EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of the 28th day of June, 2000,
between CONSECO, INC., an Indiana corporation (hereinafter called the
"Company"), and Xxxx X. Xxxxx (hereinafter called "Executive").
RECITALS
WHEREAS, the Company desires to employ Executive as its chief executive
officer upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the Company and the Executive hereby 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 June 28, 2000.
Subject to the provisions for termination as provided in Section 10 hereof, the
term of this Agreement shall be the period from the effective date through June
30, 2005. The term "Basic Employment Period" as used in this Agreement shall
mean the period remaining hereunder.
3. Duties. During the Basic Employment Period, the Company shall employ
Executive as the Chairman of the Board and Chief Executive Officer of the
Company. Executive shall report solely and directly to the Board of Directors of
the Company (the "Board"). During the Basic Employment Period, Executive shall
have such responsibilities, duties and authority as is commensurate with chief
executive officers of public entities of similar size. It is contemplated that,
in connection with each annual meeting of shareholders of the Company during the
Basic Employment Period at which Executive's term as a director expires, the
Board will nominate Executive for election as a member of the Board.
4. Extent of Services. Executive, subject to the direction and control
of the Board, shall have all power and authority commensurate with his position
as the Company's chief executive 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 position 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 serving
on boards of professional, community, civic, educational, charitable and
corporate organizations on which he presently serves or may choose to serve or
managing his personal investments. For purposes of this
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Agreement, entire employable time shall mean the normal work week for
individuals in executive management positions with the Company.
5. Compensation.
(a) On the effective date of this Agreement, the Company shall pay
Executive an amount equal to Forty-Five Million Dollars ($45,000,000)
net of any Withholding Taxes (as defined in Section 20).
(b) (i) If Executive still is, and since the effective date of this
Agreement has, continuously been employed by the Company
through June 30, 2002, he shall be entitled to receive a bonus
calculated as follows: (A) Eight Million Dollars ($8,000,000)
if the Average Stock Price (as hereafter defined) is less than
$10.00; (B) Ten Million Dollars ($10,000,000) if the Average
Stock Price is $10.00 or more, but less than $15.00; (C) Twenty
Million Dollars ($20,000,000) if the Average Stock Price is
$15.00 or more, but less than $20.00; or (D) Fifty Million
Dollars ($50,000,000) if the Average Stock Price is $20.00 or
more. The term "Average Stock Price" shall mean the average of
the closing sale prices of a share of common stock of the
Company for the twenty (20) trading days preceding June 30,
2002, as reported by The Wall Street Journal (Midwest Edition)
on the principal exchange or quotation system on which the
common stock is then traded or quoted. The bonus, net of any
Withholding Taxes, shall be paid by the Company on July 15,
2002. Such bonus may be accelerated at the option of Executive
to the date on which a "change in control" of the Company (as
defined in Section 10) occurs in which event the bonus shall be
computed on the basis of the Average Stock Price on the date
immediately preceding the date of the "change in control."
(ii) For the Basic Employment Period after June 30, 2002,
Executive shall be entitled to receive the following annual
compensation (based on a year ending June 30): (A) a base
salary ("Base Salary") of One Million Dollars ($1,000,000),
payable in accordance with the Company's payroll procedures for
its salaried employees, and which may be increased, but not
decreased during the Basic Employment Period; (B) a "Formula
Bonus" (as hereafter defined); (C) an annual grant, on July 1
of each year, of options to purchase not less than five hundred
thousand (500,000) shares of the Company's common stock
("Shares") under any of the Company's stock option plans, such
options to vest ratably over a five (5) year period (however,
such options shall continue to vest after any termination of
Executive's employment as long as Executive is not then
engaging in any of the activities specified in clauses (i)
through (v) of Section 9) and expire ten (10) years after the
date of grant; and (D) an award of Shares, on July 1 of each
year, subject to restrictions ("Restricted Stock"), with a
value based on the closing sale price on the date of the award
of not less than One Million Five Hundred Thousand Dollars
($1,500,000), with the restrictions to lapse ratably over a
five (5) year period (however, the restrictions on such
Restricted Stock shall continue to lapse after any
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termination of Executive's employment as long as Executive is
not then engaging in any of the activities specified in clauses
(i) through (v) of Section 9). For purposes of this Agreement,
the term "Formula Bonus" shall mean the amount to be paid
depending upon any increase or decrease the Company's earnings
per share (adjusted to exclude compensation payable to
Executive) for the preceding twelve month period. If the
Company's earnings per share have increased by five percent
(5%), the amount of the Formula Bonus shall be equal to One
Million Four Hundred Thousand Dollars ($1,400,000) (the "Target
Bonus"). The Formula Bonus shall be increased proportionately
above the Target Bonus up to a maximum of two (2) times the
Formula Bonus if the increase in earnings per share is more
than five percent (5%) up to a maximum increase for calculation
purposes of twenty percent (20%). The Formula Bonus shall be
decreased proportionately below the Target Bonus to a minimum
of a zero if the change in earnings per share is less than five
percent (5%) to a maximum change for calculation purposes of a
decrease of ten percent (10%). In the event that at any time
during the Basic Employment Period, Executive is able to, and
elects to, participate in a performance-based executive bonus
plan which has been approved by the Company's shareholders, the
Executive's right to receive the Formula Bonus provided for in
this subsection for the remainder of the Basic Employment
Period shall be governed by such a plan.
