EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of January 1, 1998, between CONSECO,
INC. (hereinafter called the "Company"), and XXXXXXX X. XXXXXXX (hereinafter
called "Executive").
RECITALS
WHEREAS, the Company and Executive are parties to an Employment
Agreement dated January 1, 1987, as amended by Amendment No. 1 dated February
28, 1988 (as amended, the "Existing Employment Agreement"); and
WHEREAS, the Company and Executive desire to replace the Existing
Employment Agreement with this Agreement;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Executive, and Executive
hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Term. This Agreement shall be deemed to have become effective as of
January 1, 1998; provided that the performance-based compensation provisions
hereof (i.e., Section 5(b)) have been approved by the shareholders of the
Company at Conseco's 1998 Annual Meeting of Shareholders (the date of such
shareholder approval being referred to herein as the "Approval Date"). On the
Approval Date the Existing Employment Agreement shall be terminated, with such
termination being deemed to have become effective on January 1, 1998. Subject to
provisions for termination as provided in Section 9 hereof, the term of this
Agreement shall be five (5) years from and after January 1, 1998, and it shall
be automatically renewed for successive five (5) year periods on January 1 of
each year thereafter, unless either party elects not to renew this Agreement by
serving written notice of such intention not to renew on the other party at
least one hundred eighty (180) days prior
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to January 1 of each year. If such an election is made, this Agreement shall be
in full force and effect for the remaining portion of the then current five (5)
year period, subject to the provisions for termination as provided in Section 9
hereof. The term Basic Employment Period as used in this Agreement shall mean
the five (5) year period commencing with the most recent annual renewal pursuant
to this section.
3. Duties. Executive is engaged by the Company in an executive capacity
as its chief executive officer. Executive's position with the Company shall be
Chairman of the Board of Directors, President and Chief Executive Officer, and
such other positions (not inconsistent with the aforementioned responsibilities)
as may be determined from time to time by the Board of Directors of the Company.
4. Extent of Services. Executive, subject to the direction and control
of the Board of Directors of the Company, shall have the power and authority
commensurate with his executive status and necessary to perform his duties
hereunder. The Company agrees to provide to Executive such assistance and work
accommodations as are suitable to the character of his positions with the
Company and adequate for the performance of his duties. Executive shall devote
[substantially all of] 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 [material] 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
senior executive positions with the Company.
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5. Compensation.
(a) As compensation for services hereunder rendered during the term
hereof, Executive shall receive a base salary of One Million Dollars
($1,000,000) per year payable in equal installments in accordance with the
Company's payroll procedure for its salaried employees (but in no event less
than twice a month), it being understood that for 1998 a lump sum payment shall
be made promptly after the approval of this Agreement by the shareholders of the
Company to cause the salary payments to Executive in 1998 to such date in 1998
to at least equal the pro rata portion (based on the number of days in 1998 then
elapsed through the end of the most recent pay period then ended) of One Million
Dollars ($1,000,000). Salary payments shall be subject to withholding of taxes
and other appropriate and customary amounts. In addition to the base salary
above, Executive may receive additional annual salary increases based upon his
performance in his executive and management capacity. The amounts of such salary
increases shall be determined by the Board of Directors of the Company or the
Compensation Committee thereof (the "Compensation Committee").
(b) In addition to base salary, Executive shall be entitled to receive
annually a bonus to be calculated and paid for each fiscal year as follows:
(i) First, the maximum potential bonus to Executive for such year
(the "Maximum Bonus") shall be computed. The Maximum Bonus for a fiscal year
shall be equal to three percent (3%) of the annual Net Profits (as defined
below) for such fiscal year of the Company. The bonus shall be calculated from
the books and records of the Company which shall be kept in accordance with
generally accepted accounting principles applied by the Company in the
preparation of its financial statements. The Maximum Bonus for a fiscal year
shall be payable, without reference to any other tests, to the extent it does
not exceed the Non-Discretionary Amount (as determined
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pursuant to clause (v) below, the "Non-Discretionary Amount") applicable to such
year. "Net Profits" shall mean the Company's Income from Continuing Operations
(as defined below), as adjusted to add back, in each case to the extent such
items were deducted in the computation of Income from Continuing Operations, (x)
income taxes and (y) bonuses to Executive and the Company's Executive Vice
Presidents. "Income from Continuing Operations" shall mean the Company's income
from continuing operations, which shall exclude for this computation the effect
(in each case net of applicable tax) of (i) extraordinary items, (ii)
discontinued operations and (iii) the cumulative effects of changes in
accounting principles.
