RETENTION AGREEMENT
THIS
RETENTION AGREEMENT (this “Agreement”)
is made and entered into as of March 31, 2008, by and between Financial
Industries Corporation, a Texas corporation (hereinafter, together with its
successors, referred to as the “Company”),
on the one hand, and Xxxxxxx X. Xxxxx (hereinafter referred to as the “Executive”),
on the other hand.
W I T N E S S E T H
:
WHEREAS,
the Executive currently serves as the Chief Financial Officer of the Company;
and
WHEREAS,
the Executive and the Company are parties to that certain letter agreement,
dated as of September 1, 2006, regarding certain payments to be made to the
Executive in connection with a change of control of the Company (the “Change of Control
Agreement”); and
WHEREAS,
the Company is party to that certain Agreement and Plan of Merger (the “Merger
Agreement”), dated as of January 14, 2008 and amended as of February 20,
2008, between the Company and Xxxxxxx Life, Inc. (“Xxxxxxx”),
pursuant to which, on the terms and subject to the conditions set forth in the
Merger Agreement, the Company will be merged with an indirect subsidiary of
Xxxxxxx, with the Company surviving as an indirect, wholly-owned subsidiary of
Xxxxxxx (the “Merger”);
WHEREAS,
the parties hereto desire to set forth in writing the terms and conditions of
Executive’s continued engagement as the Company’s Chief Financial Officer and to
supersede and terminate the Change of Control Agreement as set forth
herein;
NOW
THEREFORE, in consideration of the foregoing, of the mutual promises contained
herein and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section
1. Definitions. In
addition to the terms set forth throughout this Agreement, the following
capitalized terms shall have the respective meanings set forth
below:
“Accrued
Benefits” means (a) all unpaid base compensation earned or accrued
through the date the Executive’s engagement is terminated and
(b) reimbursement for any and all unreimbursed reasonable and necessary
expenses incurred by the Executive through the date the Executive’s engagement
is terminated.
“Act” shall mean the Securities
Exchange Act of 1934, as amended.
“Affiliate” shall have the meaning given
such term in Rule 12b-2 of the Act.
“Board” shall mean the board of
directors of the Company.
“Cause” shall mean any of the
following: (a) the Executive’s conviction of a crime involving dishonesty,
fraud, breach of trust or violation of the rights of employees, (b) the
Executive’s willful engagement in any misconduct in the performance of his
duties that, in the opinion of the Company, could materially injure the Company,
(c) the Executive’s performance of any act that, if known to customers,
agents, employees or stockholders of the Company, could, in the opinion of the
Company, materially injure the Company or (d) the Executive’s continued
willful and substantial nonperformance of assigned duties for at least ten days
after he receives notice from the Company of such nonperformance and of the
Company’s intention to terminate his engagement because of such
nonperformance.
“Confidential
Information”
shall mean trade secrets, confidential or proprietary information, and all other
information, documents or materials, owned, developed or possessed by the
Company or any of its Affiliates, or their respective predecessors and
successors, whether in tangible or intangible form, that is not generally known
to the public. Confidential Information includes, but is not limited
to, (a) financial information, (b) product and service plans, costs,
prices, profits and sales, (c) business ideas, recommendations and
strategies, (d) marketing plans and studies, (e) projections,
forecasts and budgets, (f) computer access codes, computer programs and
data bases (and the documentation and information contained therein),
(g) know-how, technologies, concepts and designs, (h) research and
development efforts and projects, (i) records, (j) existing or
prospective client, customer, vendor and supplier information (including, but
not limited to, contracts, identities, needs, transaction histories, volumes,
characteristics, agreements, prices, spending, preferences and habits),
(k) training manuals and similar materials, (l) skills,
responsibilities, compensation and personnel files of the employees, officers,
directors and independent contractors of the Company and its Affiliates and
(m) competitive analyses.
“Full-Time
Engagement Period” shall mean the period during
which the Company engages the Executive to act as the Chief Financial Officer of
the Company on a full-time basis pursuant to the terms of this
Agreement.
