XXXXXXX X. XXXXXXXX
EMPLOYMENT AGREEMENT
This Agreement (this "Agreement"), dated as of September 16, 2001, is made
by and among Ascent Assurance, Inc., a Delaware corporation, having its
principal offices at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxx 00000
("AAI"), Ascent Management, Inc., a Delaware corporation, having its principal
offices at 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxx 00000 (the
"Corporation"), and Xx. Xxxxxxx X. Xxxxxxxx (the "Executive"), residing at 0000
Xxxxxxxx Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxx 00000.
RECITALS
1. The Corporation and AAI each desire to retain the Executive as a
director of the Corporation and AAI and to employ him as the Chairman of the
Board, President and Chief Executive Officer of AAI and the Corporation, and to
enter into an agreement embodying the terms of those relationships which upon
proper execution shall supercede all prior written employment agreements between
the parties.
2. The Executive is willing to serve as the Chairman of the Board,
President and Chief Executive Officer of AAI and the Corporation on the terms
set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and other good and valuable consideration, the Corporation, AAI, and
the Executive hereby agree as follows:
1. Definitions.
1.1 "Affiliate" means any person or entity controlling, controlled by or
under common control with AAI or the Corporation.
1.2 "Annual Compensation" means the Executive's highest Base Salary and
Annual Bonus during the Term of Employment.
1.3 "Board" means the Board of Directors of AAI.
1.4 "Cause" means (a) Executive's material breach of any term or condition
of this Agreement; (b) Executive's (i) personal dishonesty, willful misconduct
or intentional breach of fiduciary duty, in each case involving AAI, the
Corporation or any Affiliate's property, personnel or business operations, in
each case materially detrimental to the goodwill of AAI, the Corporation's or
any Affiliate's relationships with its respective customers, clients or
employees; or (ii) intentional failure to perform the current material duties of
his employment or his material obligations hereunder, or any other intentional
act by Executive which in either case is materially detrimental to the goodwill
of AAI, the Corporation, or any Affiliate, or materially damaging to AAI's, the
Corporation's or any Affiliate's relationships with its customers, clients or
employees; (c) Executive's conviction or entry of a no-contest plea with respect
to a felony; (d) Executive's material misappropriation (or attempted material
misappropriation) of AAI's, the Corporation's or any Affiliate's, funds or
property or of a business opportunity of AAI, the Corporation or any Affiliate
(including attempting to secure or securing any personal profit in connection
with any transaction entered into on behalf of AAI, the Corporation or any
Affiliate) materially detrimental to the goodwill of AAI, the Corporation, or
any Affiliate, or materially damaging to AAI's, the Corporation's or any
Affiliate's relationships with its respective customers, clients, or employees;
or (e) Executive's gross negligence in connection with the performance of
Executive's obligations hereunder which is materially detrimental to the
goodwill of AAI and the Corporation or any Affiliate, or materially damaging to
AAI's, the Corporation's or any Affiliate's relationships with its customers,
clients or employees.
1.5 "Date of Termination" means (a) in the case of a termination for which
a Notice of Termination is required, the date of actual receipt of such Notice
of Termination or, if later, the date specified therein (in no event, however,
shall such date be later than seven (7) days after the date of actual receipt of
such notice), as the case may be, and (b) in all other cases, the actual date on
which the Executive's employment terminates during the Term of Employment.
1.6 "Disability" means mental or physical impairment or incapacity
rendering the Executive substantially unable to perform his duties under this
Agreement for at least than 180 days out of any 360 day period during the Term
of Employment.
1.7 "Good Reason" means and shall be deemed to exist if, without the prior
express written consent of the Executive, (a) the Executive is assigned any
duties or responsibilities inconsistent in any material respect with the scope
of the duties or responsibilities associated with the Executive's titles or
positions, as set forth and described in Section 4 of this Agreement; (b) the
Executive suffers a reduction in the duties, responsibilities, titles,
positions, or effective authority associated with such titles and positions, as
set forth and described in Section 4 of this Agreement; (c) the Executive is not
appointed to, or is removed from, the offices or positions provided for in
Section 4 of this Agreement; (d) the Executive's Base Salary is decreased by AAI
or the Corporation, or the Executive's benefits under employee benefit or health
or welfare plans or programs of AAI or the Corporation are decreased, except as
provided in Section 5.1 hereof as a result of a good faith change in benefits
applicable to all employees of AAI and the Corporation, or the Executive fails
to timely receive his Base Salary, 2001 Annual Bonus, 2002 Annual Bonus, LTIP
Award, expense reimbursement, or any other benefit to which he is entitled under
this Agreement; (e) AAI and the Corporation fail to maintain, or cause to be
maintained, adequate directors and officers liability insurance coverage for the
Executive or fail to comply with Section 4.3 of this Agreement; (f) AAI and the
Corporation purport to terminate the Executive's employment for Cause and such
purported termination of employment is not effected in accordance with the
requirements of this Agreement; or (g) there occurs a Change in Control.
