Exhibit 10.51
RESTRICTED STOCK AGREEMENT
This Restricted Stock Agreement ("Agreement"), dated as of July 31,
2001, between CONSECO, INC., an Indiana corporation (the "Company"), and Xxxx X.
Xxxxx, Chairman of the Board and Chief Executive Officer of the Company, and
Xxxxxxxxx Xxxxx, his wife (collectively, "Xxxxx").
RECITALS
WHEREAS, Xxxxx currently owns approximately 2,424,108 shares of
XxxXxxxxxx.xxx, Inc., a Delaware corporation ("Exl");
WHEREAS, simultaneously with the execution of this Agreement, a newly
formed, wholly-owned subsidiary of the Company will merge (the "Merger") with
and into Exl, with Exl being the surviving corporation (the "Surviving Entity")
pursuant to that certain Agreement and Plan of Merger dated as of July 27, 2001
(the "Merger Agreement");
WHEREAS, in the Merger, each share of Exl will be exchanged for .2857
shares of the Company;
WHEREAS, Xxxxx and the Company desire to eliminate any appearance of a
potential conflict of interest in Xxxxx'x receipt of the Company's common stock
in the Merger; and
WHEREAS, as a condition to the consummation of the Merger by the
Company, the Company and Xxxxx desire to set forth certain restrictions on the
shares of common stock of the Company to be issued to Xxxxx in the Merger.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
1. Issuance of Restricted Shares. As of the date of this Agreement,
the Company has issued to Xxxxx six hundred ninety-two thousand six hundred and
two (692,567.66) shares (the "Restricted Shares") of the Company's common stock
(the "Common Stock") in connection with the Merger, upon the terms and
conditions set forth in this Agreement.
2. Representations of Xxxxx. Xxxxx hereby (i) accepts the Restricted
Shares described in paragraph 1; (ii) agrees that the Restricted Shares will be
held by Xxxxx and Xxxxx'x successors subject to (and will not be disposed of
except in accordance with) all of the restrictions, terms and conditions
contained in this Agreement; (iii) represents that Xxxxx is acquiring the
Restricted Shares for investment and not with a view to or for resale or
distribution thereof; (iv) understands that the issuance of the Restricted
Shares has not been registered under the Securities Act of 1933, as amended (the
"Act"), or any applicable state securities laws and that any transfer or resale
of the Restricted Shares will be subject to restriction under such laws; and (v)
agrees that any certificates issued for the Restricted Shares may bear the
following legend or such other legend as the Company, from time to time, deems
appropriate:
"The transfer of the Shares represented by this certificate is
restricted by the terms of a Restricted Stock Agreement dated as of
July 31, 2001, a copy of which is on file at the Company's principal
office; no transfer of the Shares represented by this certificate
shall be valid or effective until the conditions with respect to such
transfer contained in the Agreement have been met."
3. Vesting. Except as otherwise provided in this Agreement, Xxxxx may
not sell, assign, transfer, pledge or otherwise dispose of or encumber any of
the Restricted Shares, or any interest therein, unless and until Xxxxx'x rights
in such Shares have vested in accordance with this Agreement (the period of time
until the Restricted Shares have vested is referred to as the "Restriction
Period"). Any purported sale, assignment, transfer, pledge or other disposition
or encumbrance in violation of this Agreement shall be void and of no effect.
The Restricted Shares shall vest upon the Vesting Event (as defined below).
The "Vesting Event" shall be deemed to have occurred on the earlier of (i)
such date as the Identifiable Cost Reductions (as defined below) realized by the
Company equals or exceeds $52.6 million as approved by a special committee of
the Board of Directors of the Company whose members are independent directors
(the "Special Committee") and based upon the confirmation of
PricewaterhouseCoopers, LLP or the Company's then current independent
accountants that the Company followed agreed upon procedures to arrive at the
Identifiable Cost Reductions, (ii) the date of the occurrence of a Force Majeure
Event (as defined below) or (iii) the date of the occurrence of a Change in
Control (as defined below).
If a disagreement arises between Xxxxx and the Company with respect to the
amount of Identifiable Cost Reductions, Xxxxx shall appoint an independent
accountant (the "Xxxxx Accountant") to review the Identifiable Cost Reductions.
If the Xxxxx Accountant and the Company disagree as to the amount of
Identifiable Cost Reductions, the Xxxxx Accountant and the Company shall agree
on the appointment of an independent accounting firm of national reputation to
establish the amount of the Identifiable Cost Reductions. Such results shall
ultimately be reviewed and approved by the Special Committee.
