SEPARATION, CONSULTING AND RELEASE AGREEMENT THIS AGREEMENT IS SUBJECT TO ARBITRATION
Exhibit 10.1
THIS AGREEMENT IS SUBJECT TO ARBITRATION
THIS SEPARATION, CONSULTING AND RELEASE AGREEMENT (this “Agreement”) is made and entered into
as of September 19, 2008, by and between HealthMarkets, Inc., a Delaware corporation
(“HealthMarkets”) and The MEGA Life and Health Insurance Company (“MEGA”), a wholly owned
subsidiary of HealthMarkets, (HealthMarkets and MEGA are hereinafter referred to collectively as
the “Company”) and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the “Executive”). Unless otherwise defined herein, capitalized
terms shall have the meaning specified in the Employment Agreement (as defined below).
WHEREAS, HealthMarkets and the Executive are parties to an Employment Agreement, dated October
29, 2007 (the “Employment Agreement”);
WHEREAS, the Executive serves as the President and Chief Operating Officer of HealthMarkets;
WHEREAS, the Executive’s employment with the Company will terminate pursuant to Section 9(b)
of the Employment Agreement on September 19, 2008 (the “Separation Date”);
WHEREAS, subject to (i) the terms of Section 14 of the Employment Agreement, (ii) the
Executive’s continued compliance with the covenants of Section 12 of the Employment Agreement, and
(iii) the Executive’s execution of this Agreement, within 21 days after the Separation Date, and
non-revocation of the Release (as defined herein) of claims against the Company, set forth in
Section 4 of this Agreement, the Executive shall be entitled to receive the payments to be made and
the benefits to be received by the Executive pursuant to Section 2 hereof; and
WHEREAS, pursuant to Section 23 of the Employment Agreement, the Company and the Executive
wish to amend the Employment Agreement, effective as of the date first written above, as set forth
herein.
NOW, THEREFORE, in consideration of the promises and agreements contained herein and other
good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and
intending to be legally bound, the Company and the Executive agree as follows:
1. Resignation.
1.1. The Executive’s employment with the Company will terminate voluntarily pursuant to Section
9(b) of the Employment Agreement, and the Executive will incur a “separation from service” within
the meaning of Section 409A of the Code, on the Separation Date. Effective as of the Separation
Date, the Executive hereby resigns from the position of President and Chief Operating Officer of
HealthMarkets and from any and all other positions, roles, offices, or titles held by the Executive
with, at the direction of, or for the benefit of the Company in accordance with Section 9(e) of the
Employment Agreement, and the Company hereby accepts such resignation.
1.2. Except as otherwise provided in the Employment Agreement or as otherwise provided herein, the
Employment Agreement, the Employment Term and the Executive’s employment shall terminate as of the
Separation Date.
1.3. The Executive shall be entitled to receive the Executive’s Base Salary through September 30,
2008, and on September 30, 2008 shall be entitled to payment equal to such earned but unpaid Base
Salary and any accrued and unused vacation time existing on and as such date. Except as otherwise
provided pursuant to this Section 1.3, Section 2 hereof, Section 11 of the Employment Agreement, as
applicable, and any benefit continuation requirements of applicable laws, the compensation and
benefits
obligations of the Company under Sections 4, 5 and 10 of the Employment Agreement shall cease as of
September 30, 2008.
1.4. In accordance with Section 12(b) of the Employment Agreement, on or before the Separation
Date, the Executive will return to the Company all papers, files, notes, memoranda, keys, access
cards, customer lists, records, reports, mobile or cell phones, pagers, mobile electronic mail
devices, computers, other tangible and intangible property, computer programs, computer files, data
and all other documents and materials, and all copies thereof whether prepared by the Executive or
others, which contain Company or HealthMarkets Affiliates (as defined below) information or relate
or belong to the Company or any HealthMarkets Affiliate which are in the possession, custody or
control of the Executive, other than agreements between the Executive and the Company and
documentation pertaining to the Executive’s employee benefits.
1.5. The Executive covenants and agrees that, notwithstanding any other provision of this
Agreement, he remains subject to the provisions of Section 12 of the Employment Agreement. The
Company and the Executive hereby agree that the parties’ respective rights and obligations under
Sections 6, 8, 9, 11, 12, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 and 24 of the Employment
Agreement, as may be modified by this Agreement, will survive the termination of the Employment
Agreement and the Executive’s employment; but for avoidance of doubt, the remainder of the
Employment Agreement will not survive the termination of the Executive’s employment.
1.6. Pursuant to Section 23 of the Employment Agreement, the Executive and the Company agree to
amend the Employment Agreement as provided herein.
1.7. The Employment Agreement is hereby amended to add the following at the end of Section 6:
Any such reimbursement shall be for payments incurred by the Executive prior to the Separation
Date and such reimbursement shall be made not later than December 31st of the year
following the year in which the Executive incurs the expense. In no event will the amount of
expenses so reimbursed by the Company in one year affect the amount of expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other taxable year. Each provision of
reimbursement pursuant to this Section 6 shall be considered a separate payment and not one of a
series of payments for purposes of Section 409A of the Code.
