EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 8th day of September, 1997, between
CONSECO, INC., an Indiana corporation (hereinafter called the "Company"), and
Xxxx X. Xxxx (hereinafter called "Executive").
RECITALS
WHEREAS, the services of Executive, his managerial and professional
experience, and his knowledge of the affairs of the Company are of great value
to the Company; and
WHEREAS, the Company deems it to be essential for it to have the benefit
and advantage of the services of the Executive for an extended period;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Executive and Executive hereby
accepts employment upon the terms and conditions hereinafter set forth.
2. Term. The effective date of this Agreement shall be September 8, 1997.
Subject to the provisions for termination as provided in Section 10 hereof, the
term of this Agreement shall be the period beginning September 8, 1997, and
ending December 31, 2002, (hereinafter called the "Basic Employment Period").
3. Duties. Executive is engaged by the Company in an executive capacity as
its chief legal officer. Executive shall report to the Chief Executive Officer
regarding the performance of his duties and shall be subject to the direction
and control of the Board of Directors of the Company (sometimes referred to
herein as the "Board") and the Chief Executive Officer. Executive's position
with the Company shall be Executive Vice President, General Counsel and
Secretary, and such other positions as may be determined from time to time by
the Board.
4. Extent of Services. Executive, subject to the direction and control of
the Chief Executive Officer and the Board, shall have the power and authority
commensurate with his executive status and necessary to perform his duties
hereunder. The Company agrees to provide to Executive such assistance and work
accommodations as are suitable to the character of his positions with the
Company and adequate for the performance of his duties. Executive shall devote
his entire employable time, attention and best efforts to the business of the
Company, and shall not, without the consent of the Company, during the term of
this Agreement be actively engaged in any other business activity, whether or
not such business activity is pursued for gain, profit or other pecuniary
advantage; but this shall not be construed as preventing Executive from
investing his assets in such form or manner as will not require any services on
the part of Executive in the operation of the
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affairs of the companies in which such investments are made. For purposes of
this Agreement, full-time employment shall be the normal work week for
individuals in comparable executive positions with the Company.
5. Compensation. As compensation for services hereunder rendered during the
term hereof, Executive shall receive (a) a base salary ("Base Salary") of One
Million Dollars ($1,000,000) per year payable in equal installments in
accordance with the Company's payroll procedure for its salaried employees.
Salary payments shall be subject to withholding of taxes and other appropriate
and customary amounts. Executive may receive increases in his Base Salary from
time to time, based upon his performance in his executive and management
capacity. The amounts of any such salary increases shall be approved by the
Board or the Compensation Committee of the Board upon the recommendation of the
Chief Executive Officer.
(b) In addition to Base Salary, Executive may receive such other bonuses
or incentive compensation as the Compensation Committee or the Board may
approve from time to time, upon the recommendation of the Chief Executive
Officer; provided, that Executive shall receive a cash bonus of at least
Seven Hundred Fifty Thousand Dollars ($750,000) for each calendar year (or
a pro rata portion thereof, based on the portion of the year worked, for
any part of a calendar year worked).
6. Fringe Benefits.
(a) Executive shall be entitled to participate in such existing employee
benefit plans and insurance programs offered by the Company, or which it
may adopt form time to time, for this executive management or supervisory
personnel generally, in accordance with the eligibility requirements for
participation therein. Nothing herein shall be construed so as to prevent
the Company from modifying or terminating any employee benefit plans or
programs, or employee fringe benefits, it may adopt from time to time.
(b) During the term of this Agreement, the Company shall pay Executive a
monthly automobile allowance in the amount of Six Hundred Dollars ($600).
In addition, the Company shall pay directly or shall reimburse Executive
for normal and reasonable automobile operating expenses, such as
maintenance, repairs and cost of fuel, that he incurs in using his
automobile in the performance of his duties under this Agreement.
(c) Executive shall be entitled to four (4) weeks vacation with pay for
each year during the term hereof.
(d) Executive may incur reasonable expenses for promoting the Company's
business, including expenses for entertainment, travel, and similar items.
The Company shall reimburse Executive for all such reasonable expenses upon
Executive's periodic presentation of an itemized account of such
expenditures.
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(e) The Company shall, upon periodic presentation of satisfactory
evidence and to a maximum of Ten Thousand Dollars ($10,000) per each year
of this Agreement, reimburse Executive for reasonable medical expenses
incurred by Executive and his dependents which are not otherwise covered by
health insurance provided to Executive under Section 6(a).