(c) The Company shall grant to Executive a non-qualified option to
purchase ten million (10,000,000) Shares (the "Initial Option"). The
Initial Option shall have an exercise price equal to $5.875. Twenty
percent (20%) of the Shares underlying the Initial Option shall vest
immediately but shall not be exercisable prior to June 30, 2002, and
the balance shall vest in four equal annual increments of twenty
percent (20%) each commencing June 30, 2002, through June 30, 2005;
however, the Shares shall also vest in full upon a "change in control"
of the Company. The Initial Option shall expire ten (10) years from the
effective date of this Agreement. Notwithstanding the foregoing,
Executive shall not, without the prior written consent of the Company,
exercise more than an aggregate of six million (6,000,000) Shares
underlying the Initial Option before the calendar year following the
calendar year in which the termination date of Executive's employment
with the Company occurs. The Initial Option shall be on the terms and
conditions contained in a Nonqualified Stock Option Agreement in the
form attached hereto as Annex 1.
(d) On the effective date of this Agreement, the Company shall issue
to Executive three million two hundred thousand (3,200,000) shares of
Restricted Stock, which restrictions shall lapse if Executive remains
an employee of the Company through June 30, 2002; however, the
restrictions shall lapse earlier upon a "change in control" of the
Company. Dividends on the Restricted Stock will be paid to Executive as
compensation during the restriction period. Executive agrees that he
will notify the Company if he makes the election provided for in
Section 83(b) of the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to the Restricted Stock. The award of Restricted
Stock shall be on such other terms and conditions contained in the
Restricted Stock Agreement in the form attached hereto as Annex 2.
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(e) Within thirty (30) days of the effective date of this Agreement,
the Company shall cause its subsidiary, Bankers Life and Casualty
Company ("Bankers Life") to appoint Executive an executive officer of
Bankers Life and to provide Executive with the nonqualified
supplemental retirement benefit (the "Supplemental Retirement Benefit")
provided for in this subsection. The Supplemental Retirement Benefit
shall be in the form of a fully vested joint and 100% survivor annuity
that commences when Executive attains age 65 and in an amount equal to
One Million Five Hundred Thousand Dollars ($1,500,000) per year.
Notwithstanding any provision of this Agreement to the contrary, the
Supplemental Retirement Benefit shall not be reduced, suspended or
otherwise affected as a result of any termination of Executive's
employment under this Agreement.
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 from time to time, for its 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. Without limiting the generality of the
foregoing, Executive shall be entitled to use Company aircraft (subject
to availability of such aircraft after business use) for personal and
business travel (it being understood that Executive shall reimburse the
Company for personal aircraft use in the amount of taxable income
Executive would otherwise recognize for such use in accordance with the
Company's policies on personal use of Company aircraft).
(b) Executive shall be entitled to four (4) weeks vacation with pay
for each year during the term hereof.
(c) 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.
(d) 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).
(e) During the Basic Employment Period, the Company shall assume or
replace on reasonably equivalent terms and coverages, including the
same annual cost to Executive, the life insurance program previously
provided to Executive by his former employer, provided, however that
the total annual cost to the Company of such program shall not exceed
$125,000 plus such additional amount to the extent the Company is
entitled to share in the death benefits of such program.
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(f) During the Basic Employment Period, the Company shall pay
Executive a monthly automobile allowance in the amount of Six Hundred
Dollars ($600), and the Company shall pay directly or reimburse
Executive for the cost of fuel that he incurs in using his automobile.