1.8 "Term of Employment" has the meaning ascribed to it in Section 3.
1.9 "Change in Control" means:
(a) the acquisition, during the Term of Employment, by an individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 34% or more of
(A) the outstanding shares of common stock of AAI (the "Common
Stock"), or (B) the combined voting power of the voting
securities of AAI entitled to vote generally in the election of
directors (the "Voting Securities"); provided, however, the
following acquisitions shall not constitute a Change in Control:
(x) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or AAI or
Affiliate, or (y) any acquisition by any corporation if,
immediately following such acquisition, more than 66% of the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation (entitled to vote generally in the election
of directors) is beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who,
immediately prior to such acquisition, were the beneficial owners
of the Common Stock and the Voting Securities in substantially
the same proportions, respectively, as their ownership,
immediately prior to such acquisition, of the Common Stock and
Voting Securities; or
(b) circumstances occurring, during the Term of Employment, whereby
individuals who(constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date of this Agreement whose election, or
nomination for election by AAI's shareholders, was approved by a
vote of at least a majority of the directors then serving and
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents; or
(c) approval, during the Term of Employment, by the shareholders of
AAI of a plan of reorganization, merger or consolidation, other
than a reorganization, merger, or consolidation with respect to
which all or substantially all of the individuals and entities
who were the beneficial owners of the Common Stock and Voting
Securities immediately prior to such reorganization, merger or
consolidation who continue to beneficially own immediately after
such reorganization, merger or consolidation, more than 66% of
the then outstanding common stock and voting securities (entitled
to vote generally in the election of directors) of the
corporation resulting from such reorganization, merger or
consolidation in substantially the same proportions as their
respective ownership, immediately prior to such reorganization,
merger or consolidation, of the Common Stock and Voting
Securities, or
(d) approval, during the Term of Employment, by the shareholders of
AAI of (i) a complete liquidation or dissolution of AAI, or (ii)
the sale or other disposition of all or substantially all of the
assets of AAI, other than to a direct or indirect wholly-owned
subsidiary of AAI. For purposes of this Agreement and without
limiting the generality of the preceding sentence, the sale or
other disposition of AAI of more than 50% of the common stock or
the Voting Securities (entitled to vote generally in the election
of directors) of AAI shall be deemed to constitute a sale or
other disposition of substantially all the assets of AAI.
2. Employment. Subject to the terms and provisions set forth in this
Agreement, AAI hereby agrees that the Executive shall be the highest ranking
officer of AAI and the Corporation with the title of Chairman of the Board,
President and Chief Executive Officer, during the Term of Employment and each of
AAI and the Corporation agrees during the Term of Employment to employ the
Executive as President and Chief Executive Officer of each of AAI and the
Corporation, and the Executive hereby accepts such employment .
3. Term of Employment. The term of employment under this Agreement shall
commence on September 16, 2001, (the "Commencement Date") and shall continue
until the earlier to occur of March 15, 2003(the "Expiration Date") or the date
on which the Executive is terminated or resigns pursuant to Section 6 hereof
(the "Term of Employment").
4. Positions, Responsibilities and Duties.
4.1 Positions. During the Term of Employment, the Executive (i) shall be
employed and serve as President and Chief Executive Officer of each of AAI and
the Corporation, as well as President and Chief Executive Officer or higher
position and title of each of the subsidiaries of AAI; (ii) shall be elected and
serve as a director of the Corporation; and (iii) if elected by AAI's
shareholders, shall be a director of AAI. Notwithstanding the foregoing,
Executive shall serve from time to time as a "loaned employee" or "borrowed
employee" of National Foundation Life Insurance Company, Freedom Life Insurance
Company of America, American Insurance Company of Texas and National Financial
Insurance Company in accordance with the administrative services agreement
executed by such insurance companies and the Corporation. In such positions with
AAI, the Executive shall have the duties, responsibilities and authority
normally associated with the office and position of president and chief
executive officer of a publicly-traded corporation. The Executive shall report
solely and directly to the Board. All officers and other senior employees of the
Corporation and AAI shall report solely and directly to the Executive or the
Executive's designees. The Executive shall perform his duties and
responsibilities hereunder at his current office address of 000 Xxxx Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxxx Xxxxx, Xxxxx 00000, or at such other home office of AAI
and the Corporation situated in or reasonably near the City of Fort Worth,
Texas. Notwithstanding the above, the Executive shall not be required to perform
any duties and responsibilities which would be likely to result in a
non-compliance with or violation of any applicable law or regulation.