(ii) If the Maximum Bonus exceeds the Non-Discretionary Amount
for such fiscal year a separate calculation shall be made to determine what
portion, if any, of the Maximum Bonus in excess of the Non-Discretionary Amount
could be paid and still permit the Company's XXX (as determined pursuant to
clause (iii) below, the "XXX") for such fiscal year to be at least 15% for such
fiscal year (such amount exceeding the Maximum Bonus and meeting such 15% XXX
test for such fiscal year being referred to as the "Additional Potential
Bonus"). The Additional Potential Bonus for a fiscal year would then be payable
to Executive for such fiscal year subject to the discretion of the Compensation
Committee to reduce or eliminate (in whole or in part) the payment of the
Additional Potential Bonus for such year in its discretion.
(iii) The XXX for a fiscal year shall be determined by dividing
(x) the Company's Income from Continuing Operations for such fiscal year,
reduced by any dividends paid with respect to such fiscal year on the Company's
preferred stock (it being understood that any amounts paid to induce the
conversion of preferred stock are not to be considered dividends on preferred
stock) by (y) the arithmetic average of the Company's Average Common Equity (as
defined below) for the four quarters of such fiscal year. The "Average Common
Equity" of the Company for a quarter shall
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mean the arithmetic average of the common shareholders equity of the Company
shown on its financial statements (adjusted to exclude unrealized appreciation
or depreciation of fixed maturity securities net of any applicable deferred
income taxes, as so adjusted "Common Shareholders Equity") as of the end of such
fiscal quarter (as adjusted as provided below, the "Quarter End Equity") and the
end of the preceding quarter (the "Quarter Start Equity"); provided, that if one
or more Significant Transactions (as defined below) has occurred during the
fiscal quarter as to which Average Common Equity is being determined, then the
impact of each such Significant Transaction on the Quarter End Equity shall be
reduced by a fraction, the numerator of which shall be the number of days in
such quarter elapsed before said Significant Transaction occurred (it being
understood that with respect to a Significant Transaction which includes a
series of transactions which closed or were otherwise consummated over a period
of time the Company shall select a reasonable midpoint for purposes of this
calculation) and the denominator of which shall be the total number of days in
such quarter, and the Quarter End Equity shall be computed taking into account
such reductions. "Significant Transaction" with respect to a quarter shall mean
any event (such as a share issuance, share repurchase, conversion, acquisition,
disposition, merger, consolidation or change in accounting principles) the
effect of which event, or series of related events, is to cause the Quarter End
Equity to change by at least 10% of the Quarter Start Equity from what it would
otherwise have been absent such event or series of related events.
(iv) The Company agrees to give notice to the Compensation
Committee as promptly as practicable after the end of each fiscal year of the
respective amounts of Maximum Bonus, Additional Potential Bonus and, if it has
been adjusted with respect to such fiscal year, Non- Discretionary Amount for
such fiscal year. The Compensation Committee shall then have fifteen (15) days
from the date such notice is sent by the Company to determine the extent, if
any, to which
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the Additional Potential Bonus with respect to such fiscal year shall have been
reduced or eliminated. The Company shall give notice to Executive not later than
five (5) days after the expiration of such 15-day period of the Incremental
Bonus to be paid for such fiscal year.
(v) The Non-Discretionary Amount for each of 1998 and 1999 shall
be $13.5 million. The Non-Discretionary Amount shall be adjusted for 2000 and
the last year of each consecutive three-year period that follows (each an
"Adjustment Year"), as described in the following sentence. For an Adjustment
Year the Non-Discretionary Amount shall be adjusted to be the lesser of (i)
one-half of the average of the Maximum Bonus for the two fiscal years
immediately preceding such Adjustment year and (ii) the arithmetic average of
the Non-Discretionary Amount and the Additional Potential Bonus, in each case
regardless of the amount of bonus actually paid, for such two fiscal years. The
Non-Discretionary Amount as so adjusted shall remain the same with respect to
the two fiscal years following such Adjustment Year.