(f) During the term of this Agreement, the Company shall at its expense
maintain a term life insurance policy or policies on the life of Executive
in the face amount of Five Hundred Thousand Dollars ($500,000), payable to
such beneficiaries as Executive may designate.
7. Disability. If Executive shall become physically or mentally disabled
during the term of this Agreement o the extent that he shall be unable to
perform his duties and services for and on behalf of the Company, and such
disability shall continue for a period in excess of one (1) month, the salary
then payable to Executive pursuant to the foregoing Section 5 shall be paid to
Executive for six (6) calendar months. Thereafter, Executive shall receive fifty
percent (50%) of his salary as determined pursuant to Section 5 during the
continuance of his disability during the term hereof, reduced by any monthly
disability insurance benefits he may received from disability insurance
purchased on his behalf by the Company. Executive's full compensation shall be
reinstated upon his return to performance of his duties and services.
For purposes of this paragraph, disability shall exclude disabilities
arising from: (a) chronic depressive use of intoxicants, drugs or narcotics, or
(b) intentional self-inflicting injury or intentionally self-induced sickness;
or (c) a proven unlawful act or enterprise on the part of Executive.
8. Disclosure of Information. Executive acknowledges that in and as a
result of his employment with the Company, he has been and will be making use
of, acquiring and/or adding to confidential information of the Company of a
special and unique nature and value. As a material inducement to the Company to
enter into this Agreement and to pay to Executive the compensation stated in
Section 5, as well as any additional benefits stated herein, Executive covenants
and agrees that he shall not, at any time during or following the term of his
employment, directly or indirectly, divulge or disclose for any purpose
whatsoever, any confidential information that has been obtained by or disclosed
to him as a result of his employment with the Company. Upon the termination of
this Agreement, Executive shall return all materials obtained from or belonging
to the Company which he may have in his possession or control. In the event of a
breach or threatened breach by Executive of the provisions of this Section, the
Company shall be entitled to an injunction restraining Executive from utilizing
or disclosing, in whole or in part, such material, or from rendering any service
to any person, firm, corporation, association, or other entity to which such
material might be useful, and/or any and all persons directly or indirectly
acting for or with Executive. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available to the Company for such
breach or threatened breach, including the recovery of damages from Executive.
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9. Covenants Against Competition and Solicitation. Executive acknowledges
that the services he is to render to the Company are of a special and unusual
character, with a unique value to the Company, the loss of which cannot
adequately be compensated by damages or an action at law. In view of the unique
value to the Company of the services of Executive for which the Company has
contracted hereunder, because of the confidential information to be obtained by,
or disclosed to, Executive as hereinabove set forth, and as a material
inducement to the Company to enter into this Agreement and to pay to Executive
the compensation stated in Section 5, as well as any additional benefits stated
herein, and other good and valuable consideration, Executive covenants and
agrees that throughout the Basic Employment Period, Executive shall not,
directly or indirectly, anywhere in the United States of America (i) render any
services, as an agent, independent contractor, consultant or otherwise, or
become employed or compensated by, any other corporation, person or entity
engaged in the business of selling or providing life or accident and health
insurance products or services; (ii) in any manner compete with the Company or
any of its subsidiaries; (iii) solicit or attempt to convert to other insurance
carriers providing these same or similar products or services provided by the
Company and its subsidiaries, any customers or policyholders of the Company, or
any of its subsidiaries; or (iv) solicit for employment or employ any employee
of the Company or any of its subsidiaries. The covenants of Executive in this
Section 9 shall be void and unenforceable in the event of a Control Termination
of this Agreement as defined in Section 10 below.
10. Termination.
(a) Either the Company or Executive may terminate this Agreement at any
time for any reason upon written notice to the other. This Agreement shall
also terminate upon the death of Executive.
(b) In the event this Agreement is terminated by the Company and such
termination is not for "just cause" as defined in (e) below and does not
constitute a Control Termination as defined in (d) below, Executive shall
be entitled to receive his Base Salary, as determined pursuant to Section
5(a) hereof, for the remainder of the Basic Employment Period and all other
unpaid amounts previously accrued or awarded pursuant to any other
provision of this Agreement.
(c) In the event this Agreement is terminated by the death of Executive,
is terminated by the Company for "just cause" as defined in (e) below, or
is terminated by Executive and such termination does not constitute a
Control Termination as defined in (d) below, Executive shall be entitled to
receive his Base Salary as provided in Section 5(a) accrued but unpaid as
of the date of termination, and all other unpaid amounts previously accrued
or awarded pursuant to any other provision of this Agreement.