4.2 Duties. During the Term of Employment, the Executive shall use his best
efforts to perform faithfully and efficiently the duties and responsibilities
contemplated by this Agreement, including, without limitation, establishing both
short and long-range strategic growth plans for AAI, the Corporation, and
Affiliates in an effort to achieve AAI's consolidated financial targets and
shall devote substantially all of his business time, skill and attention to such
services, including the service as a "loaned employee" or "borrowed employee" of
National Foundation Life Insurance Company, Freedom Life Insurance Company of
America, American Insurance Company of Texas and National Financial Insurance
Company; provided, however, that the Executive shall be allowed, to the extent
such activities do not substantially interfere with the full performance by the
Executive of his duties and responsibilities hereunder, to (a) manage the
Executive's personal, financial and legal affairs, which may include
non-competing, passive business activities and (b) serve on civil or charitable
boards or committees. The Executive shall at all times comply with and be
subject to AAI's and the Corporation's policies, procedures, directives, and
regulations as may be reasonably established by the Board from time to time.
4.3 Working Conditions. AAI and the Corporation will provide the Executive
with a private office, secretarial and stenographic services, and any other
facilities and services as are currently in place or otherwise suitable to the
Executive's position or required for the performance of his duties.
5. Compensation, Other Benefits and Deferred Payment of Certain Wages.
5.1 Base Salary. During the Term of Employment, the Executive shall receive
a base salary of no less than $400,000.00 per annum ("Base Salary") payable in
equal semi-monthly installments. Such Base Salary shall be reviewed annually for
increase in the sole discretion of the Board or the Executive Committee thereof.
Any such salary increase shall then be the "Base Salary" for purposes of this
Agreement.
5.2 Short-Term Incentive. For fiscal year 2001 of AAI (in addition to the
Base Salary), the Executive shall be eligible to receive an annual cash bonus
("2001 Annual Bonus") in an amount, if any, reasonably determined by the Board
or a committee thereof. Such 2001 Annual Bonus shall be payable to the Executive
in February 2002 or at such time as such bonuses or similar bonuses are paid to
other officers or members of the Corporation's or AAI's senior management. For
fiscal year 2002 of AAI (in addition to Base Salary), the Executive shall be
eligible to receive an annual cash bonus ("2002 Annual Bonus") based upon AAI
achieving reasonable consolidated financial targets consistent with the October
2001 Business Plan as more specifically provided and set forth in the summary
attached hereto as Exhibit "A" and by this reference is incorporated for all
purposes herein. Such 2002 Annual Bonus shall be payable to the Executive in
February 2003 or at such time as such bonuses or similar bonuses are paid to
other members of the Corporation's or AAI's senior management.
5.3 Retirement Plans. During the Term of Employment, the Executive shall be
entitled to participate in all incentive, pension, retirement, savings, 401(k)
and other employee pension benefit plans and programs maintained by AAI and/or
the Corporation from time to time for the benefit of senior executives and/or
other employees.5.4 Welfare Benefit Plans. During the Term of Employment, the
Executive, the Executive's spouse, if any, and their eligible dependents, if
any, shall be entitled to participate in and be covered under all the welfare
benefit plans or programs maintained by the Corporation and AAI from time to
time including, without limitation, all medical hospitalization, dental,
disability, life, accidental death and dismemberment and travel accident
insurance plans and programs. Executive shall also earn and receive a minimum of
six (6) weeks vacation each year with an unlimited year-end accrual of unused
vacation.
5.4 Long-Term Incentive Plan. The Executive shall be entitled to
participate in any long-term incentive plan or program adopted by the boards of
AAI and the Corporation ("LTIP Award") based on the achievement of reasonable
corporate objectives determined in good faith by AAI or the Corporation. An LTIP
Award may be in the form of performance shares, performance units, stock
options, restricted stock, or other types of awards deemed appropriate by the
Board, the Executive Committee or such other committees of the Board.
5.5 Expense Reimbursement. During the Term of Employment, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in promoting AAI and/or its Affiliates and in
otherwise performing his duties and responsibilities hereunder.