(vi) The cumulative accrued amount of the bonus shall be
calculated as of the end of each of the first three quarters of the Company's
fiscal year based on the year-to-date Net Profits, and such accrued bonus, minus
accrued bonus payments made for previous quarters of the same fiscal year, shall
be paid to Executive as soon as practicable, but in no event more than
forty-five (45) days after the end of the quarter; provided, that the cumulative
maximum bonus payable with respect to the (i) first quarter may not exceed 25%
of the Non-Discretionary Amount, (ii) first two quarters shall not exceed 50% of
the Non-Discretionary Amount and (iii) first three quarters shall not exceed 75%
of the Non-Discretionary Amount for such fiscal year. The aggregate bonus for
the fiscal year, minus the quarterly accrued payments made for the year, shall
be paid to Executive soon as practicable, but in no event more than ninety (90)
days, after the fiscal year end. If the quarterly
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payments for the first three quarters of any fiscal year exceed the aggregate
bonus payable for the entire year, the amount of such excess shall be repaid to
the Company by Executive.
6. Fringe Benefits.
(a) Executive shall be entitled to participate in such existing
employee benefit plans and insurance programs offered by the Company, or which
it may adopt from time to time for its executive management or supervisory
personnel generally, at such time as Executive shall have fulfilled 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 ($600.00)
and shall pay directly or shall reimburse Executive for the cost of fuel 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.
(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 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 paragraph 6(a).
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(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 One Million Dollars ($1,000,000), 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 twelve (12) consecutive
calendar months, the Company may terminate Executive's employment hereunder in
which case the Company shall immediately pay Executive a lump sum payment equal
to the sum of his salary and bonus as provided herein 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) intentional
self-inflicting injury or intentionally self-induced sickness; or (c) a proven
unlawful act or enterprise on the part of Executive.
8. Disclosure of Information. Executive acknowledges that in and as a
result of his employment hereunder, he 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 by the Company. Upon the termination of this
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Agreement, Executive shall return all materials obtained from or belonging to
the Company which Executive may have in his possession or control. In the event
of a breach or threatened breach by Executive of the provisions of this
paragraph, the Company shall be entitled to an injunction restraining Executive
from utilizing or disclosing, in whole or in part, such material, or from
rendering any service to any person, firm, corporation, association, or other
entity to which such material might be useful, and/or any and all persons
directly or indirectly acting for or with Executive. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to the Company for such breach or threatened breach, including the recovery of
damages from Executive.
9. 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 and (ii) termination by the Company
pursuant to Section 7.
(b) In the event this Agreement is terminated by the Company pursuant
to the first sentence of Section 9(a) and such termination does not constitute a
Control Termination as defined in (d) below, Executive shall be entitled to
receive (i) a severance payment equal to five (5) times the sum of Executive's
base salary, as determined pursuant to Section 5(a) hereof for the fiscal year
in which such termination occurs, and the Non-Discretionary Amount as defined in
Section 5(a)(iv) applicable for such fiscal year (regardless of whether the
Company's results for such fiscal year would have resulted in a bonus being paid
to Executive) and (ii) all other unpaid amounts previously accrued or awarded
pursuant to any other provision of this Agreement.