2. Severance.
2.1 Subject to Section 16 of the Employment Agreement and the Executive’s execution of this
Agreement within 21 days after the Separation Date (which for the avoidance of doubt, shall include
the 21st day) and non-revocation of the Release of claims against the Company, the
Executive will receive the payments and benefits specified in Section 2 of this Agreement;
provided, however, to the extent the Executive has not signed the Release with all
periods for revocation expired as provided in Section 9.6 of this Agreement, such determination to
be made at the conclusion of the period prescribed above in this Section 2, the Executive will
forfeit any right to receive the payments and benefits specified in Section 2.
2.2 Salary Continuation. The Company agrees to pay the Executive an amount equal to
$800,000.00 (the “Termination Payments”), such amount to be payable in equal installments payable
over the twelve (12) months following the Separation Date (the “Payment Period”). Each payment
shall be a separate payment and not one of a series of payments for purposes of Section 409A of the
Code. Commencing on the first payroll date following the Effective Date (as defined in Section 9.6
of this Agreement), but in no event later than the period permitted under Treasury Regulations
Section 1.409A-3(d), the Termination Payments shall be paid to the Executive in biweekly
installments for the duration of the Payment Period, subject to the terms and conditions of Section
2 of this Agreement.
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2.3 Bonus Entitlement. The Company agrees to pay the Executive an amount equal to $540,000
(the “Bonus Entitlement Payments”). The Bonus Entitlement Payments will be paid as follows:
$124,615.38, payable in bi-weekly installments commencing on the first payroll date following the
Effective Date, and $415,384.62 shall be paid in a Lump Sum payment on January 4, 2009. Each
payment shall be a separate payment and not one of a series of payments for purposes of Section
409A of the Code.
2.4 Equity Compensation.
(i) As of the Separation Date, the Executive is not vested in any options
granted pursuant to Nonqualified Stock Option Agreement between the Executive and
HealthMarkets dated November 26, 2007 and all unvested options shall be immediately
cancelled and forfeited.
(ii) The Company will repurchase the Executive’s shares of HealthMarkets common
stock at $24.00 per share on September 30, 2008.
2.5 Welfare Benefits.
(i) The Executive shall be entitled to continued participation in the Company’s group health
plans at the level of participation and coverage in effect at the Executive’s termination of
employment (including spousal and eligible dependent coverage) for the number of months equal to
the period of continuation coverage the Executive would be entitled to pursuant to Section 4980B of
the Code, in accordance with Section 409A of the Code. The Company will charge the Executive a
monthly amount equal to the monthly premium payment required to maintain such coverage and, for the
first twelve months, will pay the Executive an additional amount on the first payroll date of each
calendar month equal to the excess of such monthly premium payment over the amount that the
Executive was required to pay for such coverage immediately before the Separation Date, plus an
additional amount to gross up such payments to Employee to avoid tax consequences to be determined
in accordance with standard Company practice. The Company shall adjust each payment payable to the
Executive pursuant to Section 2.2 of this Agreement, to reflect the charge and payment to the
Executive described in this paragraph. Each payment shall be a separate payment and not one of a
series of payments for purposes of Section 409A of the Code.
(ii) The Executive shall be entitled to continued participation in the Company’s group health
plans at the level of participation and coverage in effect at the Executive’s termination of
employment (including spousal and eligible dependent coverage) for the number of months equal to
the Payment Period in the Company’s group health plans, in accordance with Section 409A of the
Code. The Company will charge the Executive a monthly amount equal to the monthly premium payment
required to maintain such coverage. The Company shall charge the Executive a monthly amount that
Executive will pay within fifteen (15) days of the invoice.
(iii) The Executive shall be entitled to continued participation in the Company’s group life
and other life insurance plans at the level of participation and coverage in effect at the
Executive’s termination of employment (including any employee contribution requirements) for the
Payment Period, and the Company shall deduct from each payment payable to the Executive pursuant to
Section 2.2 of this Agreement, the amount of any employee contributions necessary to maintain such
coverage for the Payment Period, based on any such contributions which were in effect immediately
prior to such termination, in accordance with Section 409A of the Code.
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Each provision of a benefit pursuant to this Section 2.5 (iii) shall be considered a separate
payment and not one of a series of payments for purposes of Section 409A of the Code.
(iv) The Executive understands that he is not eligible to participate in the Company’s long
term disability plan after the Separation Date and agrees to waive and relinquish any entitlement
to such participation or any claim to a monetary payment in lieu of such participation.
(v) Except as otherwise provided by applicable law, notwithstanding anything in this
Section 2.5 to the contrary, the Executive’s coverage under the Company’s group health plans
will terminate when the Executive becomes covered under any group health plan made available
by another employer and covering the same type of benefits. The Executive shall notify the
Company within thirty (30) days after becoming covered for any such benefits.
2.6 In the event that the Executive dies while any Termination Payments or any Bonus Entitlement
Payments are still payable to the Executive hereunder, unless otherwise provided herein, all such
unpaid amounts shall be paid, not later than the tenth (10th) business day following the
Executive’s death, to the Executive’s beneficiary as named on the Executive’s beneficiary forms
under the Company’s 401(k) Savings and Retirement Plan, or, if no such beneficiary is so named,
then to the Executive’s estate, in the form of a lump sum cash payment equal to the sum of the
remaining installments of the Termination Payments and the Bonus Entitlement Payments.
