RETENTION AGREEMENT
Exhibit
99.1
THIS
RETENTION AGREEMENT (this “Agreement”)
is made and entered into as of June 25, 2008, by and between Financial
Industries Corporation, a Texas corporation (hereinafter, together with its
successors, referred to as the “Company”),
on the one hand, and Xxxxxxx X. Xxxxxxx (hereinafter referred to as the “Executive”),
on the other hand.
W
I T N E S S E T H :
WHEREAS,
the Executive currently serves as the Executive Vice President & Chief
Operating Officer of the Company; and
WHEREAS,
the Executive and the Company are parties to that certain letter agreement,
dated as of April 15, 2005, regarding certain payments to be made to the
Executive in connection with a change of control of the Company (the “Change of Control
Agreement ”); and
WHEREAS,
the Company is party to that certain Agreement and Plan of Merger (the “Merger
Agreement ”), dated as of January 14, 2008 and amended as of February 20,
2008, between the Company and Xxxxxxx Life, Inc. (“ Xxxxxxx
”), pursuant to which, on the terms and subject to the conditions set forth in
the Merger Agreement, the Company will be merged with an indirect subsidiary of
Xxxxxxx, with the Company surviving as an indirect, wholly-owned subsidiary of
Xxxxxxx (the “ Merger
”);
WHEREAS,
the parties hereto desire to set forth in writing the terms and conditions of
Executive’s continued engagement as the Company’s Executive Vice President &
Chief Operating Officer and to supersede and terminate that certain letter
agreement, dated as of April 15, 2005, as set forth herein; and
WHEREAS,
the parties further desire to structure the change of control payment to be made
hereunder to conform to the requirements of Section 409A of the Internal Revenue
Code and final Regulations promulgated thereunder;
NOW
THEREFORE, in consideration of the foregoing, of the mutual promises contained
herein and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section
1. Definitions. In
addition to the terms set forth throughout this Agreement, the following
capitalized terms shall have the respective meanings set forth
below:
“Accrued
Benefits” means (a) all unpaid base compensation earned or accrued
through the date the Executive’s engagement is terminated and
(b) reimbursement for any and all unreimbursed reasonable and necessary
expenses incurred by the Executive through the date the Executive’s engagement
is terminated.
“Act” shall mean the Securities
Exchange Act of 1934, as amended.
“Affiliate” shall have the meaning given
such term in Rule 12b-2 of the Act.
“Board” shall mean the board of
directors of the Company.
“Cause” shall mean any of the
following: (a) the Executive’s conviction of a crime involving dishonesty,
fraud, breach of trust or violation of the rights of employees, (b) the
Executive’s willful engagement in any misconduct in the performance of his
duties that, in the opinion of the Company, could materially injure the Company,
(c) the Executive’s performance of any act that, if known to customers,
agents, employees or stockholders of the Company, could, in the opinion of the
Company, materially injure the Company or (d) the Executive’s continued
willful and substantial nonperformance of assigned duties for at least ten days
after he receives notice from the Company of such nonperformance and of the
Company’s intention to terminate his engagement because of such
nonperformance.
“Confidential
Information”
shall mean trade secrets, confidential or proprietary information, and all other
information, documents or materials, owned, developed or possessed by the
Company or any of its Affiliates, or their respective predecessors and
successors, whether in tangible or intangible form, that is not generally known
to the public. Confidential Information includes, but is not limited
to, (a) financial information, (b) product and service plans, costs,
prices, profits and sales, (c) business ideas, recommendations and
strategies, (d) marketing plans and studies, (e) projections,
forecasts and budgets, (f) computer access codes, computer programs and
data bases (and the documentation and information contained therein),
(g) know-how, technologies, concepts and designs, (h) research and
development efforts and projects, (i) records, (j) existing or
prospective client, customer, vendor and supplier information (including, but
not limited to, contracts, identities, needs, transaction histories, volumes,
characteristics, agreements, prices, spending, preferences and habits),
(k) training manuals and similar materials, (l) skills,
responsibilities, compensation and personnel files of the employees, officers,
directors and independent contractors of the Company and its Affiliates and
(m) competitive analyses.
“Investors
Life” means
Investors Life Insurance Company of North America, a wholly-owned subsidiary of
the Company.
“Person” shall mean any individual,
corporation, limited liability company, partnership, association, trust,
unincorporated organization, other entity or group (as defined in the
Act).
