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EXHIBIT-10.1.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 1991, as amended and restated
as of May 26, 1999, and as further amended and restated as of December 15, 1999,
between CONSECO, INC., an Indiana corporation (hereinafter called the
"Company"), and Xxxxxx X. Xxxx (hereinafter called "Executive").
RECITALS
WHEREAS, Executive has been employed by the Company for a number of
years and the services of Executive, his managerial and professional experience,
and his knowledge of the affairs of the Company are of great value to the
Company;
WHEREAS, the Company deems it to be essential for it to have the
benefit and advantage of the services of the Executive for an extended period;
and
WHEREAS, the Company and Executive are parties to an employment
agreement dated July 1, 1991, as amended on March 12, 1996, October 29, 1997 and
May 14, 1998 and as amended and restated as of May 26, 1999 (as so amended the
"Existing Employment Agreement"), and the Company and Executive desire to make
certain modifications to the Existing Employment Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree the Existing Employment Agreement
be amended and restated in its entirety to be 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 July 1, 1991.
Subject to the provisions for termination as provided in Section 10 hereof, the
term of this Agreement shall be the period beginning July 1, 1991 and ending
December 31, 2001 (hereinafter called the "Basic Employment Period").
3. Duties. Executive is engaged by the Company in an executive capacity
as its chief financial officer. Executive shall report to the Chief Executive
Officer regarding the performance of his duties and shall be subject to the
direction and control of the Board of Directors of the Company (sometimes
referred to herein as the "Board") and the Chief Executive Officer. Executive's
position with the Company shall initially be Executive Vice President, and such
other positions as may be determined from time to time by the Board.
4. Extent of Services. Executive, subject to the direction and control
of the Chief Executive Officer and the Board, shall have the power and authority
commensurate with his executive status and necessary to perform his duties
hereunder. The Company agrees to provide to
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Executive such assistance and work accommodations as are suitable to the
character of his positions with the Company and adequate for the performance of
his duties. Executive shall devote his entire employable time, attention and
best efforts to the business of the Company, and shall not, without the consent
of the Company, during the term of this Agreement be actively engaged in any
other business activity, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing Executive from investing his assets in such form or manner as will
not require any services on the part of Executive in the operation of the
affairs of the companies in which such investments are made. For purposes of
this Agreement, full-time employment shall be the normal work week for
individuals in comparable executive positions with the Company.
5. Compensation.
(a) As compensation for services hereunder rendered during the term
hereof, Executive shall receive a base salary ("Base Salary") of Two
Hundred Fifty Thousand Dollars ($250,000) per year payable in equal
installments in accordance with the Company's payroll procedure for its
salaried employees. Salary payments shall be subject to withholding of
taxes and other appropriate and customary amounts. Executive may
receive increases in his Base Salary from time to time, based upon his
performance in his executive and management capacity. The amounts of
any such salary increases shall be approved by the Board or the
Compensation Committee of the Board upon the recommendation of the
Chief Executive Officer.
(b) In addition to Base Salary, Executive may receive such other
bonuses or incentive compensation as the Compensation Committee or the
Board may approve from time to time, upon the recommendation of the
Chief Executive Officer.
6. Fringe Benefits.
(a) Executive shall be entitled to participate in such existing
employee benefit plans and insurance programs offered by the Company,
or which it may adopt form time to time, for 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.
(b) During the term of this Agreement, the Company shall pay
Executive a monthly automobile allowance in the amount of Six Hundred
Dollars ($600), and the Company shall pay directly or shall reimburse
Executive for the cost of fuel that he incurs in using his automobile.
(c) Executive shall be entitled to four (4) weeks vacation with pay
for each year during the term hereof.
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(d) Executive may incur reasonable expenses for promoting the
Company's business, including expenses for entertainment, travel, and
similar items. The Company shall reimburse Executive for all such
reasonable expenses upon Executive's periodic presentation of an
itemized account of such expenditures.