5.6 Payment of Deferred Wages. As of September 15, 2001, AAI and the
Corporation owed Executive wages in the amount of $619,634. However, a deferral
of the payment of such wages would enhance the financial condition of AAI and
the Corporation, and AAI and the Corporation has requested, and the Executive
has agreed to the deferral of the payment of such wages. Accordingly, in
consideration of the mutual promises and covenants contained herein, the
Executive agrees that he shall accept the following described deferred payment
from AAI and the Corporation, and AAI and the Corporation agree that they shall
make such deferred payment to the Executive in the principal amount of $619,634,
together with interest on any unpaid portion thereof at the rate of 10% per year
of 360 days from September 15, 2001 until the date paid, as deferred wages and
not as severance (the "Deferred Payment"), in accordance with the following
schedule without the necessity of any further resolution or vote approving such
payment by either of their respective board of directors once a resolution of
each such board or authorized committee thereof approving the execution of this
Agreement has been made:
The amount of such Deferred Payment shall be paid in lump sum by AAI and
the Corporation to the Executive on the earlier of (a) September 15, 2002,
(b) the date of the Executive's death whether or not during the Term of
Employment, (c) the date of the termination of the Executive's employment
hereunder due to Disability, (d) the date of the termination of Executive's
employment hereunder by AAI or the Corporation without Cause, or (e) the
date of the termination of Executive's employment hereunder by the
Executive for Good Reason.
6. Termination.
6.1 Termination Due to Death or Disability. A determination of whether the
Executive is Disabled shall be made by AAI, the Corporation or any Affiliate in
its sole, but good faith, discretion upon its own initiative after obtaining
certification from a duly licensed physician or upon request of the Executive or
a person acting on his behalf. The Executive shall cooperate with any necessary
medical examination in connection with a determination of Disability. Upon seven
(7) days prior written notice to the Executive, AAI and the Corporation may
terminate the Executive's employment hereunder due to Disability. In the event
of the Executive's death or a termination of the Executive's employment by AAI
and the Corporation due to Disability, the Executive, his estate or his legal
representative, as the case may be, shall be entitled to receive from AAI and
the Corporation without duplication the following:
(a) a lump sum payment of the Base Salary continuation at the rate in
effect (as provided for by Section 5.1 of this Agreement) at the
time of such termination through the Date of Termination;
(b) a lump sum payment of any Annual Bonus and LTIP Award awarded but
not yet paid as of the Date of Termination;
(c) a lump sum payment on the Date of Termination of the unpaid
portion of the Deferred Payment;
(d) a lump sum payment of accrued but unused vacation through the
Date of Termination;
(e) reimbursement of all expenses incurred, but not yet paid prior to
such death or Disability;
(f) in the case of death, any other compensation and benefits,
including life insurance, as may be provided in accordance with
the terms and provisions of any applicable plans and programs of
AAI or the Corporation, except any other severance benefit of AAI
or the Corporation; and
(g) in the case of Disability, (i) continuation of the Executive's
health and welfare benefits (as described in Section 5.5 of this
Agreement) at the level in effect (as provided for by Section
5.5) on the Date of Termination through the end of the one year
period following the termination of the Executive's employment
due to Disability (or the Corporation and/or AAI shall provide
the economic equivalent thereof), and (ii) any other compensation
and benefits as may be provided in accordance with the terms and
provisions of any applicable plans and programs of AAI and the
Corporation, except any other severance benefit of AAI or the
Corporation other than the Deferred Payment.
6.2 Termination by AAI and the Corporation for Cause. AAI and the
Corporation may terminate the Executive's employment hereunder for Cause as
provided in this Section 6.2. If AAI and the Corporation terminate the
Executive's employment hereunder for Cause, the Executive shall be entitled to
receive from AAI and the Corporation without duplication the following:
(a) a lump sum payment of the Base Salary continuation at the rate in
effect (as provided for by Section 5.1 of this Agreement) at the
time of such termination through the Date of Termination;
(b) a lump sum payment of any Annual Bonus and LTIP Award awarded but
not yet paid as of the Date of Termination;
(c) a lump sum payment of the Deferred Payment payable in accordance
with Section 5.7 on the earlier of September 15, 2002, the date
of the Executive's death after such termination, or the date on
which the Executive becomes mentally or physically impaired or
incapacitated to the extent rendering him unable to perform the
type of duties contemplated herein for any other employer for 180
days of any 360 day period after the date of such termination;
(d) a lump sum payment of accrued but unused vacation through the
Date of Termination;
(e) reimbursement for all expenses incurred, but not yet paid prior
to such termination of employment; and
(f) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans
and programs of AAI and the Corporation, except any other
severance benefit of AAI or the Corporation.