(c) In the event this Agreement is terminated upon the death of
Executive, or is terminated by Executive and such termination does not
constitute a Control Termination as defined in (d) below,
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Executive shall be entitled to receive his base salary as provided in Section
5(a) accrued but unpaid (i) as of the date of termination, (ii) a pro rata share
of the bonus provided for in Section 5(b) based on the number of months during
which he performed duties hereunder in the calendar year of his death, and (iii)
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 (1)
termination of this Agreement by the Company in anticipation of or following a
"change in control" of the Company (as defined below), or (2) 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 described in Section 3, a reduction in total
compensation from that provided in Section 5, or a breach by the Company of any
other provision of this Agreement; or
(ii) reasonable determination by Executive that, as a result of a
change in circumstances significantly affecting his position, he is unable to
exercise the authorities, powers, functions or duties attached to his position
and contemplated by Section 3 of this Agreement; or
(iii) the Company's principal executive offices are moved outside
the geographic area comprised of Xxxxxx County, Indiana, and the seven
contiguous counties; or
(iv) the giving of notice of termination by Executive to the
Company 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
"1934 Act") as revised effective January 20, 1987, or if Item 6(e) is no longer
in effect, any regulations issued by the Securities and Exchange
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Commission pursuant to the 1934 Act which serve similar purposes; 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)(2)
of the 0000 Xxx) is or becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the combined voting power
of the Company's then outstanding securities or (B) in connection with or as a
result of a tender offer, merger, consolidation, sale of assets or contest for
election of directors, or any combination of the foregoing transactions or
events, individuals who were members of the Board of Directors of the Company
immediately prior to any such transaction or event shall not constitute a
majority of the Board of Directors following such election.
10. 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 salary on a monthly basis at the same rate
as payable immediately prior to the date of termination plus the estimated
amount of any bonuses to which he would have been entitled had he remained in
the employ of the Company and a change in control of the Company had not
occurred.
(b) During the remainder of the Basic Employment Period, Executive
shall continue to be treated as an employee under the provisions of all
incentive compensation arrangements applicable to the Company's executive
employees. In addition, Executive shall continue to be entitled to all benefits
and service credit 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.
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(c) If, despite the provisions of paragraph (b) above, benefits under
any employee benefit plan shall not be payable or provided under any such plan
to Executive, or his dependents, beneficiaries and estate, because he is no
longer an employee of the Company, the Company itself shall, to the extent
necessary, pay or provide for payment of such benefits and service credit for
such benefits to Executive, his dependents, beneficiaries and estate.
(d) If, despite the provisions of paragraph (b) above, benefits or the
right to accrue further benefits under any stock option or other long-term
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.
11. 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 10 above, in an amount which is equal to the sum of the
amounts determined in accordance with the following paragraphs (a) and (b):
(a) an amount equivalent to salary payments for 60 calendar
months at the rate which he would have been entitled to receive in accordance
with Section 5(a) plus a pro rata share of the estimated amount of any bonus
which would have been payable for the bonus period which includes the
termination date; and
(b) an amount equivalent to five times the greater of (i) the
highest annual bonus payable under section 5(b) hereof for the last three (3)
fiscal years of the company ended prior to such Control Termination, or (ii) the
estimated amount of the annual bonus payable under Section 5(b) hereof for the
fiscal year of the Company which includes the date of such Control Termination.
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In the event that Executive makes an election pursuant to this Section
to receive a lump sum severance allowance of the amount described in clauses (a)
and (b), then, in addition to such amount, he shall receive (i) in addition to
the benefits provided under any retirement or pension benefit plan maintained by
the Company, the benefits he would have accrued under such benefit plan if he
had remained in the employ of the Company and such plan had remained in effect
for 60 calendar months after his termination, which benefits will be paid
concurrently with, and in addition to, the benefits provided under such benefit
plan, and (ii) the employee benefits (including, but not limited to, coverage
under any medical insurance and split-dollar life insurance arrangements or
programs) to which he would have been entitled under all employee benefit plans,
programs or arrangements maintained by the Company if he had remained in the
employ of the Company and such plan, 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.
12. Tax Indemnity Payments. (a) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by the Company or its affiliated companies to or for the benefit
of Executive paid or payable or distributed or distributable pursuant to the
terms of the Agreement (but determined without regard to any additional payments
required under this Section 12, a "Payment") would be subject to the excise tax
imposed by Section 4999 of the 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
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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 12(c), all determinations
required to be made under this Section 12, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by the Company's
public accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive shall appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 12, shall be paid by the Company to Executive within five (5) days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of
the uncertainty in the application of
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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 ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 12(c) and Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive.