(e) The Company shall, upon periodic presentation of satisfactory
evidence and to a maximum of Ten Thousand Dollars ($10,000) per each
year of this Agreement, reimburse Executive for reasonable medical
expenses incurred by Executive and his dependents which are not
otherwise covered by health insurance provided to Executive under
Section 6(a).
(f) During the term of this Agreement, the Company shall at its
expense maintain a term life insurance policy or policies on the life
of Executive in the face amount of Five Hundred Thousand Dollars
($500,000), payable to such beneficiaries as Executive may designate.
7. Disability. If Executive shall become physically or mentally
disabled during the term of this Agreement 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 nine (9) consecutive
months, the Company may terminate Executive's employment hereunder in which case
the Company shall immediately pay Executive a lump sum payment equal to
one-quarter of the sum of his annual salary and bonus with respect to the most
recent fiscal year then ended and, provided further, that no such lump sum
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.
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9. Covenants Against Competition and Solicitation. Executive
acknowledges that the services he is to render to the Company are of a special
and unusual character, with a unique value to the Company, the loss of which
cannot adequately be compensated by damages or an action at law. In view of the
unique value to the Company of the services of Executive for which the Company
has contracted hereunder, because of the confidential information to be obtained
by, or disclosed to, Executive as hereinabove set forth, and as a material
inducement to the Company to enter into this Agreement and to pay to Executive
the compensation stated in Section 5, as well as any additional benefits stated
herein, and other good and valuable consideration, Executive covenants and
agrees that throughout the period Executive remains employed hereunder and for
one year thereafter, 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 in the
event of a Control Termination of this Agreement as defined in Section 10 below.
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 time 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 pursuant to Section 7.
(b) In the event this Agreement is terminated by the Company and
such termination is not pursuant to the last sentence of (a) above or
for "just cause" as defined in (e) below and does not constitute a
Control Termination as defined in (d) below, Executive shall be
entitled to receive Executive's Base Salary, as determined pursuant to
Section 5(a) hereof, for the remainder of the Basic Employment Period
and all other unpaid amounts previously accrued or awarded pursuant to
any other provision of this Agreement.
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(c) In the event this Agreement is terminated by the death of
Executive, is terminated by the Company for "just cause" as defined in
(e) below, or is terminated by Executive and such termination does not
constitute a Control Termination as defined in (d) below, Executive
shall be entitled to receive Executive's Base Salary as provided in
Section 5(a) accrued but unpaid as of the date of termination, and all
other unpaid amounts previously accrued or awarded pursuant to any
other provision of this Agreement.
(d) The term "Control Termination" as used herein shall mean (A)
termination of this Agreement by the Company in anticipation of or 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" of the Company (as defined below) upon
the occurrence of any of the following events:
(i) a significant change in the nature or scope of
Executive's authorities or duties from those in existence
immediately prior to the change in control, a reduction in his total
compensation from that in existence immediately prior to the change
in control, or a breach by the Company of any other provision of
this Agreement; or
(ii) the reasonable determination by Executive that, as a
result of a change in circumstances significantly affecting his
position, he is unable to exercise Executive's authorities, powers,
functions or duties in existence immediately prior to the change in
control, or
(iii) the Company's principal executive offices are moved
outside the geographic area comprised of Xxxxxx County, Indiana, and
the seven contiguous counties or Executive is required to work at a
location other than the Company's principal executive offices; or
(iv) the giving of notice of termination by Executive during
the 6-month period commencing six (6) months after the 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
May 26, 1999; provided that, without limitation, such a change in control shall
be deemed to have occurred if and when (A) 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, 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
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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. 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.
(e) For purposes of this Agreement "just cause" shall mean:
(i) a material breach by Executive of this Agreement, the
commission of gross negligence, or willful malfeasance or fraud or
dishonesty of a substantial nature in performing Executive's
services on behalf of the Company, which is in each case (A) 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 and (B) not remedied by Executive in a reasonable
period of time after receipt of written notice from the Company
specifying such breach;
(ii) Executive's breach of any provisions of this Agreement, or
his use of alcohol or drugs which interferes with the performance of
his duties hereunder or which compromises the integrity and
reputation of the Company, its employees, and products;
(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
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(iv) Executive's absence from his employment other than as a
result of Section 7 hereof, for whatever cause, for a period of more
than one (1) month, without prior written consent from the Company.