In any case described in this Section 6.2, the Executive shall be given
written notice authorized by a vote of at least a majority of the members of the
Board that AAI and the Corporation intend to terminate the Executive's
employment hereunder for Cause. Such written notice, given in accordance with
Section 6.7 of this Agreement, shall specify the particular act or acts, or
failure to act, which is or are the basis for the decision to so terminate the
Executive's employment for Cause. Except with respect to the grounds set forth
in Section 1.4(c), as to which the following shall not apply, the Executive
shall be given the opportunity within thirty (30) calendar days after the
receipt of such notice to meet with the Board to defend such act or acts, or
failure to act, and the Executive shall be given thirty (30) business days after
such meeting to correct such act or failure to act. Upon failure of the
Executive, as fairly and reasonably determined by the Board, within such latter
thirty (30) day period, to correct such act or failure to act, or if the
Executive fails to meet with the Board after being provided an opportunity to do
so, the Executive's employment by AAI and the Corporation shall be automatically
terminated under this Section 6.2 for Cause as of the date determined under
Section 1.5 of this Agreement.
6.3 Termination without Cause or Termination for Good Reason. Upon seven
(7) days prior written notice to the Executive, AAI and the Corporation may
terminate the Executive's employment hereunder without Cause, and upon thirty
(30) days notice to AAI and the Corporation, the Executive may terminate his
employment hereunder for Good Reason. If AAI and the Corporation terminate the
Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Executive terminates his employment for Good Reason, the
Executive shall be entitled to receive from AAI and the Corporation without
duplication the following:
(a) a lump sum payment equal in amount to 117% of the sum of (i) the
Executive's Base Salary (as provided for by Section 5.1 of this
Agreement), and (ii) the highest of either the 2001 Annual Bonus,
2002 Annual Bonus, or any other annual or incentive bonus awarded
to the Executive within five (5) years prior to the Date of
Termination;
(b) a lump sum payment of any Base Salary accrued or any 2001 Annual
Bonus, 2002 Annual Bonus, and LTIP Award awarded but not yet paid
as of the Date of Termination;
(b) a lump sum payment on the Date of Termination of the Deferred
Payment;
(c) a lump sum payment of accrued but unused vacation through the
Date of Termination;
(d) reimbursement of all expenses incurred, but not yet paid prior to
such termination of employment; and
(e) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans
or programs of the Corporation and AAI, except any other
severance benefit of AAI or the Corporation.
In the case of termination by Executive for Good Reason pursuant to this
Section 6.3, AAI and the Corporation shall be given written notice that the
Executive intends to terminate his employment hereunder for Good Reason. Such
written notice, given in accordance with Section 6.7 of this Agreement, shall
specify the particular act or acts, or failure to act, which is or are the basis
for the decision to so terminate the Executive's employment for Good Reason.
Upon failure of AAI and the Corporation, as fairly and reasonably determined by
the Executive, within the thirty (30) day notice period referred to above, to
correct such act or failure to act, or if AAI and the Corporation fail to meet
with the Executive after being provided an opportunity to do so, the Executive's
employment by AAI and the Corporation shall be automatically terminated under
this Section 6.3 for Good Reason as of the date determined under Section 1.5 of
this Agreement.
6.4 Voluntary Termination. The Executive may effect, upon seven (7) days
prior written notice to AAI and the Corporation, a Voluntary Termination of his
employment hereunder. A "Voluntary Termination" shall mean a termination of
employment by the Executive on his own initiative other than (a) a termination
due to death or Disability, or (b) a termination for Good Reason. A Voluntary
Termination shall not be a breach of this Agreement. If the Executive's
employment hereunder is so terminated, the Executive shall be entitled to
receive from AAI and the Corporation the following:
(a) a lump sum payment of any accrued but unpaid Base Salary at the
rate in effect (as provided for by Section 5.1 of this Agreement)
at the time of such termination through the Date of Termination;
(b) a lump sum payment on September 15, 2002 of the Deferred Payment,
together with a lump sum payment on the Date of Termination of
any 2001 Annual Bonus, 2002 Annual Bonus, or LTIP Award awarded
but not yet paid as of the Date of Termination;
(c) a lump sum payment of accrued but unused vacation through the
Termination Date;
(d) reimbursement for expenses incurred, but not yet paid prior to
the Date of Termination; and
(e) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable
employee benefit plans or programs maintained by AAI and the
Corporation, except any other severance benefit of AAI or the
Corporation.