(g) The Company agrees to reimburse Executive for the costs of
travel and living expenses he and his household incur prior to the time
that he relocates his residence to Central Indiana up to a maximum
period of one (1) year from the effective date of this Agreement.
7. Disability. If Executive shall become physically or mentally
disabled during the term of this Agreement to the extent that his ability to
perform his duties and services hereunder is materially and adversely impaired,
his salary, bonus and other compensation provided herein shall continue while he
remains employed by the Company; provided, that if such disability (as confirmed
by competent medical evidence) continues for at least six (6) consecutive
months, the Company may terminate Executive's employment hereunder in which case
the Company shall immediately pay Executive the amounts provided for in Section
11(b), and, provided further, that no such payment shall be required if such
disability arises primarily from: (a) chronic depressive use of intoxicants,
drugs or narcotics, or (b) intentionally self-inflicted 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, except to the extent that
such confidential information (a) becomes a matter of public record or is
published in a newspaper, magazine or other periodical available to the general
public, other than as a result of any act or omission of Executive, (b) is
required to be disclosed by any law, regulation or order of any court or
regulatory commission, department or agency, provided that Executive gives
prompt notice of such requirement to the Company to enable the Company to seek
an appropriate protective order or confidential treatment, or (c) is necessary
to perform properly Executive's duties under this Agreement. 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.
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
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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 through the later of
June 30, 2002 or one (1) year after termination of Executive's employment with
the Company (the "Restriction 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, accident or health insurance products or services;
(ii) 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 any lending or other
financial products or services that are competitive with the lending or other
financial products or services sold or provided by the Company or its
subsidiaries, (iii) in any manner compete with the Company or any of its
subsidiaries; (iv) solicit or attempt to convert to other insurance carriers,
finance companies or other corporations, persons or other entities 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 (v) 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 if this Agreement is terminated pursuant to a
Control Termination as defined in Section 10. In addition, the covenants of
Executive in this Section 9 other than the covenant contained in clause (v)
shall be void and unenforceable if the Company terminates this Agreement without
"just cause" or Executive terminates this Agreement for "good reason." Should
any particular covenant or provision of this Section 9 be held unreasonable or
contrary to public policy for any reason, including, without limitation, the
Restriction Period, geographical area, or scope of activity covered by any
restrictive covenant or provision, the Company and Executive acknowledge and
agree that such covenant or provision shall automatically be deemed modified
such that the contested covenant or provision shall have the closest effect
permitted by applicable law to the original form and shall be given effect and
enforced as so modified to whatever extent would be reasonable and enforceable
under applicable law.
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 (i) the death of Executive or (ii)
termination by the Company after disability of Executive pursuant to
Section 7.
(b) The Company may terminate this Agreement at any time for "just
cause." For purposes of this Agreement "just cause" shall mean:
(i) The commission of malfeasance or fraud or dishonesty of a
substantial nature in performing Executive's services on behalf of
the Company, which is in each case willful and deliberate on
Executive's part and committed in bad faith or without reasonable
belief that such breach is in the best interests of the Company;
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(ii) Executive's breach of any material provision 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;
(iii) Executive's conviction by a court of law, or admission
that he is guilty, of a felony or other crime involving moral
turpitude; or
(iv) Executive's absence from his employment other than as a
result of Section 7 hereof, for any cause for a period of more than
four (4) weeks without prior written consent from the Company.
The Company may not terminate Executive's employment for "just cause"
unless:
(i) the Company provides Executive with at least thirty (30)
days advance written notice (the "Notice of Consideration") of its
intent to consider termination of Executive's employment for "just
cause," including a description of the specific reasons which form
the basis for such consideration;
(ii) for a period of not less than fifteen (15) days after the
date Notice of Consideration is provided, Executive shall have the
opportunity to appear before the Board, with or without legal
representation, at Executive's election, to present arguments and
evidence on his own behalf; and
(iii) following the presentation to the Board as provided in
(ii) above or Executive's failure to appear before the Board at a
date and time specified in the Notice of Consideration (which date
shall not be less than fifteen (15) days after the date the Notice
of Consideration is provided), Executive may be terminated for "just
cause" only if the Board, by the affirmative vote of all of its
members (excluding Executive), determines that the actions or
inactions of Executive specified in the Notice of Consideration
occurred, that such actions or inactions constitute "just cause,"
and that Executive's employment should be terminated for "just
cause."