As used in this Agreement, "Force Majeure Event" shall mean the either (i)
a period commencing prior to June 30, 2004 and continuing through June 30, 2005
or (ii) any twelve month period ending on or after June 30, 2005, and during
which period, the Company is unable to transfer positions to Exl or is
materially hampered from transferring positions to Exl because of fire, strike,
acts of God or of a public enemy, labor dispute, war or governmental
regulations.
As used in this Agreement, "Change in Control" shall mean the acquisition
by any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of "beneficial
ownership" (as such term is defined in Rule 13d-3 promulgated under the 1934
Act), directly or indirectly, of securities of the Company representing 51% or
more of the combined voting power of the then outstanding securities of the
Company entitled to vote with respect to the election of the Company's Board of
Directors.
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As used in this Agreement, "Identifiable Cost Reductions" shall mean the
Cumulative Cost Reductions of Conseco Outsourcing (as defined below), less (i)
Transition Costs (as defined below), less (ii) cumulative costs of Conseco's
India Oversight function (historically captured in budget center 0008056), plus
(iii) consolidated cumulative revenues of Exl and its subsidiary from customers
other than Conseco or any of its subsidiaries, since the date of acquisition of
Exl, and less (iv) all expenses of Exl and its subsidiary. To the extent
included in the financial statements of Exl, up to $21 million of expense
associated with payments under the management incentive plans adopted by Conseco
or its subsidiaries at or about the time of the acquisition of Exl shall not be
included in the calculation of Identifiable Cost Reductions. Identifiable Cost
Reductions will be calculated from the effective date of the acquisition of Exl
and shall not include any costs of unforeseen liabilities of Exl or its
subsidiary or liabilities of Exl or its subsidiary unknown by Conseco which
liabilities result primarily from events occurring prior to or primarily
attributable to periods prior to the effective date of the acquisition of Exl.
Identifiable Cost Reductions shall not include any calculation for the option
expense of Conseco associated with the options to purchase common stock of Exl
that were assumed by Conseco at the time of the acquisition of Exl.
As used in this Agreement, "Transition Costs" shall mean all costs (except
Exl charges) incurred by Conseco and its subsidiaries (other than Exl and its
subsidiary) in connection with the transfer of duties, processes or functions
from Conseco and its subsidiaries (other than Exl and its subsidiary) to Exl and
its subsidiary. Transition Costs shall not include expense reimbursement
received by Exl and its subsidiary from Conseco or any of Conseco's subsidiaries
(other than Exl and its subsidiary). Transition Costs shall be accounted for by
Conseco and its subsidiaries in designated budget centers. Transition Costs
shall include, without limitation, travel, training and severance expenses,
losses (gains) resulting from the sale or disposal of assets (other than real
estate) no longer needed as a result of the outsourcing of positions to Exl and
its subsidiary, and any other costs reasonably associated with the outsourcing
of positions to Exl and its subsidiary.
As used in this Agreement, "Cumulative Cost Reductions of Conseco
Outsourcing" shall mean the cumulative salary cost plus Overhead (as defined
below) saved from the effective date of an eliminated or avoided position at
Conseco and its subsidiaries (other than Exl and its subsidiary) as a direct
result of outsourcing such position to Exl or its subsidiary; provided that
positions eliminated or avoided prior to the date of acquisition of Exl by
Conseco shall be deemed effective as of the date of acquisition of Exl by
Conseco. Conseco and its subsidiaries shall periodically prepare reports
indicating the number of positions eliminated or avoided as a direct result of
outsourcing such positions to Exl or its subsidiary and the annual salary
associated with such positions.
As used in this Agreement, "Overhead" shall mean (i) employee benefits and
payroll and other taxes equal to 32% (the "Benefits Percentage") of the salary
of the positions eliminated or avoided, (ii) supervisory and management overhead
equal to 15% of the salary of the positions eliminated or avoided, (iii) office
and equipment expense of $2,000 per position eliminated or avoided, and (iv)
other general overhead expenses of $2,500 per position eliminated or avoided.
The Benefits Percentage shall be adjusted effective annually on the anniversary
date of this Agreement to reflect any changes in benefit plan design or cost
during the twelve months ended June 30 of each year.