3. Certain Additional Payments by the Company. Section 11 of the Employment Agreement
is modified by adding the following at the end of Section 11:
Notwithstanding any other provision of this Section 11 or Exhibit C to the contrary, all taxes
described in this Section 11 and Exhibit C shall be paid or reimbursed no later than the end of the
year following the year in which the applicable taxes are remitted or, in the case of reimbursement
of expenses incurred due to a tax audit or litigation to which there is no remittance of taxes, no
later than the end of the year following the year in which the audit is completed or there is a
final and nonappealable settlement or other resolution of the litigation in accordance with
Treasury Regulation Section 1.409A-3(i)(v). Any expenses, including interest and penalties
assessed on the taxes described in this Section 11 or Exhibit C, incurred by the Executive shall be
reimbursed promptly after the Executive submits evidence of the incurrence of such expenses, which
reimbursement in no event will be later than the end of the year following the year in which the
Executive incurs the expense, and each provision of reimbursements pursuant to this Section 11
shall be considered a separate payment and not one of a series of payments for purposes of Section
409A of the Code. Any expense reimbursed by the Company in no event will affect the amount of
expenses required to be reimbursed by the Company in any other taxable year.
4. General Release and Covenant Not to ▇▇▇. The provisions of this Section 4 are
effective on the Effective Date, as defined in Section 9.6 hereof.
4.1. In consideration of the payments and promises contained in the Executive’s Employment
Agreement and this Agreement and in full compromise and settlement of any of the Executive’s
potential claims and causes of action relating to or arising out of the Executive’s employment
relationship with the Company or the termination of that relationship and any and all other claims
or causes of action that the Executive has or may have against HealthMarkets and any HealthMarkets
Affiliate (as defined below) up to the date of execution of the release provided in this Section 4
(the “Release”), the Executive hereby knowingly and voluntarily agrees to irrevocably and
unconditionally waive and release and forever discharge HealthMarkets and any other entity
controlled by, controlling or under common control with HealthMarkets, and their respective
predecessors and successors, and their respective directors, officers,
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managers, supervisors, employees, shareholders, stockholders, representatives, attorneys, including
all other persons or entities acting by, through, under, on behalf of or in concert with any of
them (collectively, the “HealthMarkets 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 including, but not limited to, the Executive’s investment in HealthMarkets
common stock, or by reason of any fact, matter, cause or thing whatsoever, including any matter
that may be based on the sole or contributory negligence (whether active, passive or gross) of any
HealthMarkets Affiliate which the Executive, the Executive’s successors, heirs or assigns had, now
have, may have, claimed to have or any time had against the HealthMarkets Affiliates prior to the
execution of this Release or related thereto (collectively “Claims”) and the Executive agrees not
to assert any such Claims or causes of action; provided however, that in the case of the
shareholders and the stockholders, the scope of Claims released is limited to Claims that the
Executive, the Executive’s successors, heirs or assigns had, now have, may have, claimed to have or
any time had against the shareholders and stockholders solely in their capacity as shareholders or
stockholders of HealthMarkets and any other entity controlled by, controlling or under common
control with HealthMarkets, and their respective predecessors and successors.
4.2 This complete Release of Claims includes, but is not limited to, the release of all Claims or
causes of action arising out of or relating to the Executive’s employer-employee relationship with
HealthMarkets, or the termination of that relationship, and any other Claim, including, without
limitation, all Claims of alleged breach of express or implied written or oral contract, including
without limitation, alleged breach of the Employment Agreement, the HealthMarkets Employee
Handbook, or alleged wrongful or constructive discharge; all negligence and tort claims, including
without limitation, gross negligence, defamation, emotional distress, fraud, misrepresentation,
constructive or wrongful discharge; Claims for salary, benefits, bonuses, severance pay, or
vacation pay; or Claims or causes of action arising under any federal, state, or local law,
including but not limited to, Claims for discrimination and/or retaliation under any federal, state
or local law including Claims arising under the Age Discrimination in Employment Act of 1967, as
amended (ADEA); the Older Worker Benefit Protection Act (OWBPA); Title VII of the Civil Rights Act
of 1964, as amended; the Civil Rights Act of 1991; the Americans with Disabilities Act; Claims for
denial or diminishment of benefits under the Employee Retirement Income Security Act; , 29 U.S.C.
§§ 2101-2109, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended; discrimination and/or retaliation claims
under the Texas Labor Code §§ 21,001 et seq., as amended, or Chapter 451,001, et seq. of the Texas
Workers’ Compensation Act and any other Claim under any other statutes of the State of Texas, or
other jurisdictions, and any and all other Claims of Executive that could have arisen from the
Executive’s employment and termination of employment with HealthMarkets.
4.3 The Executive hereby covenants and agrees that the Executive will not indirectly or directly
commence, maintain, initiate, prosecute, 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 any of the HealthMarkets
Affiliates for or with respect to any of the Claims that are addressed in this Release. If
Executive violates this agreement not to ▇▇▇, he agrees to pay all of the Company’s costs and
expenses, including reasonable attorney fees, related to the defense of any claims except this
promise not to ▇▇▇ does not apply to claims that Executive may have under OWBPA and the ADEA.