“Unauthorized”
shall mean: (a) in contravention of the Company’s policies or procedures;
(b) otherwise inconsistent with the Company’s measures to protect its
interests in any Confidential Information; (c) in contravention of any
lawful instruction or directive, either written or oral, of the Board; or
(d) in contravention of any duty existing under law or
contract.
Section
2. Term of
Engagement. Unless earlier terminated in accordance with the
terms of this Agreement, (a) the Executive’s engagement period shall
commence on the date hereof and shall end on August 29, 2008 (the “Engagement
Period”).
Section
3. Duties.
(a)
During the Engagement Period, the Executive
(i) shall serve as Executive Vice President & Chief Operating Officer
of the Company, (ii) shall report directly Chief Executive Officer of FIC
until the merger has completed and then to the President of Xxxxxxx, Xxxxxxx
Xxxxxx, (iii) shall have such authority and responsibility to perform such
duties consistent with and reasonably related to his position as Executive Vice
President & Chief Operating Officer as may be assigned to him from time to
time by the Chief Executive Officer and (iv) subject
to Section 3(c) , shall devote his commercially reasonable best
efforts and time, attention, knowledge and skill to the operation of the
business and affairs of the Company.
(b) The
Executive will devote his full business time to his responsibilities as
Executive Vice President & Chief Operating Officer of the Company and shall
not serve as an employee of any Person other than the Company.
Section
4. Compensation. In
consideration of the services provided by the Executive to the Company during
the Engagement Period, the Executive shall be compensated as
follows:
(a) Compensation: The
Executive shall receive, at such intervals as are consistent with the Company’s
customary payroll policies as may be in effect from time to time, an annual
salary (prorated for any partial year) equal to $237,109.47.
(b)
Employee Benefits: During the entire engagement period,
the employee shall continue to be eligible for health, dental and vision group
insurance benefits under the company’s employee benefit plans.
(c) Expenses. The
Executive shall be reimbursed, at such intervals and in accordance with such
Company policies as may be in effect from time to time, for any and all
reasonable and necessary business expenses incurred by him for the benefit of
the Company during the Engagement Period.
Section
5. Termination of
Engagement. The Company and the Executive shall have the right
to terminate the engagement of the Executive as set forth in this
Section 5.
(a) Termination
by the Company for Cause. The Company may immediately terminate the
Executive’s engagement for Cause by giving the Executive written or oral notice
of such termination. Upon termination for Cause, the Executive shall
receive only the Accrued Benefits as of the date of termination and thereafter
no other payments shall be owed by the Company to the Executive.
(b) Termination
by the Company without Cause. The Company may terminate the
Executive’s engagement under this Agreement immediately without any Cause or
notice whatsoever. Upon termination without Cause, the Executive
shall receive the Accrued Benefits as of the date of termination and, a Change
of Control Payment if and when it becomes payable pursuant to
Section 5(d).
(c) Termination
by the Executive. The Executive may terminate his engagement with the
Company immediately upon notice to the Company. In the event of
termination by the Executive under this Section 5(c) , the Executive shall
be entitled to his Accrued Benefits as of the date of termination and thereafter
no other payments shall be owed by the Company to the Executive.
(d) Change
of Control Payment. On 8/29/2008, the Executive will remain entitled
to receive the Change of Control Payment in accordance with that
certain letter agreement, dated as of April 15, 2005 (the “Letter Agreement”),
in the amount of $474,219, but payable as set forth in this Section 5(d),
provided that (i) the Executive’s engagement was not terminated for Cause under
Section 5(a) hereof and (ii) the Executive fully performed all
services reasonably requested by the Company pursuant to Section
3 and did not terminate his engagement with the Company prior to the
end of the Engagement Period. In the event the Merger is not
consummated, the Executive is not entitled to this Change of Control
Payment. In accordance with IRS Notice 2007-78 and final Regulations
promulgated under Code Section 409A, the amount payable under this Section 5(d)
($474,219) shall be paid as follows:
(i) $79,036.50 on August 29,
2008;
(ii) $59,277.38
on March 1, 2009; and
(iii) Monthly
installments of $19,759.13 commencing April 1, 2009 and continuing through final
payment on August 1, 2010.
Section
6. Non-Solicitation, Confidentiality,
Discoveries and Works.