11. Payments for Control Termination. In the event of a Control
Termination of this Agreement, the Company shall pay Executive and provide him
with the following:
(a) During the remainder of the Basic Employment Period, the Company
shall continue to pay Executive his Base Salary at the same rate as
payable immediately prior to the date of termination plus the estimated
amount of any bonuses to which he would have been entitled had he
remained in the employ of the Company and a change in control of the
Company had not occurred, which estimate shall be reasonable and made
by the Company in good faith.
(b) During the remainder of the Basic Employment Period, Executive
shall continue to be treated as an employee under the provisions of all
incentive compensation arrangements applicable to the Company's
executive employees. In addition, Executive shall continue to be
entitled to all benefits and service credits for benefits under
medical, insurance and other employee benefit plans, programs and
arrangements of the Company as if he were still employed under this
Agreement and a change in control of the Company had not occurred.
(c) If, despite the provisions of paragraph (b) above, benefits
under any employee benefit plan shall not be payable or provided under\
any such plan to Executive, or Executive's dependents, beneficiaries
and estate, because he is no longer an employee of the Company, the
Company itself shall, to the extent necessary to provide the full value
of such benefits and service credits to Executive, Executive's
dependents, beneficiaries and estate, pay or provide for payment of
such benefits and service credits for such benefits to Executive,
Executive's dependents, beneficiaries and estate.
(d) If, despite the provisions of paragraph (b) above, benefits or
the right to accrue further benefits under any stock option or other
incentive compensation arrangement shall not be provided under any such
arrangement to Executive, or his dependents, beneficiaries and estate,
because he is no longer an employee of the Company, the Company shall,
to the extent necessary, pay or provide for payment of such benefits to
Executive, his dependents, beneficiaries and estate.
12. Severance Allowance. In the event of a Control Termination of this
Agreement, Executive may elect, within 60 days after such Control Termination,
to be paid a lump sum severance allowance, in lieu of the termination payments
provided for in Section 11 above, in an amount which is equal to the sum of the
amounts determined in accordance with the following clauses (a) and (b):
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(a) an amount equal to the aggregate of salary payments for 60
calendar months at the rate of Base Salary which he would have been
entitled to receive in accordance with Section 5(a); and
(b) an amount equal to the aggregate of 60 calendar months of bonus
at the greater of (i) the monthly rate of the bonus payment for the
annual bonus period immediately prior to this termination date, or (ii)
the monthly rate of the estimated amount of the bonus for the annual
bonus period which includes his termination date.
In the event that Executive makes an election pursuant to this Section
to receive a lump sum severance allowance of the amount described in clauses (a)
and (b), then, in addition to such amount, he shall receive (i) in addition to
the benefits provided under any deferred compensation, retirement or pension
benefit plan maintained by the Company, the benefits he would have accrued under
such benefit plan if he had remained in the employ of the Company and such plan
had remained in effect for 60 calendar months after his termination, which
benefits will be paid concurrently with, and in addition to, the benefits
provided under such benefit plan, and (ii) the employee benefits (including, but
not limited to, coverage under any medical insurance and life insurance
arrangements or programs) to which he would have been entitled under all
employee benefit plans, programs or arrangements maintained by the Company if he
had remained in the employ of the Company and such plans, programs or
arrangements had remained in effect for 60 calendar months after his
termination; or the value of the amounts described in clauses (i) and (ii) next
preceding. The amount of the payments described in the preceding sentence shall
be determined and such payments shall be distributed as soon as it is reasonably
possible.
13. Tax Indemnity Payments.
(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
13 (a "Payment"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986 (as amended 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 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 13(c), all determinations
required to be made under this Section 13, including whether and when a
Gross-Up Payment is required
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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 13, 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 13(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.