Although Executive is releasing claims that Executive may have under the OWBPA and the ADEA,
Executive understands that Executive may challenge the voluntary and knowing nature of this Release
under the OWBPA and the ADEA before a court, the Equal Employment Opportunity Commission (EEOC),
the National Labor Relations Board (NLRB) or any other federal, state, or local agency charged with
enforcement of any employment laws. Executive understands however, that if Executive pursues a
claim against the Company under the OWBPA and/or the ADEA, a court has the discretion to determine
whether the Company is entitled to restitution, recoupment or set off (hereinafter “reduction”)
against a monetary award obtained by Executive in the court proceeding. A reduction never can
exceed the amount Executive recovers, or the consideration Executive received for signing this
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Agreement, whichever is less. Executive also recognizes that the Company may be entitled to
recover costs and attorneys fees incurred by the Company as specifically authorized under
applicable law. Executive further understands that nothing in the Release generally prevents
Executive from filing a charge or complaint with or from participating in an investigation or
proceeding conducted by the EEOC, NLRB or any other federal, state or local agency charged with the
enforcement of any employment laws, although by signing this Agreement, Executive waives his right
to individual relief based on claims asserted in such a charge or complaint.
4.4. The Executive agrees to release and discharge the Company and the HealthMarkets Affiliates,
not only from any and all Claims which he could make on his own behalf, but also those which may or
could be brought by any person or organization, on his behalf for monetary relief, and he
specifically waives any right to recovery, directly or indirectly, in connection with any class or
collective action or representative proceeding in which a claim or claims against the Company for
monetary relief may arise, in whole or in part, from any event which occurred up through and
including the Effective Date.
4.5 Notwithstanding anything to the contrary in the foregoing provisions, nothing hereunder shall
be deemed to affect, impair, or diminish in any respect (i) any vested rights or other entitlement
the Executive may have as of the Separation Date under the Company’s 401(k) Savings and Retirement
Plan; (ii) any other vested rights or other entitlements the Executive may have as of the
Separation Date under any employee benefit plan or program, in which the Executive has participated
in his capacity as an employee of the Company; (iii) the Executive’s right to seek to collect
unemployment benefits that the Executive may be entitled to as a result of employment with the
Company or the Executive’s right to seek to collect benefits under workers’ compensation insurance,
if applicable; or (iv) any indemnity against claims, costs or expenses to which the Executive may
be entitled as a result of having served as an officer of the Company or any of its affiliates
pursuant to their respective articles or by-laws; any agreement with the Executive (including under
Section 20 of the Employment Agreement) or any policies of insurance the Company or any of its
affiliates may maintain; (v) the Executive’s rights under this Agreement; or (vi) the Executive’s
rights under the ADEA or the OWBPA as set out specifically in Section 4.3.
4.6. The parties understand, agree and intend that, upon receipt of payments and the provision of
benefits by the Company referred to in Section 2 of this Agreement, the Executive will have
received complete satisfaction of any and all claims, whether known, suspected, or unknown, that he
may have or had against the Company, and he thereby waives any and all relief not explicitly
provided for herein.
4.7. Without limiting the generality of the foregoing, the Executive agrees that the Executive will
keep the fact, terms of, the Agreement, and amounts payable under this Agreement completely
confidential and that he will not hereafter disclose any information concerning or relating to this
Agreement to any third party, other than his legal counsel or accountant, so long as they agree to
keep the Agreement confidential, provided that any party hereto may make such disclosures as are
required by law and as are necessary for legitimate law enforcement or compliance purposes.
5. Consulting Arrangement. Effective upon the Effective Date, the Company hereby
engages the Executive on an independent contractor basis as a consultant to the Company and the
Executive hereby accepts such engagement and agrees to perform the duties and responsibilities set
forth herein in accordance with the terms and conditions hereinafter set forth.
5.1. The term of engagement shall commence upon the Effective Date and shall continue for a 6-month
period (the “Consulting Term”).
5.2. The Executive’s position shall be as a consultant to the Company, in which capacity the
Executive agrees to consult with and assist management of the Company as, when, and if requested by
the Company in providing assistance with respect to such matters as may be requested by the Company
from time to time. As part of the Executive’s duties hereunder, the Executive agrees to fully
cooperate with the
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Company in connection with any and all internal or external investigations, subpoenas, requests for
information, discovery requests, etc., and to make himself available upon the request of the
Company (subject to the approval of the Executive’s then current employer) to appear in any and all
administrative or judicial proceedings with respect to activities or claims accruing prior to the
Separation Date. The Executive shall report to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Director of Human Resources of the
Company, or to his designee or successor, on a regular and periodic basis and shall keep such
individual reasonably informed as to the status and progress of each assignment. The Company
acknowledges and agrees that the consulting relationship created hereby is not exclusive, and that
the Executive may perform similar services for other clients.
5.3. In connection with the Executive’s consulting duties hereunder, the Company will promptly
reimburse the Executive for all reasonable and pre-approved out-of-pocket expenses incurred by the
Executive in connection with performing consulting duties hereunder, and the Executive agrees to
submit to the Company written evidence of all such expenses incurred on a monthly basis which
reimbursement in no event will be later than the end of the year following the year in which the
Executive incurs the expense, and each provision of reimbursement pursuant to this Section 5.3
shall be considered a separate payment and not one of a series of payments for purposes of Section
409A of the Code. In no event will the amount of expenses so reimbursed by the Company in one year
affect the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, in
any other taxable year. Monthly payments of expenses hereunder shall be made by Company check
mailed to the address set forth below or to such other address as may be designated by the
Executive in writing from time to time hereunder.
