EXHIBIT 10.15
LIMITED UNDERTAKING
This LIMITED UNDERTAKING (the "Agreement") is made as of ________ __,
2004 by and among Conseco, Inc., a Delaware corporation (the "Company"), Conseco
Life Insurance Company of Texas ("CLTX"), an insurance company organized under
the Texas Insurance Code and an indirect wholly-owned subsidiary of the Company,
and _______________ ("Director").
WHEREAS, the Company desires to attract and retain qualified directors
and to provide them with protection against liability and expenses incurred
while acting in that capacity;
WHEREAS, the certificate of incorporation and bylaws of the Company and
CDOC, Inc. ("CDOC"), and the operating agreement of Conseco Services LLC
("Services," and together with the Company and CDOC, "Indemnitors"), contain
provisions for indemnifying individuals in connection with their service as
members of the board of directors of the Company and board of managers of
Services, respectively;
WHEREAS, the Company, CDOC and Services are entering into an
Indemnification Agreement with Director (the "Indemnification Agreement")
pursuant to which the Company, CDOC and Services have agreed to jointly and
severally indemnify Director against liabilities and expenses that Director may
incur in connection with his service to the Company, CDOC and Services;
WHEREAS, in light of the Company's recent emergence from bankruptcy and
the high cost and limited availability of director and officer liability
insurance, the amount of coverage that the Company has been able to obtain for
its directors and officers (which as of the date of this Agreement is $100
million) is substantially less than the amount recommended by the Company's
insurance broker and less than the amount of coverage the Company's predecessor
provided to its officers and directors;
WHEREAS, the Company is a holding company for a group of insurance
subsidiaries, including, among others, CLTX, and conducts no business operations
of its own and holds no material assets other than cash and cash equivalents and
equity securities of its subsidiaries;
WHEREAS, CLTX is organized under the Texas Insurance Code and is
regulated by the Texas Department of Insurance (the "Department") thereunder;
WHEREAS, the Department has advised the Company that, under Texas
Insurance Code Sections 805.003(b), 823.102, 823.103 and 823.452, the execution
of this Agreement is subject to the Department's prior review and approval;
WHEREAS, CLTX and the Company's other insurance subsidiaries expect to
derive substantial direct and indirect benefits from the Company in the form of,
among other things, strategic direction, management expertise and financial
support, and, furthermore, CLTX and the Company's other insurance subsidiaries
expect to derive substantial direct and indirect benefits from Director's
involvement with the Company and Services; and
WHEREAS, as part of the mutually beneficially relationship among the
Company, CLTX and the Company's other insurance subsidiaries, CLTX has agreed,
pursuant to this Agreement
and subject to Director's obligation to act in good faith and in a manner he
reasonably believes to be in or not opposed to the best interests of the
Company, to satisfy Indemnitors' payment obligations under the Indemnification
Agreement to the extent such obligations are not satisfied by Indemnitors or out
of the Company's director and officer liability insurance.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in order to induce Director to
continue to serve as a director of the Company and to serve as a manager of
Services, and in consideration of Director's service to the Company and
Services, the parties agree as follows:
ARTICLE I
UNDERTAKING PROVISIONS
SECTION 1.1 UNDERTAKING.
(a) Subject to Section 1.3, and provided that Director
has satisfied his obligation under Delaware law to act in good faith and in a
manner he reasonably believes to be in or not opposed to the best interests of
the Company, CLTX hereby:
(i) undertakes that Director shall receive full and
punctual payment when due, in accordance with the Indemnification Agreement, of
all of the Indemnitors' payment obligations under the Indemnification Agreement,
whether such payment obligations are absolute or contingent, or now or hereafter
existing, or due or become due under the Indemnification Agreement, and all
interest, fees, expenses or other amounts due or to become due in the future
under the Indemnification Agreement (all such obligations hereinafter called the
"Obligations"); and
(ii) indemnifies and holds harmless Director for any
and all costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred by Director in connection with the enforcement of
any rights under this Agreement.