(a)
Non-Solicitation. During the Engagement
Period and for a period of twelve (12) months following the
termination of such engagement, the Executive agrees that the Executive will
not, either on the Executive’s own behalf or on behalf of
any other Person (other than for the benefit of the Company), directly or
indirectly, solicit: (1) a customer or client of the Company during Executive's
employment with the Company; and (2) solicit or encourage any person who is then
an employee or contractor of the Company or who was an employee or contractor of
the Company within the last six (6) months of the Executive’s engagement with
the Company, to leave the Company, cease working for or providing services to
the Company or discontinue doing business with the Company. “Help
wanted” and similar general solicitations not targeted at the Company’s
employees shall not be deemed to violate the foregoing prohibition.
(b)
Confidentiality.
(i) During
the Engagement Period and for all time following the termination, for any
reason, of such engagement, the Executive shall hold all Confidential
Information in a fiduciary capacity and agrees not to take any action, which
would constitute or facilitate the unauthorized use or disclosure of
Confidential Information.
(ii)
As of the date of termination, for any reason, of the Executive’s
engagement with the Company, the Executive agrees to deliver to the Company all
property and materials within the Executive’s possession or control which belong
to the Company or which contain Confidential Information.
(iii) In
the event that the Executive is requested by any governmental or judicial
authority to disclose any Confidential Information, the Executive shall (to the
extent that it is lawful and practicable to do so) give the Company prompt
notice of such request (including, by giving the Company a copy of such request
if it is in writing), such that the Company may seek a protective order or other
appropriate relief, and in any such proceeding the Executive shall disclose only
so much of the Confidential Information as is required to be
disclosed.
(c)
Discoveries and Works. All
discoveries and works made or conceived by the Executive during and in the
course of his engagement by the Company, jointly or with others, that relate to
the Company’s activities shall be owned by the Company. The terms
“discoveries and works” include, by way of example, products, inventions,
computer programs (including documentation of such programs), technical
improvements, processes, drawings, and works of authorship, including all
educational and sales materials or other publications which relate to Company’s
current business. The Executive shall promptly notify and make full
disclosure to, and execute and deliver any documents requested by, the Company
to evidence or better assure title to such discoveries and works by the Company,
assist the Company in obtaining or maintaining for itself at its own expense
United States and foreign patents, copyrights, trade secret protection and other
protection of any and all such discoveries and works, and promptly execute,
whether during his engagement or thereafter, all applications or other
endorsements necessary or appropriate to maintain trademarks, patents and other
rights for the Company and to protect its title thereto.
(d)
Representations, Warranties and
Acknowledgements. The Executive acknowledges that: (i) but for
the agreements contained in this Section 6 , the Company would
not enter into this Agreement; (ii) the Company considers Confidential
Information to be commercially and competitively valuable to the Company and
critical to its success; (iii) Unauthorized use or disclosure of
Confidential Information could cause irreparable harm to the Company; and
(iv) by this Agreement, the Company is taking reasonable steps to protect
its legitimate interests in its Confidential Information.
(e)
Remedies. In the event of breach or threatened breach by
the Executive of any provision of this Section 6 , the Company shall be
entitled to seek (i) temporary, preliminary and permanent injunctive
relief, in each case without the posting of any bond or other security,
(ii) damages and an equitable accounting of all earnings, profits and other
benefits arising from such breach, or threatened breach and (iii) any other
legal and equitable relief to which it may be entitled, including any and all
monetary damages which the Company may incur as a result of said breach or
threatened breach. The Company shall be entitled to seek temporary
and preliminary injunctive relief from a court of competent
jurisdiction. The Company may pursue any remedy available, including
declaratory relief, concurrently or consecutively, in any order, and the pursuit
of one such remedy at any time will not be deemed an election of remedies or
waiver of the right to pursue any other remedy.
Section
7. Attorney’s Fees and
Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
Section
8. Severability and
Limitation. All agreements and covenants contained herein are
severable and, in the event any of them shall be held to be invalid by any
competent court, this Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein. Should any court
or other legally constituted authority determine that for any such agreement or
covenant to be effective that it must be modified to limit its duration or
scope, the parties hereto shall consider such agreement or covenant to be
amended or modified with respect to duration and scope so as to comply with the
orders of any such court or other legally constituted authority or to be
enforceable under the laws of the State of Texas, and all other portions of such
agreement or covenants shall remain in full force and effect as originally
written. If this agreement and its covenants contained herein are
materially severed, limited, or held to be invalid, in part or in its entirety,
by any competent court or if the merger between Xxxxxxx and Financial Industries
Corporation is not consummated, that certain letter agreement dated April 15,
2005 containing a specific Change of Control payment, which is superseded and
terminated by this agreement, shall once again become immediately effective in
its entirety and shall supersede and terminate this agreement in its
entirety.