(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 of, 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 13(c) shall not
impair Executive's rights under this Section 13 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,
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(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 13(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 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 13(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 13(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.
14. Payment for Options. In the event of a Control Termination of this
Agreement, Executive may also elect, within sixty (60) days after such Control
Termination, to receive (in
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addition to any other amounts owed to Executive under this Agreement) a lump sum
payment in cash equal to the sum of the following: (i) all or any portion of the
number of shares of common stock of the Company which may be acquired pursuant
to options granted by the Company and held by Executive at the time of such
election, multiplied by the Conseco Put Price; plus (ii) all or any portion of
the number of Successor Securities which may be acquired pursuant to options
(which options were granted to Executive in exchange or substitution for options
to acquire the common stock of the Company) held by Executive at the time of
such election, multiplied by the Successor Security Put Price; plus (iii) the
number of shares of common stock of the Company which were acquired pursuant to
options granted by the Company which were exercised, or which were discharged
and satisfied by the payment to Executive of cash or other property (other than
options for Successor Securities), subsequent to the first public announcement
of the transaction or event which led to the change in control, multiplied by
the respective per share exercise prices of such exercised or discharged
options. For purposes of calculating the above lump sum payment, the options
described in clauses (i) and (ii) shall include all such options, whether or not
then exercisable, and, to compensate Executive for the loss of the potential
future speculative value of unexercised options, there shall not be any
deduction of the respective per share exercise prices for any of the options
described in such clauses (i) and (ii). The cash payment due from the Company
pursuant to this Section 14 shall be made to Executive within ten (10) days
after the date of such election hereunder, against the execution and delivery by
Executive to the Company of an appropriate agreement confirming the surrender to
the Company of the options in respect of which the lump sum cash payment is
being made to Executive.
"Successor Securities" means any securities of any person received
by the holders of the common stock of the Company in exchange, substitution or
payment for, or upon conversion of, the common stock of the Company in
connection with a change in control.
"Conseco Put Price" means the greater of (i) the Change in Control
Price or (ii) the Current Market Price of the common stock of the Company.
"Successor Security Put Price" means the greater of (i) the
Change in Control Price divided by the Exchange Ratio or (ii) the Current Market
Price of the Successor Securities.
"Current Market Price" for any security means the average of the
daily Prices per security for the twenty (20) consecutive trading days ending on
the trading day which is immediately prior to Executive's election under this
Section 14.
"Price" for any security means the average of the highest and
lowest sales price of such security (regular way) on a trading day as shown on
the Composite Tape of the New York Stock Exchange (or, if such security is not
listed or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which such security is listed or admitted to
trading) or, in case no sales take place on such day, the average of the closing
bid and asked prices on the New York Stock Exchange (or, if such security is not
listed or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which such security is listed or admitted to
trading) or, if it is not listed or admitted to trading on any national
securities exchange, the average of the highest and lowest sales prices of such
security on such day as reported by the NASDAQ Stock Market, or in case no sales
take place on such day, the average of the closing bid
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and asked prices as reported by NASDAQ, or if such security is not so reported,
the average of the closing bid and asked prices as furnished by any securities
broker-dealer of recognized national standing selected from time to time by the
Company (or its successor in interest) for that purpose.
"Change in Control Price" means (i) in the case of a change in
control which occurs solely as a result of a change in the composition of the
Board of Directors of the Company or which occurs in a transaction, or series of
related transactions, in which the same consideration is paid or delivered to
all of the holders of common stock of the Company (or, in the event of an
election by holders of the common stock of the Company of different forms of
consideration, if the same election is offered to all of the holders of common
stock of the Company), the Price per share of the common stock of the Company on
the date on which the change in control occurs, or if such date is not a trading
day, then the trading day immediately prior to such date, or (ii) in the case of
a change in control effected through a series of related transactions, or in a
single transaction in which less than all of the outstanding shares of common
stock of the Company is acquired, the highest price paid to the holders of
common stock of the Company in the transaction or series of related transactions
whereby the change in control takes place. In determining the highest price paid
to the holders pursuant to clause (ii) of the immediately preceding sentence, in
the case of Successor Securities paid or delivered to the holders of common
stock of the Company in exchange, payment or substitution for, or upon
conversion of, the common stock of the Company, the price paid to such holders
shall be the Price of such security at the time or times paid or delivered to
such holders.