(d) The term "Control Termination" as used herein shall mean (a)
termination of this Agreement by the Company in anticipation of or
following a "change in control" of the Company (as defined below), or (b)
termination of this Agreement by
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Executive following "change in control" of the Company (as defined
below) upon the occurrence of any of the following events:
(i) significant change in the nature or scope of Executive's
authorities or duties from those described in Section 3, a reduction in
his total compensation from that provided in Section 5, or a breach by
the Company of any other provision of this Agreement; or
(ii) reasonable determination by Executive that, as a result of a
change in circumstances significantly affecting his position, he is
unable to exercise the authorities, powers, functions or duties attached
to his position and contemplated by Section 3 of this Agreement, or
(iii) the Company's principal executive offices are moved outside
the geographic area comprised of Xxxxxx County, Indiana, and the seven
contiguous counties.
The term "change in control" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Act")
as revised effective January 20, 1987, or, if Item 6(e) is no longer in effect,
any regulations issued by the Securities and Exchange Commission pursuant to the
Act which serve similar purposes; provided that, without limitation,
(x) such a change in control shall be deemed to have occurred if
and when either (A) except as provided in (y) below, any "person" (as
such term is used in Sections 13(d) and 14(d) of the Act) is or becomes
a "beneficial owner" (as such term is defined in Rule 13d-3 promulgated
under the Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's
then outstanding securities entitled to vote with respect to the
election of its Board of Directors or (B) as the result of a tender
offer, merger, consolidation, sale of assets, or contest for election of
directors, or any combination of the foregoing transactions or events,
individuals who were members of the Board of Directors of the Company
immediately prior to any such transaction or event shall not constitute
a majority of the Board of Directors following such transaction or
event, and
(y) no change of control shall be deemed to have occurred if and
when either (A) any such change is the result of a transaction which
constitutes a "rule 13e-3 transaction" as such term is defined in Rule
13e-3 promulgated under the Act or (B) any such person becomes, with the
approval of the Board of Directors of the Company, the beneficial owner
of securities of the Company representing 25% or more but less than 50%
of the combined voting power of the Company's then outstanding
securities entitled to vote with respect to the election of its Board of
Directors and in connection therewith represents, and at all times
continues to
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represent, in a filing, as amended, with the Securities and Exchange
Commission on Schedule 13D or Schedule 13G (or any successor Schedule
thereto) that "such person has acquired such securities for investment
and not with the purpose nor with the effect of changing or influencing
the control of the Company, nor in connection with or as a participant
in any transaction having such purpose or effect", or words of
comparable meaning and import. The designation by any such person, with
the approval of the Board of Directors of the Company, of a single
individual to serve as a member of, or observer at meetings of, the
Company's Board of Directors, shall not be considered "changing or
influencing the control of the Company" within the meaning of the
immediately preceding clause (B), so long as such individual does not
constitute at any time more than one-third of the total number of
directors serving on such Board.
(e) For purposes of this Agreement "just cause" shall mean and
include:
(i) Executive's breach of any provisions of this Agreement, or
his use of alcohol or drugs which interferes with the performance
of his duties hereunder or which compromises the integrity and
reputation of the Company, its employees, and products;
(ii) Executive's conviction by a court of law, or admission
that he is guilty, or a felony or other crime involving moral
turpitude;
(iii) Executive's absence from his employment other than as a
result of Section 7 hereof, for whatever cause, for a period of
more than one (1) month, without prior written consent from the
Company;
(iv) Executive becomes incompetent or is reasonably unable to
undertake and discharge the duties and responsibilities of his
position; or
(v) Executive's gross negligence, willful malfeasance or fraud
or dishonesty in performing has services on behalf of the Company
pursuant to this Agreement.
11. Payments for Control Termination. In the event of a Control Termination
of this Agreement, the Company shall pay Executive and provide him with the
following:
(a) During the remainder of the Basic Employment Period, the Company
shall continue to pay Executive his Base Salary at the same rate as payable
immediately prior to the date of termination plus the estimated amount of
any bonuses to which he would have been entitled had he remained in the
employ of the Company and a change in control of the Company had not
occurred.
(b) During the remainder of the Basic Employment Period, Executive shall
continue to be treated as an employee under the provisions of all incentive
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compensation arrangements applicable to the Company's executive employees.
In addition, Executive shall continue to be entitled to all benefits and
service credits for benefits under medical, insurance and other employee
benefit plans, programs and arrangements of the Company as if he were still
employed under this Agreement and a change in control of the Company had
not occurred.