Unless the Company complies with the requirements of this subsection (b), any
termination of employment shall be deemed a termination by the Company without
"just cause." After providing a Notice of Consideration pursuant to the
provisions of this subsection (b), the Board may, by the affirmative vote of all
of its members (excluding Executive), suspend Executive with pay until a final
determination pursuant to this subsection has been made.
(c) The Executive may terminate this Agreement at any time with
"good reason." For purposes of this Agreement "good reason" shall mean:
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(i) a failure to nominate or elect Executive as Chairman of the
Board and Chief Executive Officer of the Company or as a member of
the Board or any removal of Executive as a member of the Board; or
(ii) a significant reduction in the nature or scope of
Executive's authority or duties from those contemplated by this
Agreement; or
(iii) causing or requiring Executive to report to anyone other
than the Board or appointing any other person to a position of equal
authority or having a direct reporting responsibility to the Board
(other than the Company's internal auditors); or
(iv) any violation by the Company of its obligations to
Executive's most recent former employer under Section 4.01(b) of a
certain Inducement Agreement executed contemporaneously herewith
such that Executive no longer has the right, under Executive's
agreement with such former employer, to be employed by the Company;
or
(v) any other breach of any material provision of this
Agreement by the Company which is not remedied by the Company within
forty-five (45) days after receipt of written notice from Executive
specifying such breach.
(d) The term "Control Termination" as used herein shall mean (A)
termination of this Agreement by the Company for any reason other than
death, disability under Section 7 or for "just cause" in anticipation
of or not later than two years following a "change in control" of the
Company (as defined below), or (B) termination of this Agreement by
Executive following a "change in control" upon the occurrence of (i)
any of the events specified in (c) above as constituting "good reason"
or (ii) the giving of a notice of a termination by Executive during the
6-month period commencing six (6) months after a "change in control."
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")
if such Item 6(e) were applicable to the Company as such Item is in effect on
the effective date of this Agreement; provided that, without limitation,
(x) such a change in control shall be deemed to have occurred if and
when (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, as of the date hereof,
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constitute the Board of Directors of the Company (the "Incumbent
Board") cease to constitute at least a majority of such Board;
provided, however, that any individual who becomes a director of the
Company subsequent to the date hereof whose election was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board, shall be deemed to have been a member of the Incumbent
Board; and provided further, that no individual who was initially
elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any
person other than the Board of Directors shall be deemed to have been a
member of the Incumbent Board, or (C) any reorganization, merger or
consolidation or the issuance of shares of common stock of the Company
in connection therewith unless immediately after any such
reorganization, merger or consolidation (i) more than 60% of the then
outstanding shares of common stock of the corporation surviving or
resulting from such reorganization, merger or consolidation and more
than 60% of the combined voting power of the then outstanding
securities of such corporation entitled to vote generally in the
election of directors are then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities
who were the beneficial owners, respectively, of the outstanding shares
of common stock of the Company and the outstanding voting securities of
the Company immediately prior to such reorganization, merger or
consolidation and in substantially the same proportions relative to
each other as their ownership, immediately prior to such
reorganization, merger or consolidation, of the outstanding shares of
common stock of the Company and the outstanding voting securities of
the Company, as the case may be, and (ii) at least a majority of the
members of the board of directors of the corporation surviving or
resulting from such reorganization, merger or consolidation were
members of the Board of Directors of the Company at the time of the
execution of the initial agreement or action of the Board of Directors
providing for such reorganization, merger or consolidation or issuance
of shares of common stock of the Company, and
(y) no change of control shall be deemed to have occurred if and
when 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
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
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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.
Upon the occurrence of a change in control, the Company shall promptly notify
Executive in writing of the occurrence of such event (such notice, the "Change
in Control Notice"). If the Change in Control Notice is not given within 10 days
after the occurrence of a change in control the period specified in clause
(d)(A) of this Section 10 shall be extended until the second anniversary of the
date such Change in Control Notice is given.
11. Payments Following Termination.
(a) In the event of termination of this Agreement by the Company for
"just cause" or by Executive without "good reason," the Company shall
pay Executive all unpaid amounts previously accrued or awarded pursuant
to this Agreement. In the event of the termination of this Agreement by
the Company for "just cause" prior to June 30, 2002, the award of
Restricted Stock provided for in Section 5(d) shall fully vest as of
the termination date. In the event of the termination of his Agreement
by Executive without "good reason" prior to June 30, 2001, Executive
shall pay the Company One Million Dollars ($1,000,000) within fifteen
(15) days of the termination date.