"Exchange Ratio" means, in connection with a change in control, the
number of Successor Securities to be paid or delivered to the holders of common
stock of the Company in exchange, payment or substitution for, or upon
conversion of, each share of such common stock.
15. Character of Termination Payments. The amounts payable to Executive
upon any termination of this Agreement shall be considered severance pay in
consideration of past services rendered on behalf of the Company and his
continued service from the date hereof to the date he becomes entitled to such
payments. Executive shall have no duty to mitigate his damages by seeking other
employment and, should Executive actually receive compensation from any such
other employment, the payments required hereunder shall not be reduced or offset
by any such other compensation.
16. Right of First Refusal to Purchase Stock. Executive agrees that the
Company shall have throughout the Basic Employment Period the right of first
refusal to purchase all or any portion of the shares of the Company's common
stock owned by him (the "Shares") at the following price:
(a) in the event of a bona fide offer for the Shares, or any part
thereof, received by Executive from any other person (a "Third Party
Offer"), the price to be paid by the Company shall be the price set
forth in such Third Party Offer; and
(b) in the event Executive desires to sell the Shares, or any part
thereof, in the public securities market, the price to be paid by the
Company shall be the last sale price quoted on the New York Stock
Exchange (or any other exchange or national market system upon which
price quotations for the Company's common stock are regularly
available) for the Company's
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common stock on the last business day preceding the date on which
Executive notifies the Company of such desire.
In the event Executive shall receive a Third Party Offer which he
desires to accept, he shall deliver to the Company a written notification of the
terms thereof and the Company shall have a period of 48 hours after such
delivery in which to notify Executive of its desire to exercise its right of
first refusal hereunder.
In the event Executive desires to sell any portion of the Shares in the
public market he shall deliver to the Company a written notification of the
amount of Shares he desires to sell, and the Company shall have a period of 24
hours after such delivery to notify Executive of its desire to exercise its
right of first refusal hereunder with respect to such amount of Shares.
Upon each exercise by the Company of its right of first refusal
hereunder, it shall make payment to Executive for the Shares in accordance with
standard practice in the securities brokerage industry. After each failure by
the Company to exercise its right of first refusal hereunder, Executive may
proceed to complete the sale of Shares pursuant to the Third Party Offer or in
the open market in accordance with his notification to the Company, but his
failure to complete such sale within two weeks after his notification to the
Company shall reinstate the Company's right of first refusal with respect
thereto and require a new notification to the Company.
17. Arbitration of 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)
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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.
18. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
his residence, in the case of Executive, or to the business office of its Chief
Executive Officer, in the case of the Company.
19. Waiver of Breach and Severability. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by either party. In the
event any provision of this Agreement is found to be invalid or unenforceable,
it may be severed from the Agreement and the remaining provisions of the
Agreement shall continue to be binding and effective.
20. Entire Agreement. This instrument contains the entire agreement of
the parties and supersedes all prior agreements between them. This agreement may
not be changed orally, but only by an instrument in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
21. Binding Agreement and Governing Law; Assignment Limited. This
Agreement shall be binding upon and shall inure to the benefit of the parties
and their lawful successors in interest and shall be construed in accordance
with and governed by the laws of the State of Indiana. This Agreement is
personal to each of the parties hereto, and neither party may assign nor
delegate any of its rights or obligations hereunder without the prior written
consent of the other.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CONSECO, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Chairman of the Board
"Company"
/s/ Xxxxxx X. Xxxx
-------------------------------
Xxxxxx X. Xxxx
"Executive"
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