6.5 Termination of Agreement by Expiration. If this Agreement expires
pursuant to Section 3 hereof, the Executive shall be entitled to receive on the
Expiration Date from AAI and the Corporation the following:
(a) a lump sum payment of any accrued but unpaid Base Salary at the
rate in effect (as provided for by Section 5.1 of this Agreement)
through the Expiration Date;
(b) a lump sum payment of any 2001 Annual Bonus, 2002 Annual Bonus,
and LTIP Award awarded but not yet paid as of the Expiration
Date;
(c) a lump sum payment of accrued but unused vacation through the
Expiration Date;
(d) reimbursement of all expenses incurred, but not yet paid prior to
such termination of employment;
(e) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable plans
or programs of the Corporation and AAI, except any other
severance benefit of AAI or the Corporation.
6.6 No Mitigation; No Offset. In the event of any termination of employment
under this Section 6, the Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due the Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that the Executive may obtain. Any amounts due under this
Section 6, with the exception of the Deferred Payment, are in the nature of
severance payments, or liquidated damages, or both, and in no event are either
such severance payments, liquidated damages or the Deferred Payment in the
nature of a penalty.
6.7 Notice of Termination. Any termination by AAI and the Corporation for
Cause or by the Executive for Good Reason shall be communicated by a notice of
termination to the other party hereto given in accordance with Section 13.3 of
this Agreement (the "Notice of Termination"). The Notice of Termination shall be
given, in the case of a termination for Cause, within ninety (90) business days
after a director of the Corporation (excluding the Executive) knew or should
have known of the events giving rise to such purported termination, and in the
case of a termination by the Executive for Good Reason, within ninety (90) days
of the Executive having actual knowledge of the events giving rise to such
termination, except in the case of termination for Good Reason resulting from a
Change in Control then within one hundred eighty (180) days of the effective
date of such Change in Control. Such notice shall (a) indicate the specific
termination provision in this Agreement relied upon, (b) set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, and (c) if the
termination date is other than the date of receipt of such notice, specify the
date on which the Executive's employment is to be terminated (which date shall
not be earlier than the date on which such notice is actually given).
6.8 Certain Other Payments. Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be received
by the Executive in connection with a Change in Control or the termination of
the Executive's employment, whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with AAI and the Corporation or any of
their Affiliates (all such payments and benefits being hereinafter called the
"Total Payments") would subject the Executive to the excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any successor section thereto (the "Excise Tax"), and if, and only if, such
Total Payments less the Excise Tax is less than the maximum amount of the Total
Payments which could be payable to the Executive without the imposition of the
Excise Tax, then and only then, and only to the extent necessary to eliminate
the imposition of the Excise Tax (and after taking into account any reduction in
the Total Payments provided by reason of Section 280G of the Code in any such
other plan, arrangement or agreement), (A) any cash payments hereunder shall
first be reduced (if necessary, to zero), and (B) all other non-cash payments
hereunder shall next be reduced. For purposes of this limitation (i) no portion
of the Total Payments the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the Date of Termination shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by AAI's independent auditors and
reasonably acceptable to the Executive does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code, including by reason of
Section 280G(b)(4)(A) of the Code, (iii) all payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clauses (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4)(B) of the
Code or are otherwise not subject to disallowance as deductions under Code
Section 280G, in the opinion of the tax counsel referred to in clause (ii); and
(iv) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by AAI's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
6.9 Payment. Except as otherwise provided in this Agreement, any payments
to which the Executive shall be entitled to under this Section 6, including,
without limitation, any economic equivalent of any benefit, shall be made
immediately on the Date of Termination. If the amount of any payment due to the
Executive cannot be finally determined within thirty (30) days after the Date of
Termination, such amount shall be estimated on a good faith basis by AAI and the
estimated amount shall be paid no later than thirty (30) days after such Date of
Termination. As soon as practicable thereafter, the final determination of the
amount due shall be made and any adjustment requiring a payment to or from the
Executive shall be made as promptly as practicable.
7. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided or maintained by AAI and/or the
Corporation for which the Executive may qualify, nor shall anything herein limit
or otherwise prejudice such rights as the Executive may have under any other
existing or future agreements with the Corporation, AAI, and/or any Affiliate of
either, including, without limitation, any stock option agreements or plans.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plans or programs of the Corporation, AAI and/or any
Affiliate of either at or subsequent to the Date of Termination shall be payable
in accordance with such plans or programs. Notwithstanding the foregoing,
payments to the Executive under Section 6 hereof, with the exception of the
Deferred Payment by AAI and the Corporation, shall be in lieu of payments under
any severance plan or program.
8. Settlement. AAI's and the Corporation's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off (except set-off for a fixed and liquidated obligation),
counterclaim, recoupment, defense or other right which AAI and/or the
Corporation and/or any Affiliates may have against the Executive or others.
