April 15, 2005
Mr. Michael P. Hydanus
9625 Spring Hollow Cove
Germantown, TN 38139
Dear Mr. Hydanus:
It gives me great pleasure to invite you to join our team at Financial
Industries Corporation (the "Company") as the Senior Vice President - Operations
("SVP - Operations") of the Company, effective no later than May 2, 2005. As the
SVP - Operations of the Company, your responsibilities will include all of the
Company's operations in the areas of underwriting, policy administration and
policy holder services, claims, and agency. Your responsibilities will also
include the Company's information technology and services, comprising generally
its programming/systems development, network services, and data
center/information services functions. In addition, you will take responsibility
for leading the Company's Sarbanes-Oxley Section 404 documentation and testing.
These described responsibilities are consistent with the organization chart that
I have sent to you previously, another copy of which is enclosed with this
letter; they (and the organization chart and the assignments it reflects) may be
changed from time to time at the Company's discretion.
Your salary will be $8,076.92 on a biweekly basis (representing an
annualized amount of $210,000.00). In addition, you will be eligible for an
annual bonus of $35,000 in 2005, based on attainment of certain Company-wide and
individual goals. Your salary and bonus may be changed each year, depending on
your performance and the fortunes of the Company.
The Board of Directors will recommend to the Company's shareholders an
equity ownership plan for approval at the Company's annual meeting to be held in
2005. Assuming that the plan is approved, and that you continue to be employed
by the Company at that time, you will receive a grant of options to acquire
15,000 shares of the common stock of the Company. The exercise price of the
options will be equal to the price of the Company's stock (as determined under
the new plan) at the date that the options are granted; you will be vested in
5,000 of the options on the first anniversary of your acceptance of this offer,
and an additional 5,000 of the option on each the following two such
anniversaries. The options will vest immediately, however, in the event of (i)
acquisition of more than 50% of the Company's stock by a single shareholder (or
affiliated shareholders) or (ii) a change in the majority of the members of the
Company's Board of Directors within a six-month period (either one of these two
events constituting and referred to in this letter as a "Change of Control").
You will also be eligible for additional option grants in the future.
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As an employee of the Company, you will be eligible to participate in the
full range of the Company's benefit programs. Beginning the first of the month
following 30 days of employment, the Company makes available medical insurance
coverage, supplemented by a Section 125 plan. The Company will provide you with
Company-paid life insurance of $50,000 annually, business travel insurance and
long-term disability insurance, and the option to purchase additional accidental
death, optional and dependent life insurance. In addition, we provide a 401(k)
plan with unilateral employer cash contributions as well as employer matching
contributions, and also sick leave and vacation plans. Although some of these
plans may change from time to time, and you will be subject to such changes, you
can see that the Company is committed to maintaining ample benefit plans for its
employees. You will be eligible for three weeks of vacation in your first year
of employment. The Company will also encourage and support your reasonable
involvement in industry associations.
In accepting this position, you agree that you will relocate your residence
to Austin within a reasonable period after taking up the position. The Company
will pay the costs of relocation, defined as the cost of two house-hunting trips
for you and your wife, moving costs, and one-half of your reasonable brokerage
expenses associated with the sale of your house. In addition, in consideration
of your willingness to take up your new duties immediately, the Company will
reimburse you for the reasonable cost of temporary accommodations for you and
your family here in Austin for a reasonable period of time while you market and
sell your house in Memphis. (The reimbursement for your relocation expenses will
be "grossed up" to account for the tax effects to you of such reimbursement.)
You will report to the CEO & President of the Company and will discharge
such duties as he may assign to you from time to time. You will be required to
devote your full-time business attention and activities exclusively to the
Company's business (other than the management of your own investments and your
service on boards of directors approved by the CEO & President).
Either you or the Company may terminate your employment at any time. If the
Company terminates your employment for Cause or you terminate your employment
without Good Reason (both as defined below) (or if you die while an employee of
the Company), you (or your estate) will be entitled to receive only your accrued
but unpaid salary and vacation pay. If the Company terminates your employment
without Cause, or you terminate your employment for Good Reason, you will be
entitled to a continuation of your salary payments for twelve months after the
date of termination. If, however, the Company terminates your employment without
Cause, or you terminate your employment with Good Reason, at any time within
twelve months of a Change in Control, you will instead be entitled to a
continuation of your salary payments for twenty-four months after the date of
termination.
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For purposes of the preceding paragraph, "Cause" shall mean (i) your
conviction of a crime involving dishonesty, fraud, breach of trust, or violation
of the rights of employees; (ii) your willful engagement in any misconduct in
the performance or your duties that, in the opinion of the Company, could
materially injure the Company; (iii) your 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 (iv) your continued
willful and substantial nonperformance of assigned duties for at least ten days
after you receive notice from the Company of such nonperformance and of the
Company's intention to terminate your employment because of such nonperformance.
For purposes of the preceding paragraph, "Good Reason" shall exist if the
Company takes any of the following actions with regard to your employment:
a) makes a significant reduction in your duties, authority, or
responsibilities;
b) materially reduces your salary, target bonus, or fringe benefits
relative to those of its other senior executives;
c) requires you to relocate from the Austin, Texas, metropolitan area; or
d) fails to obtain the assumption of this letter agreement by any of its
successors, including any purchaser of all or substantially all of the
Company's assets.
If you become disabled by injury, disease or mental condition (as
reasonably determined by the Company) from performing the principal duties of
your employment, the Company may terminate your employment. Upon such a
termination, you will be entitled to continue to receive your salary for the
lesser of (i) any waiting period set forth in any disability policy maintained
by the Company that covers you or (ii) six months after termination of your
employment.
As the SVP - Operations of the Company, you will be required to sign both
the Company's Business Ethics Policy and its Code of Ethics for Senior
Executives and Financial Officers. I have enclosed copies of both for your
review and signature. In addition, as a member of the senior management team of
the Company, you will be expected to exemplify in all your actions and
communications, inside and outside the Company, the high standards of
professionalism, honesty, candor, and competence that we intend to make the
hallmark of the Company going forward. For its part, the Company will indemnify
and hold you harmless against any and all claims, suits, costs, losses, and
expenses of any nature (including reasonable attorneys' fees and litigation
costs) which arise from your performance of your duties as contemplated in this
letter, as and to the extent provided in the Company's charter and bylaws.
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Once accepted by you, the terms set forth in this letter shall be binding
upon any successor entity to the Company, whether direct or indirect and whether
by purchase, merger, consolidation, liquidation, or otherwise. Any successor to
all or substantially all of the Company's business and/or assets shall assume
all of the obligations under this Agreement.
This offer will remain open until the close of business on April 20, 2005,
unless earlier accepted by you or revoked by me, in either case, in writing. If
you have questions or would like to discuss the terms of the offer, please call
me. To signify your acceptance of the offer, please countersign a copy of the
letter and return it to me by fax at (512) 404-5129.
Sincerely yours,
/s/ J. Bruce Boisture
J. Bruce Boisture
CEO & President
Accepted and agreed:
/s/ Michael P. Hydanus
Michael P. Hydanus
Date: April 19, 2005
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