5.4. Notwithstanding anything in the foregoing provisions to the contrary, it is agreed and
understood that the Executive shall be available twenty (20) hours per month upon request of the
Company to provide consulting services to the Company. Consulting services requested by the Company
and provided by the Executive during the Consulting Team in excess of twenty (20) hours per month
shall be invoiced by the Executive to the Company for payment to the Executive at an hourly rate of
$350.00 per hour. The Executive agrees to keep accurate and timely records of actual hours spent
performing consulting duties hereunder during each month of the Consulting Term and to submit a
copy of such records to the Company promptly after the end of each such month. The Company and the
Executive reasonably anticipate that after the Separation Date, the level of services the Executive
will perform as a consultant will permanently decrease to less than twenty percent (20)% of the
average level of services performed by the Executive for the Company over his entire term of
employment with the Company prior to the Separation Date.
5.5. The consulting arrangement created hereby may be terminated before the end of the Consulting
Term as follows:
(A) by the Company at any time for “cause,” with or without notice;
(B) by the Company at any time without cause, upon not less than 5
calendar days’ prior written notice to the Executive;
(C) upon the Executive’s disability or death; or
(D) by the Executive at any time upon not less than 5 calendar days’
prior written notice to the Company.
For purposes of this Agreement, termination for “cause” shall mean termination for reason of the
Executive’s failure to comply with any of the provisions set forth in this Agreement or the
Company’s Code of Conduct, or termination for reason of theft, dishonesty, gross misconduct,
embezzlement, fraud, insubordination, conviction of a felony involving fraud, committing bodily
harm or damage to property
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(whether connected with the consulting relationship or not), or use of the facilities or premises
of the Company or a subsidiary for the conduct of unlawful or unauthorized activities or
transactions.
6. Non-Disparagement. The Executive agrees that the Executive will not make any
statements, whether written or in any other medium, that disparage or are derogatory to
HealthMarkets, its affiliates, subsidiaries or any member of management; provided,
however, that the Executive may make such statements as are necessary to comply with the
law.
7. Covenant Not to Compete; Covenant Not to Solicit. For a period commencing on the
Separation Date and ending on the first anniversary thereof (the “Restricted Period”), the
Executive acknowledges and agrees that he will not, directly or indirectly, individually or on
behalf of any other person or entity:
(a) engage in any activity that can be reasonably expected to result in a direct and material
competitive harm to the Company or any of the HealthMarkets Affiliates in any region of the United
States in which the business of the HealthMarkets Affiliates is being conducted; or
(b) solicit for hire, hire or employ (whether as an officer, director, employee or insurance
agent) any person who is an employee or independent contractor of any member of the HealthMarkets
Affiliates or solicit, aid or induce any such person to leave his or her employment with any member
of the HealthMarkets Affiliates to accept employment with any other person or entity.
7.1 The Executive’s ownership of less than one percent (1%) of any class of stock in a
publicly-traded corporation shall not be deemed a breach of Section 7(a).
7.2 By way of example, the following, even if occurring during the Restricted Period, would
not be considered contrary to the restrictions of Section 7(a):
(1) Executive working for an employer that underwrites Medicare and/or Medicaid business
primarily through distribution other than a captive field force.
(2) Executive working for an employer that underwrites or administers Group business primarily
through distribution other than a captive field force.
(3) Executive working for an employer that underwrites or administers Group primarily through
distribution other than a captive field force and Individual business, so long as the Executive has
no accountability for the Individual business.
(4) Executive working for a Blue Cross plan that distributes its products through non-captive
agents.
(5) Executive working for an employer that administers wellness plans.
By way of further example, employment during the Restricted Period by Executive with an employer
that is engaged in the Individual health business, and primarily uses captive agents as compared to
non-captive agents to distribute its products shall be considered contrary to the restrictions of
Section 7(a).
7.3 The Executive acknowledges and agrees that a violation of the foregoing provisions of
Sections 6 or 7(b) of this Agreement or Section 12 of the Employment Agreement would result in
material detriment to the Company and would cause irreparable harm to the Company, and that the
Company’s remedy at law for any such violation would be inadequate. In recognition of the
foregoing, the Executive agrees that, in addition to any other relief afforded by law or this
Agreement, including damages sustained by a breach of this Agreement and without the necessity or
proof of actual damages,
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the Company shall have the right to enforce this Agreement by specific remedies, which shall
include, among other things, temporary and permanent injunctions, it being the understanding of the
undersigned parties hereto that damages and injunctions all shall be proper modes of relief and are
not to be considered alternative remedies.
7.4 If Executive secures new employment during the Restricted Period, he shall contact the
Company to disclose the identity of the proposed employer and the position he is seeking and the
Company will notify Executive, within seven days, whether it believes that for the Executive to
accept or remain in such position would reasonably be expected to result in a direct and material
competitive harm to the Company or any of the HealthMarkets Affiliates as provided in Section 7(a)
and, if so whether the Company will waive application of that provision. If the Company informs
Executive that it believes Executive would be in violation of Section 7(a) if he accepted or
remained in such a position and that it is not willing to waive application of that provision,
Executive may decline to assume such new position or resign within 7 days from such new position,
and in either case Executive will not be found to be in violation of Section 7(a). If Executive
assumes or remains in such a position after receiving such notice from the Company, the Company may
discontinue payments pursuant to Section 2.2 of this Agreement and may discontinue payments for
welfare benefits pursuant to Section 2.5(i) of this Agreement, but shall have no additional remedy
against Executive. For avoidance of doubt, Executive may challenge the Company’s determination and
any cessation of payments under Section 2.2 and 2.5(i) pursuant to this provision through the
procedures of Section 10 of this Agreement. Notwithstanding anything herein to the contrary, the
nonsolicitation provision of this Section 7(b) shall remain in full force and effect for the entire
Restricted Period.