(b) CLTX undertakes that the Obligations of Indemnitors
will be paid strictly in accordance with the terms of the Indemnification
Agreement. Subject to Section 1.3, CLTX's liability under this Agreement shall
be absolute, unconditional and irrevocable irrespective of:
(i) any reduction, limitation, impairment or
termination of the Obligations of Indemnitors for any reason, including any
waiver, release, surrender, alteration or compromise, and shall not be subject
to (and CLTX hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment, or termination whatsoever by reason of any event or
occurrence affecting the Obligations of Indemnitors; or
(ii) any other circumstance which might otherwise
constitute a defense available to, or a legal or equitable discharge of,
Indemnitors, including, but not limited to any defense based on (A) the
rejection of the Indemnification Agreement or any of the Obligations of
Indemnitors thereunder in any proceeding under the United States Bankruptcy
Code, (B) the disallowance of any claim asserted by Director in any proceeding
under the United States Bankruptcy Code or otherwise based on the Obligations of
Indemnitors under the
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Indemnification Agreement or (C) any limitation or diminution of the amounts
payable by Indemnitors under the Indemnification Agreement imposed by law or any
court, it being the intention of the parties that this Agreement shall in any or
all of such circumstances be payable to the full extent of the Obligations of
Indemnitors as set forth in the Indemnification Agreement as if no such defense
were available or asserted.
SECTION 1.2 LIMITATIONS ON UNDERTAKING. Notwithstanding
anything to the contrary in this Agreement, the obligations of CLTX shall be
subject to the following limitations:
(a) Two Year Time Limitation. CLTX shall have no
obligation to make payments with respect to any claim which arises from or
relates to any action or omission of Director occurring after the second
anniversary of the date of this Agreement (the "Coverage Period").
(b) Unrelated Business Activities. CLTX shall have no
obligation to make payments with respect to any claim which is neither directly
or indirectly related to, nor directly or indirectly for the benefit of, the
insurance, advisory or investment business and activities of the Company and its
subsidiaries (or activities at the Company, Services or other subsidiaries of
the Company which directly or indirectly support or provide services to the
insurance, advisory or investment businesses, including, without limitation, the
accounting, public reporting and corporate finance activities at the Company
level).
(c) Priority of Policyholders. The right of Director to
receive payments from CLTX under this Agreement shall be subordinate in right of
payment to obligations to policyholders. CLTX shall not make any payment to
Director under this Agreement unless, after giving effect to such payment,
CLTX's risk based capital shall be at least 250% of the authorized control
level; it being understood that if CLTX does not satisfy such condition at the
time its obligation to make payments hereunder arises but subsequently satisfies
such condition, it shall make payment at such subsequent time (but subject to
satisfaction of the other conditions to payment set forth herein). The parties
understand and agree that, for regulatory approval purposes, payments under this
Agreement by CLTX will be treated as distributions under the Texas Insurance
Code. Any payment under this Agreement shall be treated as an ordinary
distribution unless such payment (when aggregated with all dividends and
distributions by CLTX in the preceding 12 months) would constitute an
extraordinary distribution under Section 823.107 of the Texas Insurance Code.
Any payment under this Agreement that would be treated as an extraordinary
distribution under Section 823.107 of the Texas Insurance Code shall be subject
to the notice and approval provisions of that section.
(d) Limitation on Coverage. In no event will CLTX's
obligations under this Agreement and similar limited undertaking agreements
entered into with other directors of the Company exceed $150 million in the
aggregate.
(e) Priority of Obligations. It is understood and agreed
that the first source of recovery in respect of any losses incurred by Director
shall be the Company's director and officer liability insurance policy (if
available) and that the second source of recovery shall be payments from the
Company, CDOC and Services under the Indemnification Agreement. CLTX's liability
for payment under this Agreement shall only be triggered after Director has used
commercially
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reasonable efforts to obtain recovery under the Company's director and officer
liability insurance policy and from the Company, CDOC and Services under the
Indemnification Agreement.
