (ii) a decrease in Executive’s base salary or target
bonus, other than in the case of a decrease for a majority of similarly
situated executives; (iii) a reduction in Executive’s participation in
the Company’s benefit plans and policies to a level materially less
favorable to Executive unless such reduction applies to a majority of
senior level executives; or (iv) the announcement of the relocation of
the Executive’s primary place of employment to a location 50 or more
miles from the current headquarters).
	 
	 	 
	280G Gross Up

	 	The Executive will be entitled to a full 280G gross up on all payments
and benefits (whether or not payable or due under the Employment
Agreement) other than with respect to excise tax relating to the
transactions contemplated by the Merger Agreement; provided that the
Company shall be entitled to reduce payments to the Executive by not
more than 10% if doing so would allow for the avoidance of the
imposition of excise taxes.
	 
	 	 
	Prior Agreement (if any):

	 	Supersedes existing agreement effective upon Effective Time.
	 
	 	 
	Governing Law:

	 	Delaware

 

 

The foregoing represents a legally binding commitment of the parties hereto. The parties agree to
negotiate in good faith final documentation to reflect the above as soon as reasonably practicable
after the date hereof; provided, however, that if an employment agreement is not entered into
between the parties this term sheet shall continue in full force and effect; and provided further
that if the Merger Agreement is terminated this term sheet shall be void ab initio and shall have
no further force or effect.

Prior to the Effective Time, the Company and the Executive will not amend or modify this Term
Sheet, or enter into an employment agreement which amends or modifies the terms and conditions of
this Term Sheet, or waive any rights of any party hereunder, without the prior consent of SibCo I
(as defined in the Merger Agreement). SibCo I is intended to be, and shall be, a third-party
beneficiary of this provision, with full rights of enforcement.

Dated September 14, 2005

UICI

	 	 	 	 	 
	By:

	 	/s/ William J. Gedwed	 	 
	 

	 	 	 	 
	 

	 	Name: William J. Gedwed, 

President and CEO	 	 
	 
	 	 	 	 
	By:

	 	/s/ Phillip J. Myhra	 	 
	 

	 	 	 	 
	 

	 	Name: Phillip J. Myhra	 	 

 

 

Exhibit A

Certain Terms and Conditions of Employment

	 	 	 	 	 
	Name:

	 	Phillip J. Myhra

	 
	 	 	 	 
	Position:

	 	UICI Executive Vice President Insurance Operations and Risk Management

	 
	 	 	 	 
	Reporting Duties,
Responsibilities
and Authority:

	 	Reports to Bill Gedwed, UICI Chairman, President and CEO

	 
	 	 	 	 
	Annual Base Salary:

	 	$ 375,000	 	 
	 
	 	 	 	 
	Target Bonus:

	 	75% of Annual Base Salary

	 
	 	 	 	 
	Maximum Bonus:

	 	150% of Annual Base Salary

	 
	 	 	 	 
	Rollover/Investment:

	 	53,287 options, 1,877 shares and full Success Bonus

 

 

Exhibit B

Management Option Plan/Grant Term Sheet

	 	 	 
	General:

	 	The Company to establish option plan effective as of
the Effective Time of the merger pursuant to which __
% of the Company’s total common shares will be
reserved for issuance as awards and 70% of awards
reserved for issuance will be granted to Company
executives as of the Effective Time (“Initial Grant”).
	 
	 	 
	Number of Shares
Subject to Initial
Grant:

	 	[TBD].
	 
	 	 
	Per Share Exercise
Price of Initial
Grant:

	 	$___.
	 
	 	 
	Option Term of
Initial Grant:

	 	10 years
	 
	 	 
	Vesting Schedule of
Initial Grant:

	 	Subject to executive’s continued employment with the
Company through each applicable vesting date:
	 

	 	Time-Based Tranche: One-third of options in Initial
Grant will vest 20% on each anniversary of the
Effective Time beginning with the first anniversary of
such grant, based on continued employment. The
exercise price of these options will be the deal
price.
	 
	 	 
	 

	 	Performance-Based Tranche: One-third of options in
Initial Grant will vest 25% on each of the first and
second anniversaries of the Effective Time, 17% on the
third and fourth anniversaries of the Effective Time
and 16% on the fifth anniversary of the Effective Time
based upon continued employment and achievement of
performance targets (EBIT, net income, revenue growth,
etc.) set by the Compensation Committee (in some cases
individually) after consultation in good faith with
the CEO for such year. Failure to achieve goal in any
year will result in forfeiture of options subject to
the Initial Grant that would have vested in such year.
The exercise price of these options will be the deal
price.
	 
	 	 
	 

	 	Tranche C: One-third of options in Initial Grant will
vest 25% on each of the first and second anniversaries
of the Effective Time, 17% on the third and fourth
anniversaries of the Effective Time and 16% on the
fifth anniversary of the Effective Time based upon
continued employment. The initial exercise price of
these options will be the deal price and will accrete
at the rate of 10% per year from the Effective Time.
	 