8. Tax Effects.
8.1. The Company will withhold from any amounts payable or transfer made under any compensation or
other amount owing to the Executive under this Agreement all applicable federal, state, city or
other withholding taxes as the Company is required to withhold pursuant to any law or government
regulation or ruling.
8.2. The Executive acknowledges and agrees that neither HealthMarkets nor MEGA has made any
representations to the Executive regarding the tax consequences of any amounts to be received by
Executive pursuant to this Agreement. The Executive agrees to pay any federal, state or other
taxes, if any, which are required by law to be paid by the Executive with respect to payments to
Executive under this Agreement. The Executive, in his individual capacity and for the Executive’s
heirs, executors, personal representatives, administrators, successors, and assigns, further agrees
to indemnify, defend, and hold harmless each of the HealthMarkets Affiliates from and against any
and all claims, demands, deficiencies, levies, assessments, executions, judgments, or recoveries by
any governmental entity against any of the HealthMarkets Affiliates for any amounts claimed due on
account of Section 5 of this Agreement or pursuant to claims made under any federal, state or
other tax laws and any costs, expenses, or damages sustained by any of the HealthMarkets Affiliates
by reason of any such claims on account of Section 5 of this Agreement, including without
limitation any amounts paid by any of the HealthMarkets Affiliates as taxes, attorneys’ fees,
deficiencies, levies, assessments, fines, penalties, interest, or otherwise.
9. Acknowledgments. The Executive acknowledges as follows:
9.1. the Executive has carefully read and fully understands all of the provisions of this
Agreement, including the Release;
9.2. the Executive’s waiver and release of rights and claims as set forth in the Release is in
exchange for valuable consideration which he would not otherwise be entitled to receive;
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9.3. the Executive knowingly and voluntarily agrees to all of the terms set forth in this Agreement
and enters into this Agreement and the Release freely, voluntarily, without coercion or duress of
any kind and intending to be legally bound by such terms;
9.4. the Executive has been advised by the Company to consult with his own legal counsel prior to
executing and delivering this Agreement and the Release and Executive affirmatively states that he
has consulted with legal counsel of his own choosing prior to entering into this Agreement and
Executive states that he is not relying on any representation or statement of the Company with
regard to the subject matter , basis or effect of this Agreement;
9.5. the Executive has been given the opportunity to review and consider this Agreement and the
terms and provisions set forth herein for a period of at least twenty-one (21) days following the
Separation Date prior to executing and delivering this Agreement, and in the event that the
Executive has executed this Agreement within less than 21 days of the Separation Date, the
Executive acknowledges that such decision was entirely voluntary and that he had the opportunity to
consider this Agreement to his satisfaction;
9.6. the Executive and the Company acknowledge that for a period of seven (7) days from the date
that the Executive executes this Agreement (the “Revocation Period”), he shall retain the right to
revoke this Release by written notice that is received by the Company’s Director of Human Resources
of the Company before the end of such Revocation Period; provided that this Agreement is not
revoked pursuant to the preceding sentence, this Agreement shall become effective, binding,
irrevocable and enforceable on the first day after due execution and delivery of this Agreement by
the Executive and the Company on or by which all of the following conditions shall have been
satisfied (the “Effective Date”): (i) the Revocation Period has expired such that this Agreement
may no longer be revoked or rescinded by either party; and (ii) the Director of Human Resources of
the Company has received an original Revocation Waiver substantially in the form attached hereto as
Exhibit A, which has been duly and properly executed and notarized by and on behalf of the
Executive;
9.7. if the Executive exercises his right to revoke this Agreement, this Agreement shall be null
and void ab initio;
9.8. the Executive also acknowledges and agrees that if the Company has not received the
Executive’s notice of revocation of this Agreement prior to the expiration of the Revocation
Period, the Executive will have forever waived his right to revoke this Agreement, and this
Agreement shall thereafter be enforceable and have full force and effect;
9.9. for the purpose of implementing a full and complete release and discharge of the Company, the
Executive expressly acknowledges that the Release is intended to include in its effect, without
limitation, all claims which the Executive does not know or suspect to exist in his favor at the
time of execution hereof, and that this Agreement and the Release contemplates the extinguishment
of any such claim or claims. IN EXECUTING THIS AGREEMENT, THE EXECUTIVE EXPRESSLY REPRESENTS THAT
HE IS DOING SO VOLUNTARILY AND OF HIS OWN FREE WILL AND THAT HE IS OF SOUND MIND AT THE TIME OF
SAID EXECUTION.
9.10. the Executive represents that he has not filed any complaints or lawsuits against the Company
with any government agency or any court, and that he will not seek to recover any monetary damages
in the future with respect to Claims that arose prior to the Effective Date; provided,
however, that this shall not limit the Executive from filing a lawsuit for the sole purpose
of enforcing the Executive’s rights under this Agreement;
9.11. the Executive understands that the Executive has not released or waived any rights or claims
under the Age Discrimination in Employment Act of 1967 that may arise after the date of execution
and
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delivery of this Agreement by all parties and that the release and waiver of claims contained in
this Agreement are given by the Executive in exchange for additional consideration over and above
any consideration to which the Executive was already indisputably entitled; and
9.12. the Executive represents and warrants that he has not assigned any Claims released in this
Agreement.