“Investors
Life” means
Investors Life Insurance Company of North America, a wholly-owned subsidiary of
the Company.
“Part-Time
Engagement Period” shall mean the period during
which the Company engages the Executive to act as the Chief Financial Officer of
the Company on a part-time basis pursuant to the terms of this
Agreement.
“Person” shall mean any individual,
corporation, limited liability company, partnership, association, trust,
unincorporated organization, other entity or group (as defined in the
Act).
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“Unauthorized”
shall mean: (a) in contravention of the Company’s policies or procedures;
(b) otherwise inconsistent with the Company’s measures to protect its
interests in any Confidential Information; (c) in contravention of any
lawful instruction or directive, either written or oral, of the Board; or
(d) in contravention of any duty existing under law or
contract.
Section
2. Term of
Engagement. Unless earlier terminated in accordance with the
terms of this Agreement, (a) the Executive’s Full-Time Engagement Period
shall commence on the date hereof and shall end on April 13, 2008, and
(b) the Executive’s Part-Time Engagement Period shall commence on April 14,
2008 and shall end on May 30, 2008. The Full-Time Engagement Period
and the Part-Time Engagement Period shall be referred to collectively herein as
the “Engagement
Period.”
Section
3. Duties.
(a) During
the Engagement Period, the Executive (i) shall serve as Chief Financial
Officer of the Company, (ii) shall report directly to the Company’s Chief
Executive Officer, (iii) shall have such authority and responsibility to
perform such duties consistent with and reasonably related to his position as
Chief Financial Officer as may be assigned to him from time to time by the Chief
Executive Officer and (iv) subject to Section 3(c),
shall devote his commercially reasonable best efforts and time, attention,
knowledge and skill to the operation of the business and affairs of the
Company.
(b) During
the Full-Time Engagement Period, the Executive will devote his full business
time to his responsibilities as Chief Financial Officer of the Company and shall
not serve as an employee of any Person other than the Company.
(c) During
the Part-Time Engagement Period, the Executive will devote such time to his
responsibilities as Chief Financial Officer of the Company as is requested by
the Company, provided that such
time shall not exceed the amount reasonably necessary, in the good faith opinion
of the Company, for the timely completion of the Company’s statutory and
publicly-filed financial statements for the fiscal quarter ended March 31, 2008
and the Executive’s execution of applicable regulatory certifications,
including, without limitation, the certifications required pursuant to Section
302 of the Xxxxxxxx-Xxxxx Act of 2002 and 18 U.S.C. Section 1350, and other
duties assigned. The Company expressly acknowledges that the
Executive may serve as an employee of a Person other than the Company during the
Part-Time Engagement Period; provided that such
employment does not unreasonably interfere with the Executive’s obligations to
the Company pursuant to this Section 3.
Section
4. Compensation. In
consideration of the services provided by the Executive to the Company during
the Engagement Period, the Executive shall be compensated as
follows:
3
(a) Full-Time
Compensation. The Executive shall receive, at such intervals
as are consistent with the Company’s customary payroll policies as may be in
effect from time to time, an annual salary (prorated for any partial year) equal
to $204,075 during the Full-Time Engagement Period.
(b) Part-Time
Compensation. The Executive shall receive, at such intervals
as are consistent with the Company’s customary payroll policies as may be in
effect from time to time, an amount equal to $105 per hour (prorated for any
partial hours, rounded to the nearest one-tenth of an hour) of services
requested by the Company and actually provided by the Executive during the
Part-Time Engagement Period.
(c) Expenses. The
Executive shall be reimbursed, at such intervals and in accordance with such
Company policies as may be in effect from time to time, for any and all
reasonable and necessary business expenses incurred by him for the benefit of
the Company during the Engagement Period.
