EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 1991, as amended and
restated as of May 26, 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 (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 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
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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.
(d) Executive may incur reasonable expenses for promoting the
Company's business, including expenses for entertainment, travel, and
similar items. The Company shall
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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.
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
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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.
(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)
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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 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
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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
(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.
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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):
(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
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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 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,
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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,
(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
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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 and Stock. 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 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 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; plus (iv) all or any
portion of the number of shares of common stock of the Company held by Executive
at the time of such election, multiplied by the Conseco Put Price; plus (v) all
or any portion of the number of Successor Securities held by Executive at the
time of such election, multiplied by the Successor Security Put Price; plus (vi)
to the extent that any of Executive's deferred compensation units were not
satisfied in cash in connection with the change in control and were instead
payable in shares of common stock of the Company or Successor Securities, all or
any portion of the number of units held by Executive at the time of such
election, multiplied by the Conseco Put Price of the common stock of the Company
or the Successor Security Put Price of the Successor Securities, as the case may
be. 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
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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 and deferred compensation units and the certificates representing
the common stock of the Company or Successor Securities, in each case 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 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
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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 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
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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) 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
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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
--------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board
"Company"
/s/ Xxxxxx X. Xxxx
--------------------------
Xxxxxx X. Xxxx
"Executive"
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