10. Arbitration.
10.1. The Company and the Executive agree that, except for injunctive relief sought by the Company
to enforce Sections 1.4, 4 or 7(b) of this Agreement or Section 12 of the Employment Agreement,
which actions may be brought in state or federal court in Tarrant County, Texas, any controversy
or claim (including all claims pursuant to common and statutory law) relating to or arising from
this Agreement or arising out of or relating to the subject matter of this Agreement shall be
resolved exclusively through binding arbitration. The arbitration shall be administered by a panel
of three neutral arbitrators (the “Panel”) admitted to practice law in Texas for ten years or more
chosen by agreement of the Parties, or, if no agreement can be reached, in accordance with the
American Arbitration Association Rules, or any successor thereto. Any such arbitration proceeding
shall take place in Dallas County, Texas. The arbitration proceeding and all related documents
will be confidential, unless disclosure is required by law. The Panel will have the authority to
award the same remedies, damages, and costs that a court could award, including but not limited to
the right to award injunctive relief in accordance with the other provisions of this Agreement.
The Panel shall issue a written reasoned award explaining the decision, the reasons for the
decision, and any damages awarded. The Panel’s decision will be final and binding. The judgment
on the award rendered by the Panel may be entered in any court having jurisdiction thereof. This
provision can be enforced under the Federal Arbitration Act. The Panel shall determine the
prevailing party in the arbitration. The Panel shall be permitted to award only those remedies in
law or equity that are requested by the parties, appropriate for the claims and supported by
credible, relevant evidence.
10.2. Subject to the terms and any exceptions provided in this Agreement, the parties each waive
the right to a jury trial and waive the right to adjudicate their disputes under this Agreement
outside the arbitration forum provided for in this Agreement. All controversies, claims, or
disputes, including any representative claims against the Company and/or related third parties,
shall be resolved by binding arbitrations only on an individual basis. There shall be no right or
authority for any claims to be arbitrated on a class action or consolidated basis, it being
expressly acknowledged by the Executive that he waives the right to file, participate in, or be a
member of any class action lawsuit, representative action, or class arbitration. The Panel shall
not allow the Executive to serve as a representative, as a private attorney general, or in any
other representative capacity for others in the arbitration. It is an indispensable condition of
the arbitration that there will be no class arbitration.
10.3. The Company will pay the arbitration fees and expenses, less any filing fees. The Executive
agrees to submit to the Company written evidence of all such expenses incurred on a monthly basis
which reimbursement in no event will be later than the end of the year following the year in which
the Executive incurs the expense, and each provision of reimbursement pursuant to this Section 10.3
shall be considered a separate payment and not one of a series of payments for purposes of Section
409A of the Code. Any expenses reimbursed by the Company in no event will affect the amount of
expenses required to be reimbursed by the Company in any other taxable year. Otherwise, each party
shall be solely responsible for its/her/his own costs and attorneys’ fees, unless otherwise awarded
by the Panel.
10.4. Should a court of competent jurisdiction determine that the scope of the arbitration and
related provisions of this Agreement are too broad to be enforced as written, the parties intend
that the court reform the provision in question to such narrower scope as it determines to be
reasonable and enforceable,
Page 11
except for Section 10.2 above, which is an indispensable condition of the arbitration clauses set
forth herein.
11. General Provisions.
11.1 Survival. Notwithstanding the termination of the consulting arrangement hereby
created, upon or prior to expiration of the Consulting Term for any reason, the covenants contained
in this Agreement shall survive and remain in full force and effect.
11.2 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the
benefit of the Executive, the Company, the HealthMarkets Affiliates, and their respective heirs,
executors, administrators, successors, agents, attorneys, representatives, and permitted assigns.
The Executive may not assign or delegate this Agreement or any portion hereof to any third party
without the prior written consent of the Company, and any assignment or delegation attempted
without such consent shall be null, void, and of no effect.
11.3 Code Section 409A. It is intended that any amounts payable under this Agreement and
the Company’s and the Executive’s exercise of authority or discretion hereunder shall comply with
the provisions of Section 409A of the Code and the treasury regulations relating thereto so as not
to subject the Executive to the payment of the additional tax, interest and any tax penalty which
may be imposed under Code Section 409A. In furtherance of this interest, to the extent that any
provision hereof would result in the Executive being subject to payment of the additional tax,
interest and tax penalty under Code Section 409A, the parties agree to amend this Agreement in
order to bring this Agreement into compliance with Code Section 409A; and thereafter interpret its
provisions in a manner that complies with Section 409A of the Code. Reference to Section 409A of
the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include
any proposed, temporary or final regulations, or any other guidance, promulgated with respect to
such Section by the U.S. Department of Treasury or the Internal Revenue Service.
11.4 Entire Agreement; Amendments. Except as specifically amended herein, the provisions
of the Employment Agreement as specified herein, shall continue in full force and effect. This
Agreement and the Employment Agreement, as modified by this Agreement, contains the entire
agreement and understanding between the Company and the Executive relating to the termination of
the Executive’s employment and supersedes prior agreements and understandings, whether written or
verbal, between the Company and the Executive relating to the subject matter hereof. No
representations, oral or written, are being relied upon by the Company or the Executive in
executing this Agreement other than the express representations of this Agreement. This Agreement
may not be amended, modified, or supplemented in any respect except by a subsequent written
agreement executed by all of the parties to this Agreement.