(c) If, despite the provisions of paragraph (b) above, benefits under
any employee benefit plan shall not be payable or provided under any such
plan to Executive, or his dependents, beneficiaries and estate, because he
is no longer an employee of the Company, the Company itself shall, to the
extent necessary, pay or provide for payment of such benefits and service
credits for such benefits to Executive, his dependents, beneficiaries and
estate.
(d) If, despite the provisions of paragraph (b) above, benefits or the
right to accrue further benefits under any stock option or other incentive
compensation arrangement shall not be provided under any such arrangement
to Executive, or his dependents, beneficiaries and estate, because he is no
longer an employee of the Company, the Company shall, to the extent
necessary, pay or provide for payment of such benefits to Executive, his
dependents, beneficiaries and estate.
12. Severance Allowance. In the event of a Control Termination of this
Agreement, Executive may elect, within 60 days after such Control Termination,
to be paid a lump sum severance allowance, in lieu of the termination payments
provided for in Section 11 above, in an amount which is equal to the sum of the
amounts determined in accordance with the following clauses (a) and (b):
(a) an amount equivalent to salary payments for 60 calendar months at
the rate of Base Salary which he would have been entitled to receive in
accordance with Section 5(a); and
(b) an amount equivalent to 60 calendar months of bonus at the greater
of (i) the monthly rate of the bonus payment for the bonus period
immediately prior to this termination date, or (ii) the monthly rate of the
estimated amount of the bonus for the period which includes his termination
date.
In the event that Executive makes an election pursuant to this Section to
receive a lump sum severance allowance of the amount described in clauses (a)
and (b), then, in addition to such amount, he shall receive (i) in addition to
the benefits provided under any retirement or pension benefit plan maintained by
the Company, the benefits he would have accrued under such benefit plan if he
had remained in the employ of the Company and such plan had remained in effect
for 60 calendar months after his termination, which benefits will be paid
concurrently with, and in addition to, the benefits provided under such benefit
plan, and (ii) the employee benefits (including, but not limited to, coverage
under any medical insurance and split-dollar life insurance arrangements or
programs) to which he would have been entitled under all employee benefit plans,
programs or arrangements
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maintained by the Company if he had remained in the employ of the Company and
such plans, programs or arrangements had remained in effect for 60 calendar
months after his termination; or the value of the amounts described in clauses
(i) and (ii) next preceding. The amount of the payments described in the
preceding sentence shall be determined and such payments shall be distributed as
soon as it is reasonably possible.
13. Tax Indemnity Payments. To the extent that any payments made to
Executive pursuant to Section 11, 12 or 14 constitute an "excess parachute
payment", as such term is defined in Section 280G(b)(1) of the Internal Revenue
Code, as amended (the "Code"), the Company shall pay to Executive an amount
equal to (x) divided by (y), where (x) is the aggregate dollar amount of excise
taxes Executive becomes obligated to pay on such "excess parachute payments"
pursuant to Section 4999 of the Code and (y) is 1-[.2+ the maximum federal
income tax rate for single individuals applicable for the year in which
Executive receives the payment provided under this Section]; it being the intent
of this Section that if Executive incurs any such excise tax, the payments to
him shall be grossed up in full for such excise tax, so that the amount he
retains after paying all federal income taxes due with respect to payments to
him under this Agreement is the same as what he would have retained if Section
280G of the Code had not been applicable.
14. Payment for Options and Stock. In the event of a Control Termination of
this Agreement, Executive may also elect, within sixty (60) days after such
Control Termination, to receive a lump sum payment form the Company in return
for surrender by the Executive of all or any portion of the options then
outstanding held by the Executive to purchase shares of common stock of the
Company ("Unexercised Options") and all or any portion of the common stock of
the Company then owned by Executive (the "Owned Stock"). For purposes of this
provision, Unexercised Options shall include all outstanding options whether or
not they are exercisable at the time of the election by Executive hereunder. For
each Unexercised Option to purchase one share of common stock, the Company shall
pay to Executive an amount equal to the highest per share fair market value of
the common stock on any day during the period beginning six (6) months prior to
the date of Executive's election pursuant to this Section. To compensate
Executive for his loss of the potential future speculative value of the
Unexercised Options, there shall be no deduction of Executive's exercise price
per share for each Unexercised Option from the amount to be received by him
pursuant to the foregoing sentence. For each share of Owned Stock, the Company
shall pay to Executive the highest fair market value per share of the common
stock on any date during the period beginning six (6) months prior to the date
of Executive's election pursuant to this Section. The payment due from the
Company pursuant to this Section shall be made to Executive within ten (10) days
after the date of his election hereunder, against execution and delivery by
Executive to the Company of an appropriate agreement confirming his surrender of
the Unexercised Options and the certificates duly endorsed by Executive for the
Owned Stock.