SECTION 1.3 SUBROGATION. In the event of payment by CLTX to Director
under this Agreement, CLTX shall be subrogated to the extent of such payment to
all of the rights of recovery of Director against Indemnitors, who shall execute
all papers required and shall do everything that may be necessary to secure such
rights, including the execution of such documents necessary to enable CLTX
effectively to bring suit to enforce such rights.
SECTION 1.4 DIRECTOR AND OFFICER LIABILITY INSURANCE. The Company
hereby agrees to use commercially reasonable efforts to obtain and at all times
maintain, for the benefit of Director, coverage of at least $100 million under a
director and officer liability insurance policy (or such other amount as is
available on commercially reasonable terms in the marketplace). If the Company
does not maintain at least $100 million in director and officer liability
insurance, it will promptly notify the Department and the Department will have
the ability to request and require CLTX to amend or terminate this Agreement.
SECTION 1.5 REINSTATEMENT. CLTX agrees that this Agreement shall
continue to be effective or to be reinstated, as the case may be, if any time
any payment (in whole or in part) of any of the Obligations is rescinded or must
otherwise be restored by Director, whether upon the insolvency, bankruptcy or
reorganization of either Indemnitor or otherwise, all as though such payment had
not been made.
SECTION 1.6 WAIVER. CLTX hereby waives promptness, diligence, notice
or acceptance and any other notice with respect to any of the Obligations of
Indemnitors and/or obligations under this Agreement.
SECTION 1.7 SUCCESSORS, TRANSFEREES AND ASSIGNS. This Agreement shall
(a) be binding on CLTX, and its successors, transferees and assigns; and (b)
inure to the benefit of and be enforceable by Director or his heirs,
beneficiaries, transferees and assigns.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CLTX
To induce Director to continue to serve as a director of the Company
and to serve as a manager of Services, CLTX represents and warrants that:
SECTION 2.1 ORGANIZATION. CLTX is duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and CLTX is duly qualified to transact business and in good standing as a
foreign corporation, authorized to do business in each jurisdiction where the
nature of its business makes such qualification necessary and failure to so
qualify could reasonably be expected to have a material adverse effect upon its
business or assets or upon its ability or right to carry out all of the terms of
this Agreement.
SECTION 2.2 AUTHORIZATION. CLTX (a) has the power to execute,
deliver and perform this Agreement, and (b) has taken all necessary action to
authorize the execution, delivery and performance of this Agreement, including,
without limitation, approval and/or ratification of this
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Agreement by its board of directors, which, in connection with such approval,
reviewed a true copy of the Indemnification Agreement and determined that the
consideration being received by CLTX for the execution and delivery of this
Agreement is fair to CLTX and reasonable.
SECTION 2.3 NO CONFLICT. The execution, delivery and performance
by CLTX of this Agreement and payments made pursuant to this Agreement do not
and will not (a) contravene or conflict with any provision of any law, statute,
rule or regulation, (b) contravene or conflict with, result in any breach of, or
constitute a default under, any material agreement or instrument binding on CLTX
(including, without limitation, any writ, judgment, injunction or other similar
court order), (c) result in the creation or imposition of or the obligation to
create or impose any lien upon any of the property or assets of CLTX or (d)
contravene or conflict with any provision of the Articles of Incorporation or
By-laws (or equivalent governing documents) of CLTX.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 INDEMNIFICATION. CLTX agrees to indemnify Director
and hold Director harmless from and against any and all liabilities, losses,
claims, damages, costs and expenses of any kind which Director may incur or to
which he may become subject, whether directly or indirectly (including, without
limitation, the reasonable fees and expenses of counsel for Director), relating
to or arising out of this Agreement or the enforcement by Director of this
Agreement.