(d) Change of Control
Payment. Subject to Section 5(d), within
five business days following the consummation of the Merger, the Company shall
pay to the Executive $204,075 in cash (the “Change of Control
Payment”). In the event that the Merger is not consummated,
the Executive is not entitled to the Change of Control Payment.
Section
5. Termination
of Engagement. The Company and the Executive shall have the
right to terminate the engagement of the Executive as set forth in this Section 5.
(a) Termination by the Company
for Cause. The Company may immediately terminate the
Executive’s engagement for Cause by giving the Executive written or oral notice
of such termination. Upon termination for Cause, the Executive shall
receive only the Accrued Benefits as of the date of termination and thereafter
no other payments shall be owed by the Company to the Executive.
(b) Termination by the Company
without Cause. The Company may terminate the Executive’s
engagement under this Agreement immediately without any Cause or notice
whatsoever. Upon termination without Cause, the Executive shall
receive the Accrued Benefits as of the date of termination and, if and when it
becomes payable pursuant to Section 4(d),
the Change of Control Payment.
(c) Termination by the
Executive. The Executive may terminate his engagement with the
Company immediately upon notice to the Company. In the event of
termination by the Executive under this Section 5(c),
the Executive shall be entitled to his Accrued Benefits as of the date of
termination and thereafter no other payments shall be owed by the Company to the
Executive.
(d) Change of Control
Payment. Notwithstanding anything herein to the contrary,
following the termination of the Executive’s engagement with the Company, the
Executive will remain entitled to receive the Change of Control Payment in
accordance with Section 4(d) provided
that (i) the Executive’s engagement was not terminated for Cause under Section 5(a) hereof
and (ii) the Executive fully performed all services requested by the Company
pursuant to Section 3 and
did not terminate his engagement with the Company prior to the end of the
Engagement Period.
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Section
6. Non-Solicitation,
Confidentiality, Discoveries and Works.
(a) Non-Solicitation. During
the Engagement Period and for a period of twelve (12) months following the
termination of such engagement, the Executive agrees that the Executive will
not, either on the Executive’s own behalf or on behalf of
any other Person (other than for the benefit of the Company), directly or
indirectly, solicit or encourage any person who is then an employee or
contractor of the Company or who was an employee or contractor of the Company
within the last six (6) months of the Executive’s engagement with the Company,
to leave the Company, cease working for or providing services to the Company or
discontinue doing business with the Company. “Help wanted” and
similar general solicitations not targeted at the Company’s employees shall not
be deemed to violate the foregoing prohibition.
(b) Confidentiality.
(i) During
the Engagement Period and for all time following the termination, for any
reason, of such engagement, the Executive shall hold all Confidential
Information in a fiduciary capacity and agrees not to take any action which
would constitute or facilitate the Unauthorized use or disclosure of
Confidential Information.
(ii) As
of the date of termination, for any reason, of the Executive’s engagement with
the Company, the Executive agrees to deliver to the Company all property and
materials within the Executive’s possession or control which belong to the
Company or which contain Confidential Information.
(iii) In
the event that the Executive is requested by any governmental or judicial
authority to disclose any Confidential Information, the Executive shall (to the
extent that it is lawful and practicable to do so) give the Company prompt
notice of such request (including, by giving the Company a copy of such request
if it is in writing), such that the Company may seek a protective order or other
appropriate relief, and in any such proceeding the Executive shall disclose only
so much of the Confidential Information as is required to be
disclosed.
(c) Discoveries and
Works. All discoveries and works made or conceived by the
Executive during and in the course of his engagement by the Company, jointly or
with others, that relate to the Company’s activities shall be owned by the
Company. The terms “discoveries and works” include, by way of
example, products, inventions, computer programs (including documentation of
such programs), technical improvements, processes, drawings, and works of
authorship, including all educational and sales materials or other publications
which relate to Company’s current business. The Executive shall
promptly notify and make full disclosure to, and execute and deliver any
documents requested by, the Company to evidence or better assure title to such
discoveries and works by the Company, assist the Company in obtaining or
maintaining for itself at its own expense United States and foreign patents,
copyrights, trade secret protection and other protection of any and all such
discoveries and works, and promptly execute, whether during his engagement or
thereafter, all applications or other endorsements necessary or appropriate to
maintain trademarks, patents and other rights for the Company and to protect its
title thereto.