	 	 
	Termination of
Employment:

	 	Except as provided below, if the Executive’s
employment terminates for any reason, the option, to
the extent not then vested, will be immediately
forfeited and all vested options will remain
exercisable for the shorter of (1) 90 days following
the date of termination and (2) the remainder of their
original scheduled term.
	 
	 	 
	 

	 	If the Executive’s employment is terminated by the
Company without Cause or by the Executive for Good
Reason (in each case, as defined in the Employment
Agreement)

 

 

	 	 	 
	 

	 	or by reason of the Executive’s death or
Disability (as defined in the Employment Agreement),
to the extent not previously cancelled or expired, the
next tranche of the Executive’s unvested Time-Based,
Performance-Based (provided that it is not apparent,
in the reasonable judgment of the Company, that the
Company will miss the applicable performance targets)
and Tranche C options will vest and all vested options
will remain exercisable for the shorter of (1) one
year following the date of termination and (2) the
remainder of their original scheduled term.
	 
	 	 
	 

	 	If the Executive’s employment is terminated by the
Company for Cause, all options, whether or not vested,
will be immediately forfeited.
	 
	 	 
	 

	 	Upon a termination of employment for any reason prior
to an Initial Public Offering, the Company will have
the right to purchase (a “Call Right”) any shares
received pursuant to the exercise of the option at
Fair Market Value (except in the event of a
termination for Cause, in which case the Call Right
will be at the lower of the exercise price or Fair
Market Value). The Call Right may be exercised at any
time following the later of six months following (1)
the Executive’s receipt of shares pursuant to the
exercise of the option and (2) the Executive’s
termination of employment.
	 
	 	 
	 

	 	“Fair Market Value” shall be determined from time to
time (but no less frequently than quarterly) by the
Board in good faith. 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
within 6 months of a termination of employment (except
in the case of a termination for Cause) an Initial
Public Offering or Change of Control occurs, for
purposes of the Call Right, Fair Market Value shall
equal the consideration paid per share pursuant to
such transaction.
	 
	 	 
	 

	 	Please note that other shares (other than existing
management shares rolled over) will be subject to a
similar call right upon termination (including any
applicable delay so that such shares shall have been
held by the Executive for at least six months), at
Fair Market Value or, in the case of a termination for
“Cause” at the lower of cost or Fair Market Value.
	 
	 	 
	Change of Control:

	 	Upon a Change of Control all options will vest in full.
	 
	 	 
	 

	 	A “Change of Control” will mean: (i) The acquisition
by any individual entity or group, within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
“Person”), other than The Blackstone Group, DLJ
Merchant Banking Partners IV, L.P. and Goldman, Sachs
& Co. and their respective affiliates (the “Permitted
Holders”), directly or indirectly, of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of equity
securities of the Company representing more than 50%
of the voting power of the then-outstanding equity
securities of the Company entitled to vote generally
in the election of directors (the “Outstanding Company
Voting Securities”); provided, however, that for
purposes of this subsection (i), the following
acquisitions will not constitute a Change of Control: (1) any acquisition by the Company, (2) any
acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (3) any
acquisition by any Person pursuant to a transaction
which comp-

 

 

	 	 	 
	 

	 	lies with clauses (A) and (B) of subsection
(ii) below; or
	 
	 	 
	 

	 	(ii) The consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
purchase of assets or stock of another entity (a
“Business Combination”), in each case, unless
immediately following such Business Combination, (A)
all or substantially all of the individuals and
entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately
prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the
then-outstanding combined voting power of the
then-outstanding securities entitled to vote generally
in the election of directors of the entity resulting
from such Business Combination (including an entity
which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries)
in substantially the same proportion as their
ownership immediately prior to such Business
Combination of the Outstanding Company Voting
Securities, and (B) no Person (excluding the Permitted
Holders) beneficially owns, directly or indirectly,
more than a majority of the combined voting power of
the then-outstanding voting securities of such entity
except to the extent that such ownership of the
Company existed prior to the Business Combination.
	 
	 	 
	 

	 	Notwithstanding paragraphs (i) and (ii) above, in no
event will a Change of Control be deemed to occur if
the Permitted Holders maintain a direct or indirect
Controlling Interest in the Company or in an entity
that maintains a direct or indirect Controlling
Interest in the Company. A “Controlling Interest” in
an entity will mean (x) beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the equity
securities representing more than 50% of the voting
power of the outstanding equity securities of the
entity.
	 
	 	 
	Adjustment:

	 	In the event of any change in the outstanding shares
after the Effective Time, the Board may make such
substitution or adjustment (including cash payments)
as it determines in good faith to be equitable.
	 
	 	 
	Withholding:

	 	The Company may withhold from any payment due to or
transfer made under any compensation or other amount
owing to the executive the amount of any applicable
withholding taxes in respect of the option, including
by having shares received upon exercise of the option
withheld by the Company with a fair market value equal
to the amount of the tax liability.
	 