SECTION 3.2 NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing and shall be given to
such party at its address or facsimile number. Each such notice, request or
other communication shall be effective (a) if given by facsimile when such
facsimile is transmitted to the proper facsimile number, (b) if given by United
Sates mail, seventy-two (72) hours after such communication is deposited in the
mails by certified or registered mail return receipt requested, with sufficient
postage prepaid, addressed to the proper addres or (c) if given by recognized
courier (such as Federal Express or UPS) which guarantees next business day
delivery, when delivered to the proper address. The Company shall promptly
provide written notice to the Department of (a) any claims made by any party
under the Indemnification Agreements and (b) any notices of claims or potential
claims made under the Company's director and officer insurance policy. In no
event shall CLTX make any payment hereunder without first providing the
Department thirty (30) days advance written notice of such payment.
SECTION 3.3 NO ASSIGNMENT. Neither CLTX, the Company nor Director
shall assign this Agreement nor any interest herein without the mutual consent
of the other party hereto.
SECTION 3.4 AMENDMENTS. The provisions of this Agreement may from
time to time be amended, modified or waived, only if such amendment,
modification or waiver is in writing and consented to by CLTX, the Company and
Director, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
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SECTION 3.5 SECTION HEADINGS. The section headings in this
Agreement are inserted for convenience of reference and shall not be considered
part of this Agreement or used in its interpretation.
SECTION 3.6 NO LIMITATION OF OTHER OBLIGATIONS. All obligations
of CLTX and the Company and rights of Director or obligation expressed in this
Agreement shall be in addition to and not in limitation of those provided under
applicable law or in any other written instrument or agreement relating to any
of the Obligations. Nothing in this Agreement (including the limitations under
Section 1.2) shall limit (a) the right or obligation of the Company, CDOC or
Services to indemnify their directors, officers and employees or (b) the
circumstances in which Director is entitled to indemnification from the Company,
CDOC or Services (it being understood that the limitations on payments under
this Agreement apply only to payments by CLTX to Director under this Agreement).
SECTION 3.7 GOVERNING LAW; REGULATORY APPROVAL. If CLTX has
insufficient funds from which to make any payment to Director under this
Agreement, CLTX will comply with all required insurance regulatory notices and
approvals relating to any dividends from its subsidiaries that it may seek in
connection with such payment. This Agreement shall be a contract made under and
governed by the laws of the State of Texas, without regard to conflicts of laws
principles. All obligations of CLTX and the Company and rights of Director in
respect of the obligations of CLTX expressed herein shall be in addition to and
not in limitation of those provided by applicable law.
SECTION 3.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall for all purposes be deemed an
original, but all of such counterparts shall constitute but one and the same
agreement.
SECTION 3.9 NOT A CONTRACT OF INSURANCE. Nothing contained in
this Agreement shall be interpreted as creating a contract of insurance between
CLTX, the Company and Director, and Director shall not be deemed a policyholder
for any purpose under this Agreement.
SECTION 3.10 FUNDING. All amounts payable or credited to Director
shall be paid in cash from the general assets of CLTX. CLTX shall be under no
obligation to establish a special or separate fund, or to segregate any of its
assets, to assure payment of amounts under this Agreement.
SECTION 3.11 UNSECURED CREDITOR. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind, nor a fiduciary relationship between
CLTX and Director. To the extent that Director acquires a right to receive any
amount from CLTX under this Agreement, such right shall be no greater than the
right of an unsecured creditor of CLTX. Director acknowledges that, in the event
that CLTX becomes financially distressed (whether due to insolvency or
otherwise), CLTX's ability to pay benefits to Director under this Agreement
could be impaired.
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IN WITNESS WHEREOF, the parties have executed this Limited Undertaking
as of the date first written above.
CONSECO LIFE INSURANCE COMPANY OF TEXAS
By:
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Name:
Title:
CONSECO, INC.
By:
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Name:
Title:
AGREED AND ACCEPTED:
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Name:
Address:
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