5
(d) Representations, Warranties
and Acknowledgements. The Executive acknowledges that:
(i) but for the agreements contained in this Section 6, the
Company would not enter into this Agreement; (ii) the Company considers
Confidential Information to be commercially and competitively valuable to the
Company and critical to its success; (iii) Unauthorized use or disclosure
of Confidential Information could cause irreparable harm to the Company; and
(iv) by this Agreement, the Company is taking reasonable steps to protect
its legitimate interests in its Confidential Information.
(e) Remedies. In
the event of breach or threatened breach by the Executive of any provision of
this Section 6, the
Company shall be entitled to seek (i) temporary, preliminary and permanent
injunctive relief, in each case without the posting of any bond or other
security, (ii) damages and an equitable accounting of all earnings, profits
and other benefits arising from such breach, or threatened breach and
(iii) any other legal and equitable relief to which it may be entitled,
including any and all monetary damages which the Company may incur as a result
of said breach or threatened breach. The Company shall be entitled to
seek temporary and preliminary injunctive relief from a court of competent
jurisdiction. The Company may pursue any remedy available, including
declaratory relief, concurrently or consecutively, in any order, and the pursuit
of one such remedy at any time will not be deemed an election of remedies or
waiver of the right to pursue any other remedy.
Section
7. Attorney’s
Fees and Costs. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney’s fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
Section
8. Severability
and Limitation. All agreements and covenants contained herein
are severable and, in the event any of them shall be held to be invalid by any
competent court, this Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein. Should any court
or other legally constituted authority determine that for any such agreement or
covenant to be effective that it must be modified to limit its duration or
scope, the parties hereto shall consider such agreement or covenant to be
amended or modified with respect to duration and scope so as to comply with the
orders of any such court or other legally constituted authority or to be
enforceable under the laws of the State of Texas, and all other portions of such
agreement or covenants shall remain in full force and effect as originally
written.
6
Section
9. Mandatory
Arbitration. All claims, disputes, controversies, differences
or misunderstandings between the parties arising out of, or by virtue of this
Agreement or the interpretation of this Agreement which cannot be settled or
resolved by the parties hereto shall be settled or determined by binding
arbitration under the then-current rules of the American Arbitration
Association. The exclusive jurisdiction for any such arbitration
shall be Xxxxxx County, Texas, and each party consents to personal jurisdiction
in Xxxxxx County, Texas. The arbitrator will apportion attorneys’
fees and costs in his or her judgment. Either party may, however,
seek injunctive relief in any court of competent jurisdiction, pending
arbitration. Judgment based on the arbitrator’s award may be entered
in any court of competent jurisdiction.
Section
10. Exculpation
and Indemnification. Subject to applicable law, the Executive
shall be entitled to such exculpation and indemnification under the terms of the
Company’s Articles of Incorporation and bylaws and such other liability
insurance as the Company may purchase for its officers and directors from time
to time.
Section
11. Assignment;
Successors. The Company may assign its rights under this
Agreement to any successor to all or substantially all the assets of the
Company, by merger or otherwise. The rights of the Executive under
this Agreement, except as provided in the last sentence of this Section 11, may not
be assigned or encumbered by the Executive, voluntarily or involuntarily, during
his lifetime, and any such purported assignment shall be void ab
initio. However, all rights of the Executive under this
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, estates, executors, administrators, heirs and
beneficiaries.
Section
12. Third
Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person other than the parties
hereto and their successors and permitted assigns any rights or remedies under
or by reason of this Agreement.
Section
13. Amendment. Except
as otherwise provided in Section 8, this
Agreement may not be amended or modified at any time except by a written
agreement approved and executed by the Company and the Executive. Any
attempted amendment or modification without such approval and execution shall be
null and void ab initio
and of no effect.