Notwithstanding anything contained herein to the contrary, the obligations of
AAI and the Corporation hereunder for the payment of severance under Section 6.3
(a) shall be subject to Executive having executed and delivered an instrument to
AAI and the Corporation on the date of the receipt of such severance payment
irrevocably waiving and releasing AAI, the Corporation, and each Affiliate from
any and all obligations or liabilities to Executive and his heirs and assigns
(i) for the specific severance payments called for in Section 6.3 (a), (ii)
arising from or in connection with Executive's employment with AAI and the
Corporation or (iii) the termination of such employment and any and all claims
Executive may have under federal, state or local statutes, regulations or
ordinances or under any common law principles or breach of contract or the
covenant of good faith and fair dealing, defamation, wrongful discharge,
intentional infliction of emotional distress or promissory estoppel; provided,
however, such instrument of waiver and release to be executed by Executive shall
not be applicable to, reduce or otherwise diminish or release either AAI or the
Corporation from their obligation to make the Deferred Payment. Further,
notwithstanding anything contained herein to the contrary, the obligations of
AAI and the Corporation for the timely and proper payment of the Deferred
Payment shall be subject to Executive having executed and delivered an
instrument to AAI and the Corporation on the date of the receipt of such
Deferred Payment irrevocably waiving and releasing AAI, the Corporation, and
each Affiliate from any and all obligations or liabilities to Executive and his
heirs and assigns for such Deferred Payment.
9. Legal Fees and Other Expenses. In the event that a claim for payment or
benefits under this Agreement is disputed, the Executive shall be reimbursed for
all attorney fees and expenses incurred by the Executive in pursuing such claim,
provided that the Executive is successful as to at least part of the disputed
claim by reason of litigation, arbitration or settlement. In addition, the
Executive shall be paid or reimbursed for all legal fees and expenses incurred
by the Executive in connection with the review, preparation and negotiation of
this Agreement and/or any other agreements or plans referenced herein. The
Executive shall also be entitled to recover pre-judgment interest at the rate of
10% per annum on the amount of any past due payment obligations under Sections
5.1, 5.2, 6.1 (a), (b), (d), (e), 6.2 (a), (b), (d), (e), 6.3 (a), (b), (d),
(e), 6.4 (a), (b), (c), (d) and 6.5 (a), (b), (c), (d) from the date any such
payment was due until the earlier of the date of payment in full of such
obligation or the date of entry of a final judgment against AAI and/or the
Corporation.
10. Confidential Information and Nonsolicitation
10.1 Confidential Information. The Executive shall not, during the Term of
Employment and thereafter, without the prior express written consent of AAI
and/or the Corporation, disclose any confidential information, knowledge or data
relating to AAI, the Corporation, or any Affiliate of either and their
respective businesses, which (a) was obtained by the Executive in the course of
the Executive's employment with AAI and the Corporation, and (b) which is not
information, knowledge or data otherwise in the public domain (other than by
reason of a breach of this provision by the Executive), unless required to do so
by a court of law or equity or by any governmental agency or other authority.
10.2 No Solicitation. The Executive hereby agrees that, if his employment
hereunder is terminated by AAI and the Corporation for Cause or by the Executive
under Section 6.4 of this Agreement, he shall not, for twelve (12) months after
the Date of Termination, directly or indirectly, divert, solicit or take away
the patronage of (a) any customers or agents of the Corporation, AAI or any
Affiliate of either as of the relevant Date of Termination, or (b) any
prospective customers or agents of the Corporation, AAI or any Affiliate whose
business the Corporation and/or AAI was actively soliciting on the relevant Date
of Termination, and with which the Executive had business contact while employed
by the Corporation and AAI. The Executive agrees that, under the circumstances
and conditions described above and for the same period of time, the Executive
shall not, directly or indirectly, induce or solicit any employees or agents of
the Corporation, AAI or any Affiliate of either to leave or terminate their
employment or agency relationship with the Corporation or AAI. The Corporation
and AAI agrees that (i) any announcement made by the Executive, at any press
conference or in any press release or through individual notices, shall not, in
and of itself, constitute an attempt directly or indirectly to induce, divert,
solicit or take away customers or employees, (ii) any such announcement creates
no presumption with respect to any such inducement, diversion, solicitation or
taking, and (iii) in all cases both the burden of production of evidence and the
ultimate burden of persuasion with respect to any allegations or claims that
this Section 10.2 has been breached or violated by the Executive shall be borne
by AAI and the Corporation. Executive agrees that all restrictions and
agreements contained in this Section 10, including without limitation, those
relating to duration and restricted territory, are necessary and fundamental to
the protection of the business of AAI, the Corporation or any Affiliate, and are
reasonable and valid, and all defenses to the strict enforcement thereof by
Executive are hereby waived. Executive agrees that the remedy at law for such
breach of this Agreement will be inadequate, and that the damages from such
breach are not readily susceptible to being measured in monetary terms.