	 	 
	Other:

	 	Shares acquired on exercise will be subject to
generally applicable Shareholders Agreement only until
there is a Change of Control or Initial Public
Offering pursuant to which the Company shares become
publicly traded. The Company has the option of
requiring management to waive their registration
rights with regard to such shares upon an Initial
Public Offering, in which case the Company will
implement an IPO Bonus Plan in cash, stock or
additional options to compensate for management’s loss
of liquidity.

 

 

Exhibit C

Form of UICI Employee Release

     1. In consideration of the payments and promises contained in this Agreement, and in full
compromise and settlement of any of your potential claims and causes of action relating to or
arising out of your employment relationship with UICI or the termination of that relationship, and
any and all other claims or causes of action that you have or may have against the UICI Affiliates
(as defined below) up to the date of execution of this Agreement, you hereby:

     1.1. Knowingly and voluntarily agree to irrevocably and unconditionally waive and
release UICI and any other entity controlled by, controlling or under common control with
the UICI, and their predecessors and successors and directors, officers, employees,
representatives, attorneys, including all persons acting by, through, under or in concert
with any of them (collectively, the “UICI Affiliates”), from any and all charges,
complaints, claims, liabilities, obligations, promises, sums of money, agreements,
controversies, damages, actions, lawsuits, rights, demands, sanctions, costs (including
attorneys’ fees), losses, debts and expenses of any nature whatsoever, existing on, or at
any time prior to, the date hereof in law, in equity or otherwise, which you, your
successors, heirs or assigns had or have upon or by reason of any fact, matter, cause, or
thing whatsoever, and specifically including any matter that may be based on the sole or
contributory negligence (whether active, passive or gross) of any UICI Affiliate. This
release includes, but is not limited to, a release of all claims or causes of action arising
out of or relating to your employer-employee relationship with UICI or the termination of
that relationship, and any other claim, including, without limitation, alleged breach of
express or implied written or oral contract, alleged breach of employee handbook, alleged
wrongful discharge, and tort claims, or claims or causes of action arising under any
federal, state, or local law, including, but not limited to, the Age Discrimination in
Employment Act, 29 U.S.C. § 621, et seq., the Reconstruction Era Civil Rights Act of 1866
and 1871, 42 U.S.C. §§ 1981 and 1983, the Civil Rights Act of 1964, Title VII, 42 U.S.C. §§
2000(e) et seq., The Civil Rights Act of 1991, 42 U.S.C. § 1981(a) et seq., the Equal Pay
Act of 1963, 29 U.S.C. § 206(d) et seq., the Americans with Disabilities Act of 1990, 42
U.S.C. §§ 12101 et seq. the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101-2109, the Sarbanes-Oxley Act
of 2002, as amended, [state-specific employee-employer laws] and any claim under any other
statutes of the State of ___, or other jurisdictions, and the facts, circumstances,
allegations, and controversies relating or giving rise thereto that have accrued to the date
of execution of this Agreement; and

     1.2. Agree that you will not commence, maintain, initiate, or prosecute, or cause,
encourage, assist, volunteer, advise or cooperate with any other person to commence,
maintain, initiate or prosecute, any action, lawsuit, proceeding, investigation, or claim
before any court, legislative body or committee, or administrative agency (whether state,
federal or otherwise) against the UICI Affiliates relating to any claims, liabilities,
obligations, promises, sums of money, agreements, controversies, damages, actions, lawsuits,
rights, demands, sanctions, costs (including attorneys’ fees), losses, debts and expenses
described in the foregoing subparagraph 1.1; provided, however, that, notwithstanding
anything to the contrary in the foregoing, nothing hereunder shall be deemed to affect,
impair or diminish in any respect (i) any vested rights as of the Termination Date or
entitlement you may have under the UICI Employee Savings and Stock Ownership Plan; (ii) any
other vested rights as of the Termination Date you may have under any employee plan or
program in which you have participated in your capacity as an employee of the Company or any
other UICI Affiliate; (iii) your right to seek to collect unemployment benefits that you may
be entitled to as a result of your employment with the Company or your right to seek
benefits un-

 

 

der workers’ compensation insurance, if applicable; (iv) your rights under this
Agreement; including but not limited to your right to bring a claim for breach of this
Agreement; (v) [any rights you may have under that certain Indemnification Agreement, dated
as of ___, ___between you and UICI (which Indemnification Agreement UICI, by its signature
hereto, confirms shall remain in full force and effect in accordance with the terms
thereof)]; (vi) any rights to indemnification that you have or may have under the terms of
the UICI Amended and Restated Bylaws; or (vii) your right to bring a claim under the Age
Discrimination in Employment Act to challenge the validity of this Agreement, to file a
charge under the civil rights statutes, or to otherwise participate in an investigation or
proceeding conducted by the Equal Employment Opportunity Commission or other investigative
agency.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]