(b) (i) In the event of termination of this Agreement because of
death or disability of Executive prior to June 30, 2002, the Company
shall pay to Executive or his beneficiaries immediately after the
termination date (A) all unpaid amounts previously accrued or
awarded pursuant to this Agreement and (B) a "Prorata Bonus" (as
hereafter defined). In addition, a minimum of four million
(4,000,000) Shares underlying the Initial Option provided for in
Section 5(e) and the entire award of Restricted Stock provided for
in Section 5(d) shall fully vest as of the termination date. For
purposes of this Agreement, the term "Prorata Bonus" means the
greater of: (x) Eight Million Dollars ($8,000,000) or (y) the bonus
provided for in Section 5(b)(i) computed on the basis of the Average
Stock Price on the termination date and multiplied by a fraction of
which the numerator is the number of months which have elapsed since
the effective date and the denominator is twenty-four (24).
(ii) In the event of termination of this Agreement because of
death or disability of Executive on or after June 30, 2002, the
Company shall pay to Executive or his beneficiaries immediately
after the termination date all unpaid amounts previously accrued or
awarded pursuant to this Agreement. In addition, any annual awards
of options made pursuant to Section 5(b)(ii) prior to the
termination which would have vested at any time in the twelve months
following the termination date shall fully vest as of the
termination date and any annual award of Restricted Stock provided
for in Section 5(b)(ii) made prior to the termination date shall
fully vest as of the termination date.
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(iii) If Executive shall die prior to June 30, 2005, the
Company shall also pay to the spouse of Executive if she should
survive him a nonqualified benefit in the amount of One Million
Dollars ($1,000,000) for each twelve (12) month period from the date
of Executive's death through December 2006.
(c) (i) In the event of termination of this Agreement by the
Company without "just cause," or by Executive with "good reason"
prior to June 30, 2002, the Company shall pay Executive immediately
after the termination date: (A) all unpaid amounts previously
accrued or awarded pursuant to this Agreement; and (B) a Prorata
Bonus (as defined in Section 11(b)(i)). In addition, a minimum of
four million (4,000,000) Shares underlying the Initial Option
provided for in Section 5(c) and the award of Restricted Stock
provided for in Section 5(d) shall fully vest as of the termination
date.
(ii) In the event of termination of this Agreement by the
Company without "just cause" or by Executive with "good reason" on
or after June 30, 2002, the Company shall pay Executive immediately
after the termination date: (A) all unpaid amounts previously
accrued or awarded pursuant to this Agreement and (B) an amount
equal to three (3) times the sum of the Base Salary and the Target
Bonus provided for in Section 5(b)(ii). In addition, the Shares
underlying the Initial Option that would have vested at any time in
the twelve months following the termination date shall fully vest as
of the termination date and any annual awards of options and
Restricted Stock provided for in Section 5(b)(ii) made prior to the
termination date shall fully vest as of the termination date.
(d) (i) In the event of a Control Termination prior to June 30,
2002, the Company shall pay Executive immediately after the Control
Termination: (A) all unpaid amounts previously accrued or awarded
pursuant to this Agreement and (B) the Prorata Bonus provided for in
Section 11(b)(i) except that the bonus shall be computed using the
fair market value of the consideration paid or payable to the
holders of the Company's common stock in connection with the "change
in control," valued as of the date of the "change in control." In
addition, the award of the Restricted Stock provided for in Section
5(d) shall fully vest as of the earliest date on which Executive
could give notice of termination pursuant to clause (ii) of Section
10(d) regardless of whether or not Executive issues such notice of
termination.
(ii) In the event of a Control Termination on or after June 30,
2002, the Company shall pay Executive immediately after the Control
Termination: (A) all unpaid amounts previously accrued or awarded
pursuant to this Agreement and (B) an amount equal to three (3)
times the sum of the Base Salary and the Target Bonus provided for
in Section 5(b)(ii). In addition, any annual awards of options and
Restricted Stock provided for in Section 5(b)(ii) made prior to the
Control Termination shall fully vest as of the Control Termination.