11.5 Negotiated Agreement. All terms and provisions of this Agreement, and the drafting of
this Agreement, have been negotiated by the Company and the Executive at arm’s length and to mutual
agreement, with consideration by and participation of each, and no party shall be deemed the
scrivener, author, or draftsman of this Agreement or any term or provision contained herein.
11.6 Notices. All notices, requests, demands and other communications required or
permitted to be given hereunder shall be transmitted by hand-delivery, certified, or registered
mail with return receipt requested, telecopier, or overnight courier to the parties as set forth
below. Such notices when transmitted in such manner shall be deemed given upon receipt in all
cases.
If to the Company:
Page 12
Attn: Human Resources
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Executive:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
11.7 Execution in Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original agreement, but all of which together
shall constitute one and the same instrument.
11.8 Titles and Headings. Titles and headings to paragraphs and sections herein are for
purposes of reference only, and shall in no way limit, define, or otherwise affect the provisions
herein.
11.9 Governing Law; Submission to Jurisdiction. Except as provided in Section 10 hereof,
this Agreement shall be governed by and construed and enforced in accordance with the laws of the
State of Delaware, provided that provisions of Delaware law requiring application of the law of any
other jurisdiction shall be disregarded. Each of the Executive and the Company hereby submits to
the exclusive jurisdiction of (i) the Texas state courts having general trial jurisdiction in and
for Dallas County, Texas and (ii) the United States District Court for the Northern District of
Texas, in each case for the purposes of all legal proceedings arising out of or relating to the
Agreement. Each of the Executive and the Company irrevocably waives, to the fullest extent
permitted by law, any objection which either Party may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any such proceeding brought
in such a court has been brought in an inconvenient forum. Notwithstanding any of the foregoing,
this Section 11.9 shall in all respects be subject to the provisions set forth in Section 10 of
this Agreement regarding arbitration.
11.10 Severability. If any provision of this Agreement or application thereof to anyone or
under any circumstances is adjudicated to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision or application of this Agreement that can be
given effect without the invalid or unenforceable provision or application, except for Section 10.2
above, which is an indispensable condition of the arbitration clauses set forth in Section 10.
PLEASE READ AND CONSIDER THIS AGREEMENT CAREFULLY BEFORE EXECUTING THIS AGREEMENT AND GENERAL
RELEASE WHICH INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
Please acknowledge your agreement to the foregoing by signing and returning to the undersigned
the enclosed copy of this Agreement.
THIS AGREEMENT IS INVALID IF SIGNED BY THE EXECUTIVE BEFORE THE SEPARATION DATE.
Page 13
| THE MEGA LIFE AND HEALTH INSURANCE COMPANY | ||||||
| By: | ||||||
| Name: | ||||||
| Its: | ||||||
| HEALTHMARKETS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Its: | ||||||
STATE OF TEXAS:
COUNTY OF TARRANT:
BEFORE ME, on this day of , 2008, personally appeared ,
, known to me to be the person described herein and
who executed the foregoing instrument on behalf of such entities, and acknowledged that he
voluntarily executed the same.
(Seal)
|
||||
| My Commission Expires: |
AGREED AND ACKNOWLEDGED as of this ___ day of , 2008.
| EXECUTIVE: | ||||
STATE OF
COUNTY OF
BEFORE ME, on this ___ day of , 2008, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ known to
me to be the person described herein and who executed the foregoing instrument, and acknowledged
that he voluntarily executed the same.
(Seal)
|
||||
| My Commission Expires: |
Page 14
EXHIBIT A
REVOCATION WAIVER
Reference is made to that certain Separation and Release Agreement dated September 19, 2008 (the
“Agreement”) by and between HealthMarkets, Inc. and The MEGA Life and Health Insurance Company
(collectively, the “Company”), on the one hand, and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (“the Executive”), on the other
hand.
The Executive hereby certifies to the Company as follows:
| 1. | The Executive was given the opportunity to review and consider the Agreement and the terms and provisions set forth therein, including without limitation this Revocation Waiver, for a period of at least twenty-one (21) days after the Separation Date prior to executing and delivering the Agreement. | ||
| 2. | The Executive had the right to revoke the Agreement within seven (7) days from and after the date on which the Agreement was executed and delivered by the Executive, and the Agreement does not become binding, effective or enforceable until, among other things, such revocation period has expired without the Executive having exercised such right of revocation. | ||
| 3. | The Executive was advised and was afforded full and fair opportunity, to consult with an attorney of the Executive’s choice prior to executing the Agreement and prior to executing this Revocation Waiver and Executive acknowledges and agrees that he has consulted with his own legal counsel prior to entering into this Agreement and executing this Revocation Waiver. | ||
| 4. | Seven (7) days have passed since the Executive’s execution and delivery of the Agreement and the Executive has not revoked the Agreement, is not revoking the Agreement and does not intend to revoke the Agreement. | ||
| 5. | The Executive intends to and does hereby waive any and all right to revoke the Agreement. |
GIVEN on this ___ day of
, 2008.
STATE OF
COUNTY OF
BEFORE ME, on this ___ day of
, 2008, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
known to me to be the person described herein and who executed the foregoing instrument, and
acknowledged that he voluntarily executed the same.
(Seal)
|
||||
| My Commission Expires: |
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