Section
14. Withholding. The
Company shall be entitled to withhold from any amounts to be paid to the
Executive hereunder any federal, state, local, or foreign withholding or other
taxes or charges that it is from time to time required to
withhold.
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Section
15. Governing
Law. This Agreement and the rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the State of
Texas, without regard to principles of conflicts of law of Texas or any other
jurisdiction. Subject to Section 9, the
exclusive jurisdiction for any litigation arising under or in connection with
this Agreement shall be Xxxxxx County, Texas (provided, that this limitation
shall not apply if and to the extent that the courts in Xxxxxx County, Texas, do
not have or do not accept jurisdiction over such litigation), and each party
consents to personal jurisdiction in Xxxxxx County, Texas.
Section
16. Notice. Notices
given pursuant to this Agreement shall be in writing and will be effective
(a) upon delivery, if delivered personally, (b) three days after
depositing in the United Stated mail, if mailed by registered or certified mail,
return receipt requested, postage prepaid, (c) the next business day, if
sent via a reputable, established courier service that guarantees next business
day delivery or (d) upon transmission of the telecopy in complete, readable
form, if sent via telecopier followed within 24 hours by confirmation, addressed
as set forth below.
If to the
Company:
Financial
Industries Corporation
0000
Xxxxx Xxxxx Xxxxxxxxx
Xxxxxxxx
X
Xxxxxx,
Xxxxx 00000
Attention: General
Counsel
Facsimile
No.: (000) 000-0000
If to the
Executive:
At the
address for the Executive set forth on his signature page hereto; or to such
other address as the party to be notified shall have given to the other in
accordance with the notice provisions set forth herein.
Section
17. No
Waiver. No term or condition of this Agreement shall be deemed
to have been waived nor shall there be any estoppel to enforce any of the terms
of provisions of this Agreement except by written instrument of the party
charged with such waiver or estoppel. No waiver by either party at
any time of any breach by the other party of, or compliance with, any condition
or provision of this Agreement to be performed by the other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at any
time.
Section
18. Headings. The
headings contained herein are for reference only and shall not affect the
meaning or interpretation of any provision of this Agreement.
Section
19. Entire
Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing between the parties hereto with respect to
the engagement of the Executive by the Company, including, without limitation,
the Change of Control Agreement. This Agreement constitutes the
entire agreement and understanding by and between the Executive and the Company
with respect to the engagement of the Executive by the Company. No
agreement or representation, oral or otherwise, express or implied, with respect
to the subject matter hereof has been made by either party which is not set
forth expressly in this Agreement.
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Section
20. Executive
Representations. The Executive hereby represents and warrants
to the Company that (a) the Executive has negotiated and entered into this
Agreement with the full advice and representation of legal counsel specifically
retained for such purpose, (b) the Executive’s execution and delivery of this
Agreement and his performance of his duties and obligations hereunder will not
conflict with, or cause a default under, or give any party a right to damages
under, or to terminate, any other agreement to which the Executive is a party or
by which he is bound and (c) there are no agreements or understandings that
would make unlawful the Executive’s execution or delivery of this Agreement or
his engagement hereunder.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN
WITNESS WHEREOF, the parties have executed this Agreement in one or more
counterparts, each of which shall be deemed one and the same instrument, as of
the day and year first written above.
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FINANCIAL
INDUSTRIES CORPORATION
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By:
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/s/ Xxxxxxx X. Xxxxxx
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Name:
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Xxxxxxx
X. Xxxxxx
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Title:
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Chief
Executive Officer
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EXECUTIVE:
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/s/ Xxxxxxx X. Xxxxx
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Xxxxxxx
X. Xxxxx
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Address
for Notice:
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00000
Xxxxxxxxx Xxxx
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Xxxxxx,
Xxxxx 00000
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SIGNATURE PAGE TO RETENTION AGREEMENT