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12. Tax Indemnity Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by
the Company or its affiliated companies to or for the benefit of
Executive, whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise but determined
without regard to any additional payments required under this Section
12 (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Code, or any successor provision (collectively, "Section
4999"), or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any
Federal, state or local income and employment taxes and the Excise Tax
(and any interest and penalties imposed with respect to any such taxes)
imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 12(c), all determinations
required to be made under this Section 12, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination,
shall be made by the Company's public accounting firm (the "Accounting
Firm") which shall provide detailed supporting calculations both to the
Company and Executive within fifteen (15) business days of the receipt
of notice from Executive that there has been a Payment, or such earlier
time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or
group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as
the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 12, shall be paid by the Company to
Executive within five (5) days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion
that failure to report the Excise Tax on Executive's applicable federal
income tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty
in the application of Section 4999 at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should
have been made by the Company ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 12(c) and Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
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(c) Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require a
payment by the Company, or a change in the amount of the payment by the
Company of, the Gross-Up Payment. Such notification shall be given as
soon as practicable after Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid; provided that the
failure to give any notice pursuant to this Section 12(c) shall not
impair Executive's rights under this Section 12 except to the extent
the Company is materially prejudiced thereby. Executive shall not pay
such claim prior to the expiration of the 30-day period following the
date on which Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
Executive harmless, on an after-tax basis, for any Excise Tax or
income, employment or other tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions
of this Section 12(c), the Company shall control all proceedings taken
in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided
further, that if the Company directs Executive to pay such claim and
xxx for a refund, the Company shall advance the amount of such payment
to Executive on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or
income, employment or other tax (including interest or penalties with
respect to any such taxes) imposed with respect to such advance or with
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respect to any imputed income with respect to such advance; and
provided further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 12(c), Executive becomes entitled to
receive, and receives, any refund with respect to such claim, Executive
shall (subject to the Company's complying with the requirements of
Section 12(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 12(c), a determination is
made that Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify Executive in writing of its
intent to contest such denial of refund prior to the expiration of
thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
13. Representations of the Parties.
(a) The Company represents and warrants to Executive that: (i) this
Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company;
and (ii) the employment of Executive on the terms and conditions
contained in this Agreement will not conflict with, result in a breach
or violation of, constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to: (A) the articles of incorporation or
by-laws of the Company, (B) the terms of any indenture, contract,
lease, mortgage, dead of trust, note, loan agreement or other
agreement, obligation, condition, covenant or instrument to which the
Company is a party or bound or to which its property is subject, or (C)
any statute, law, rule, regulation, judgment, order or decree
applicable to the Company, or any regulatory body, administrative
agency, governmental body, arbitrator or other authority having
jurisdiction over the Company.
(b) Executive represents and warrants to the Company that: (i) this
Agreement has been duly executed and delivered by Executive and
constitutes a valid and binding obligation of Executive; and (ii)
neither the execution of this Agreement by Executive nor his employment
by the Company on the terms and conditions contained herein will
conflict with, result in a breach or violation of, constitute a default
under any agreement, obligation, condition, covenant or instrument to
which Executive is a party or bound or to which his property is
subject, or any statute, law,
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rule, regulation, judgment, order or decree applicable to Executive of
any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over Executive or any
of his property.
14. 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 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.
15. Arbitration of Disputes; Injunctive Relief.
(a) Except as provided in paragraph (b) below, any controversy or
claim arising out of or relating to this Agreement or the breach
thereof, shall be settled by binding 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 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 the 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.
(b) Executive acknowledges that a breach or threatened breach by
Executive of Sections 8 or 9 of this Agreement will give rise to
irreparable injury to the Company and that money damages will not be
adequate relief for such injury. Notwithstanding paragraph (a) above,
the Company and Executive agree that the Company may seek and obtain
injunctive relief, including, without limitation, temporary restraining
orders, preliminary injunctions and/or permanent injunctions, in a
court of proper jurisdiction to restrain or prohibit a breach or
threatened breach of Section 8 or 9 of this Agreement. 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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16. 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
General Counsel, in the case of the Company.
17. 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.
18. 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.
19. 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.
20. Withholding. In connection with any compensation payable to
Executive under this Agreement, the Company shall have the right to require
Executive to pay an amount in cash sufficient to cover any tax, including
Federal, state or local income tax, required by any governmental entity to be
withheld or otherwise deducted and paid with respect to such transfer
("Withholding Taxes"), and to make payment to the appropriate taxing authority
of the amount of such Withholding Taxes.
21. No Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not intended to confer
third-party beneficiary rights upon any other person.
22. Expenses of Executive. The Company agrees to reimburse Executive
for all reasonable attorneys fees he incurred in connection with the negotiation
of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CONSECO, INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx
Interim Chairman of the Board and
Chief Executive Officer
"Company"
/s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx
"Executive"
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