15. Character of Termination Payments. The amounts payable to Executive
upon any termination of this Agreement shall be considered severance pay in
consideration of past services rendered on behalf of the Company and his
continued
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service from the date hereof to the date he becomes entitled to such payments.
Executive shall have no duty to mitigate his damages by seeking other employment
and, should Executive actually receive compensation from any such other
employment, the payments required hereunder shall not be reduced or offset by
any such other compensation.
16. Right of First Refusal to Purchase Stock. Executive agrees that the
Company shall have throughout the Basic Employment Period the right of first
refusal to purchase all or any portion of the shares of the Company's common
stock owned by him (the "Shares") at the following price:
(a) in the event of a bona fide offer for the Shares, or any part
thereof, received by Executive from any other person (a "Third Party
Offer"), the price to be paid by the Company shall be the price set forth
in such Third Party Offer; and
(b) in the event Executive desires to sell the Shares, or any part
thereof, in the public securities market, the price to be paid by the
Company shall be the last sale price quoted on the New York Stock Exchange
(or any other exchange or national market system upon which price
quotations for the Company's common stock are regularly available) for the
Company's common stock on the last business day preceding the date on which
Executive notifies the Company of such desire.
In the event Executive shall receive a Third Party Offer which he desires
to accept, he shall deliver to the Company a written notification of the terms
thereof and the Company shall have a period of 48 hours after such delivery in
which to notify Executive of its desire to exercise its right of first refusal
hereunder.
In the event Executive desires to sell any portion of the Shares in the
public market he shall deliver to the Company a written notification of the
amount of Shares he desires to sell, and the Company shall have a period of 24
hours after such delivery to notify Executive of its desire to exercise its
right of first refusal hereunder with respect to such amount of Shares.
Upon each exercise by the Company of its right of first refusal hereunder,
it shall make payment to Executive for the Shares in accordance with standard
practice in the securities brokerage industry. After each failure by the Company
to exercise its right of first refusal hereunder, Executive may proceed to
complete the sale of Shares pursuant to the Third Party Offer or in the open
market in accordance with his notification to the Company, but his failure to
complete such sale within two weeks after his notification to the Company shall
reinstate the Company's right of first refusal with respect thereto and require
a new notification to the Company.
17. Arbitration of All Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, shall be settled by
arbitration in the City of Indianapolis, Indiana, in accordance with the laws of
the State of Indiana by three arbitrators, one of whom shall be appointed by the
Company, one by Executive and the
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third of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the Chief Judge of the United States
District Court for the Southern District of Indiana. The arbitration shall be
conducted in accordance with the rules of the American Arbitration Association,
except with respect to the selection of arbitrators which shall be as provided
in this Section. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for Executive to retain legal counsel and/or incur other
costs and expenses in connection with the enforcement of any and all of his
rights under this Agreement, the Company shall pay (or Executive shall be
entitled to recover from he Company, as the case may be) his reasonable
attorneys' fees and costs and expenses in connection with the enforcement of any
arbitration award in court, regardless of the final outcome, unless the
arbitrators shall determine that under the circumstances recovery by Executive
of all or a part of any such fees and costs and expenses would be unjust.
18. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
his residence, in the case of Executive, or to the business office of its Chief
Executive Officer, in the case of the Company.
19. Waiver of Breach and Severability. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by either party. In the
event any provision of this Agreement is found to be invalid or unenforceable,
it may be severed from the Agreement and the remaining provisions of the
Agreement shall continue to be binding and effective.
20. Entire Agreement. This instrument contains the entire agreement of the
parties and supersedes all prior agreements between them. This agreement may not
be changed orally, but only by an instrument in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
21. Binding Agreement and Governing Law; Assignment Limited. This Agreement
shall be binding upon and shall inure to the benefit of the parties and their
lawful successors in interest and shall be construed in accordance with and
governed by the laws of the State of Indiana. This Agreement is personal to each
of the parties hereto, and neither party may assign nor delegate any of its
rights or obligations hereunder without the prior written consent of the other.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CONSECO, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board
"Company"
/s/ XXXX X. XXXX
--------------------------------
Xxxx X. Xxxx
"Executive"
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