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4. Voting and Dividends. Except as provided in this paragraph, with
respect to the Restricted Shares, Xxxxx shall have all of the rights of a
shareholder of the Company, including the right to vote the Restricted Shares
during the Restriction Period. Any cash dividends paid on any Restricted Shares
during the Restriction Period shall be paid to Xxxxx. In the event any non-cash
dividends or other distributions, whether in property or stock of another
company, are paid on any Restricted Shares during the Restriction Period, such
non-cash dividends or other distributions payable to Xxxxx shall be retained by
the Company and not delivered to Xxxxx unless and until such time as the
Restriction Period on the shares with respect to which such non-cash dividends
or other distributions have been paid shall have lapsed and such shares become
fully vested. Such non-cash dividends or distributions with respect to the
Restricted Shares shall be paid to Xxxxx upon the lapse of the restrictions.
Stock dividends and shares issued as a result of any stock split, if any, issued
with respect to the Restricted Shares shall be treated as additional Restricted
Shares and shall be subject to the same restrictions and other terms and
conditions that apply with respect to, and shall vest or be forfeited at the
same time as, the Restricted Shares with respect to which such stock dividends
or shares are issued.
5. Certificates. As soon as practicable after the date of this
Agreement, the Company shall issue a stock certificate in respect of the
Restricted Shares that will be registered in Xxxxx'x name, and which shall bear
whatever legend the Company shall determine, including, but not limited to, the
legend set forth in paragraph 2. Such certificate shall be held by the Company
pending vesting pursuant to paragraph 3. To the extent the Restricted Shares
become vested, the Company shall promptly provide Xxxxx (or in the case of the
death of both Xxxx X. Xxxxx and Xxxxxxxxx Xxxxx, the designated beneficiary) the
appropriate certificate for the vested shares of Common Stock.
6. Registration Rights. The Company shall use its commercially
reasonable best efforts to prepare and file no later than 30 days from the
occurrence of the Vesting Event a registration statement on Form S-3 or other
applicable form under the Act ("Registration Statement") to register the resale
of the Restricted Shares then owned by Xxxxx. The Company will use its
commercially reasonable best efforts to cause the Registration Statement to be
declared effective and remain effective on the date or dates reasonably
requested by Xxxxx; provided, that Xxxxx may request the registration of the
Restricted Shares only once. The Company shall use its commercially reasonable
best efforts to prepare and file such amendments and post-effective amendments
to the Registration Statement as may be necessary to keep such Registration
Statement current, cause the prospectus to be included in any such Registration
Statement to be supplemented by any required prospectus supplement, and as so
supplemented, to be filed pursuant to applicable rules under the Act and to
comply fully with rules, as applicable, under the Act in a timely manner, and
comply with the provisions of the Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period in
accordance with the intended method or methods of distribution set forth in such
Registration Statement or supplement to the prospectus. The Company and Xxxxx
shall enter into underwriting, custody and indemnification agreements containing
customary terms, representations and covenants with one or more managing
underwriters selected by Xxxxx (subject to the approval of the Company, which
approval shall not unreasonably be withheld). The Company shall pay all of the
legal, accounting, printing, filing and other fees and expenses of
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such registration, except that Xxxxx shall pay all underwriters' discounts and
commissions relating to the sale of Xxxxx'x Common Stock and the fees and
disbursements of Xxxxx'x legal counsel, if any.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. Any term or
provision of this Agreement may be waived at any time by the party which is
entitled to the benefits thereof, and any term or provision of this Agreement
may be amended or supplemented at any time by the mutual consent of the parties
hereto, except that any waiver of any term or condition, or any amendment, of
this Agreement must be in writing.
8. Governing Law. The laws of the State of Indiana shall govern the
interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflict of
laws.
9. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors, assigns and heirs of the respective
parties.
10. Notices. All notices and other communications required or
permitted under this Agreement shall be written and shall be delivered
personally or sent by registered or certified first-class mail, postage prepaid
and return receipt required, addressed as follows: if to the Company, to the
Company's executive offices in Carmel, Indiana, attention: General Counsel, and
if to Xxxxx or successor, to the address last furnished by Xxxxx to the Company.
Each notice and communication shall be deemed to have been given when received
by the Company or Xxxxx.
11. No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
thereof or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
12. Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Agreement. The
masculine pronoun shall include the feminine and neuter and the singular shall
include the plural, when the context so indicates.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
/s/ Xxxx X. Xxxxx CONSECO, INC.
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Xxxx X. Xxxxx
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
Title: Executive Vice President, Strategic
/s/ Xxxxxxxxx Xxxxx Business Development
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Xxxxxxxxx Xxxxx
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