(c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid; provided that the failure to give any notice pursuant
to this Section 12(c) shall not impair Executive's rights under this Section 12
except to the extent the Company is materially prejudiced thereby. Executive
shall not pay such claim prior to the expiration of the 30- day period following
the date on which Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration of
such period that it desires to contest such claim, Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
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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 12(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct Executive to pay the tax claimed and xxx for a refund
or contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided further, that if the Company directs Executive
to pay such claim and xxx for a refund, the Company shall advance the amount of
such payment to Executive on an interest-free basis and shall indemnify and hold
Executive harmless, on an after-tax basis, from any Excise Tax or income,
employment or other tax (including interest or penalties with respect to any
such taxes) imposed with respect to such advance or with 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
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hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 12(c), Executive becomes entitled to receive, and
receives, any refund with respect to such claim, Executive shall (subject to the
Company's complying with the requirements of Section 12(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by Executive of
an amount advanced by the Company pursuant to Section 12(c), a determination is
made that Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify Executive in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
13. Payment for Options and Stock. In the event of a Control
Termination of this Agreement, Executive may elect, within sixty (60) days after
such Control Termination, to receive a lump-sum payment from the Company in
return for surrender by the Executive of all or any portion of the options then
outstanding held by the Executive to purchase shares of common stock of the
Company ("Unexercised Options") and all or any portion of the common stock of
the Company then owned by Executive (the "Owned Stock"). For purposes of this
provision, Unexercised Options shall include all outstanding options whether or
not they are exercisable at the time of the election by Executive hereunder. For
each Unexercised Option to purchase one share of common stock, the Company shall
pay to Executive an amount equal to the highest per share fair market value of
the common stock on any day during the period beginning six (6) months prior to
the date of Executive's
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election pursuant to this Section. To compensate Executive for his loss of the
potential future speculative value of the Unexercised Options, there shall be no
deduction of Executive's exercise price per share for each Unexercised Option
from the amount to be received by Executive pursuant to the foregoing sentence.
For each share of Owned Stock, the Company also shall pay to Executive the
highest fair market value per share of the common stock on any date during the
period beginning six (6) months prior to the date of Executive's election
pursuant to this Section. The payment due from the Company pursuant to this
Section shall be made to Executive within ten (10) days after the date of his
election hereunder, against execution and delivery by Executive to the Company
of an appropriate agreement confirming his surrender of the Unexercised Options
and the certificates duly endorsed by Executive for the Owned Stock.
15. Character of Termination Payments. The amounts payable to Executive
upon any termination of this Agreement shall be considered severance pay in
consideration of past services rendered on behalf of the Company and his
continued 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. Grant of Stock Option. On the Approval Date, the Company shall
grant to Executive, a nonqualified stock option under the Code to purchase One
Million Five Hundred Thousand (1,500,000) shares of common stock at the fair
market value per share of common stock on the Effective Date. Such stock option
shall expire ten (10) years after the Approval Date of grant and shall become
exercisable with respect to one-half of the shares covered on the third
anniversary of the Approval Date, with respect to one-quarter of such shares on
the fourth anniversary of the
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Approval Date and with respect to the remaining one-quarter of such shares on
the fifth anniversary of the Approval Date. If the Approval Date is subsequent
to any stock dividend, stock split, recapitalization, merger, consolidation,
stock combination or exchange of shares affecting the common stock, appropriate
adjustment shall be made in the nature and number of shares or other securities
of the Company (or securities issued by a corporation into which the Company has
merged or with which the Company has consolidated) subject to the options
provided for in this Section by the good faith determination of the Compensation
Committee.
17. Arbitration of All Disputes. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof, shall be settled by
arbitration in the City of Indianapolis, Indiana, in accordance with the laws of
the State of Indiana by three arbitrators, one of whom shall be appointed by the
Company, one by Executive and the 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 such
rights, 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.
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18. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified registered
mail to his residence, in the case of Executive, or to its principal offices 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. It may not be changed orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. This Agreement supersedes and
replaces all prior employment and compensatory agreements, understandings and
arrangements between Executive and the Company or any subsidiary of the Company.
21. Binding Agreement and Governing Law. This Agreement shall be
binding upon and shall insure to the benefit of the parties and their 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.
/s/ XXXXXX X. XXXX /s/ XXXXXXX X. XXXXXXX
By: ------------------------- -------------------------------
Xxxxxx X. Xxxx Xxxxxxx X. Xxxxxxx
"Company" "Executive"
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