Section
9. Assignment;
Successors. The Company may assign its rights under this
Agreement to any successor to all or substantially all the assets of the
Company, by merger or otherwise. The rights of the Executive under
this Agreement, except as provided in the last sentence of this Section 9, may
not be assigned or encumbered by the Executive, voluntarily or involuntarily,
during his lifetime, and any such purported assignment shall be void ab
initio. However, all rights of the Executive under this
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, estates, executors, administrators, heirs and
beneficiaries.
Section
10. Third
Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person other than the parties
hereto and their successors and permitted assigns any rights or remedies under
or by reason of this Agreement.
Section
11. Amendment. Except
as otherwise provided in Section 8, this Agreement may not be amended or
modified at any time except by a written agreement approved and executed by the
Company and the Executive. Any attempted amendment or modification
without such approval and execution shall be null and void ab initio and of no
effect.
Section
12. Withholding. The
Company shall be entitled to withhold from any amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes or charges that it is from time to time required to withhold.
Section
13. Governing Law. This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
principles of conflicts of law of Texas or any other jurisdiction.
Section
14. Notice. Notices
given pursuant to this Agreement shall be in writing and will be effective
(a) upon delivery, if delivered personally, (b) three days after
depositing in the United Stated mail, if mailed by registered or certified mail,
return receipt requested, postage prepaid, (c) the next business day, if
sent via a reputable, established courier service that guarantees next business
day delivery or (d) upon transmission of the telecopy in complete, readable
form, if sent via telecopier followed within 24 hours by confirmation, addressed
as set forth below.
If to the
Company:
Financial
Industries Corporation
0000
Xxxxx Xxxxx Xxxxxxxxx
Xxxxxxxx
X
Xxxxxx,
Xxxxx 00000
Attention: Associate
Counsel
Facsimile
No.: (000) 000-0000
If to the
Executive:
At the
address for the Executive set forth on his signature page hereto; or to such
other address as the party to be notified shall have given to the other in
accordance with the notice provisions set forth herein.
Section
15. No Waiver. No term
or condition of this Agreement shall be deemed to have been waived nor shall
there be any estoppel to enforce any of the terms of provisions of this
Agreement except by written instrument of the party charged with such waiver or
estoppel. No waiver by either party at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by the other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at any time.
Section
16. Headings. The
headings contained herein are for reference only and shall not affect the
meaning or interpretation of any provision of this Agreement.
Section
17. Entire
Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing between the parties hereto with respect to
the engagement of the Executive by the Company, including, without limitation,
the Change of Control Agreement. This Agreement constitutes the
entire agreement and understanding by and between the Executive and the Company
with respect to the engagement of the Executive by the Company. No
agreement or representation, oral or otherwise, express or implied, with respect
to the subject matter hereof has been made by either party which is not set
forth expressly in this Agreement.
Section
18.
Executive
Representations. The Executive hereby represents and warrants
to the Company that (a) the Executive has negotiated and entered into this
Agreement with the full advice and representation of legal counsel specifically
retained for such purpose, (b) the Executive’s execution and delivery of this
Agreement and his performance of his duties and obligations hereunder will not
conflict with, or cause a default under, or give any party a right to damages
under, or to terminate, any other agreement to which the Executive is a party or
by which he is bound and (c) there are no agreements or understandings that
would make unlawful the Executive’s execution or delivery of this Agreement or
his engagement hereunder.
IN
WITNESS WHEREOF, the parties have executed this Agreement in one or more
counterparts, each of which shall be deemed one and the same instrument, as of
the day and year first written above.
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XXXXXXX LIFE
CORPORATION
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FINANCIAL
INDUSTRIES CORPORATION
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By:
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/s/Xxxxxxx
Xxxxxx
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Name:
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Xxxxxxx
Xxxxxx
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Name:
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Xxxxxxx
X. Xxxxxx
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Title:
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President
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Title:
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Chief
Executive Officer
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EXECUTIVE:
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/s/
Xxxxxxx X. Xxxxxxx
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Xxxxxxx
X. Xxxxxxx
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Address
for Notice:
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0
Xxxxxxx Xxxxx
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Xxx
Xxxxx, XX 00000
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