Accordingly, Executive agrees that upon breach of this Xxxxxxx 00, XXX, the
Corporation or any Affiliate shall be entitled to immediate injunctive relief
and may obtain a temporary order restraining any threatened further breach.
Nothing in this Agreement shall be deemed to limit AAI's, the Corporation's or
any Affiliate's remedies at law or in equity for any breach by Executive or any
of the provisions of this Agreement that may be pursued or availed of by AAI,
the Corporation or any Affiliate.
11. Successors.
11.1 The Executive. This Agreement is personal to the Executive and,
without the prior express written consent of AAI and the Corporation, shall not
be assignable by the Executive, except that the Executive's rights to receive
any compensation or benefits under this Agreement may be transferred or disposed
of pursuant to testamentary disposition, intestate succession or pursuant to a
domestic relations order. This Agreement shall inure to the benefit of and be
enforceable by the Executive's heirs, beneficiaries and/or legal
representatives.
11.2 AAI and the Corporation. This Agreement shall inure to the benefit of
and be binding upon AAI, the Corporation, and their respective successors and
assigns. AAI shall require any successor to all or substantially all of the
Corporation's and its Affiliates' business and/or assets, whether direct or
indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as AAI and the Corporation would be required to perform if no
such succession had taken place.
12. Indemnification. AAI and the Corporation agree that if the Executive is
made a party or is threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director or officer of
AAI, the Corporation, and/or any Affiliate of either or is or was serving at the
request of the Corporation, AAI and/or any Affiliate as a director, officer,
member, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including, without limitation, service with
respect to employee benefit plans, whether or not the basis of such Proceeding
is alleged action in an official capacity as a director, officer, member,
employee or agent while serving as a director, officer, member, employee or
agent, he shall be indemnified and held harmless by AAI and the Corporation to
the fullest extent authorized by applicable law, as the same exists or may
hereafter be amended, against all Expenses incurred or suffered by the Executive
in connection therewith, and such indemnification shall continue as to the
Executive even if the Executive has ceased to be an officer, director or agent,
or is no longer employed by AAI and the Corporation and shall inure to the
benefit of his heirs, executors and administrators; provided, however, that
Executive shall not be indemnified for any act or omission that constitutes
gross negligence or willful misconduct.
13. Miscellaneous.
13.1 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, applied without reference to the
principles of conflict of laws.
13.2 Amendments. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
13.3 Notices. All notices and other communications hereunder shall be in
writing and shall be given by hand-delivery to the other parties or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Xx. Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxxx Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxx 00000
If to the Corporation: Ascent Management, Inc.
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
Attention: General Counsel
If to AAI: Ascent Assurance, Inc.
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as any party hereto shall have furnished to the others
in writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
13.4 Withholding. AAI and the Corporation may withhold from any amounts
payable under this Agreement such federal, state or local income taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
13.5 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
13.6 Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
13.7 Beneficiaries/References. The Executive shall be entitled to select
(and change) a beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following the Executive's death, and may change such
election, in either case by giving AAI or the Corporation written notice
thereof. In the event of the Executive's death or a judicial determination of
his incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary(ies), estate or other legal
representative(s).
13.8 Entire Agreement. This Agreement contains the entire agreement between
the parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the parties with respect thereto.
13.9 Representations. AAI and the Corporation each represents and warrants
that it is fully authorized and empowered to enter into this Agreement. The
Executive represents and warrants that the performance of the Executive's duties
under this Agreement will not violate any agreement between the Executive and
any other person, firm, partnership, corporation, or organization.
13.10 Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement or the Executive's
Term of Employment hereunder for any reason to the extent necessary to the
intended provision of such rights and the intended performance of such
obligations.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and
AAI, as well as the Corporation have each caused this Agreement to be executed
in its name on its behalf, and attested to by their respective Secretaries, all
as of the day and year first above written.
Ascent Management, Inc.
Attest: By:/s/ Xxxxxxx X. X'Xxxxx
Xxxxxxx X. X'Xxxxx
/s/ Xxxxxxx X. Xxxxxxxx Title: Secretary
Ascent Assurance, Inc.
Attest: By:/s/ Xxxxxxx X. X'Xxxxx
Xxxxxxx X. X'Xxxxx
/s/ Xxxxxxx X. Xxxxxxxx Title: Secretary
/s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
