EMPLOYMENT AGREEMENT dated as of July 1, 1996 (the "Agreement"),
between ARM FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), and
John R. Lindholm (the "Executive").
WHEREAS, the Company desires to employ the Executive and to enter
into the Agreement to set forth the terms of such employment; and
WHEREAS, the Executive desires to accept such employment and enter
into the Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective as of the date set forth above
(the "Effective Date").
2. EMPLOYMENT AND DUTIES
2.1. General. The Company hereby employs the Executive, and the
Executive agrees to serve the Company, upon the terms and conditions herein
contained. The Executive shall serve in such professional capacities and
positions, and shall perform such duties and services for the Company and its
affiliates, as may be designated from time to time by the Board of Directors of
the Company (the "Board"). The Executive agrees to serve the Company faithfully
and to the best of his ability under the direction of the Board and any Chief
Executive Officer of the Company. The Executive's office shall be located in
Louisville, Kentucky, but the Executive shall undertake such business-related
travel as may from time to time be required in the performance of his duties
hereunder.
2.2. Exclusive Services. Except as may otherwise be approved in
advance by the Board, and except during vacation periods and reasonable periods
of absence due to sickness, personal injury or other disability, the Executive
shall devote his full working time throughout the Employment Term (as defined in
Section 2.3) to the services required of him hereunder. The Executive shall
render his services exclusively to the Company during the Employment Term, and
shall use his best efforts, judgment and energy to improve and advance the
business and interests of the Company in a manner consistent with the duties of
his position. Without limiting the foregoing, the Executive may devote a
reasonable period of time to community service and charitable activities, and
may manage his personal investment portfolio, subject to Section 7.3 below.
2.3. Term of Employment. The Executive's employment under this
Agreement shall commence as of the Effective Date and shall terminate on the
earlier of (a) the third anniversary of the Effective Date or (b) the date of
termination of the Executive's
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employment pursuant to Section 5 or 6 below; provided, however, that the term of
the Executive's employment may be automatically extended by the Company for
additional one year periods, by means of the Board giving written notice to the
Executive of its intention to extend the term at least sixty days prior to the
expiration of the then effective term. The period commencing as of the Effective
Date and ending on the third anniversary of the Effective Date or such later
date to which the term of the Executive's employment under this Agreement shall
have been extended is hereinafter referred to as the "Employment Term".
2.4. Reimbursement of Business Expenses. The Company shall reimburse
the Executive for reasonable travel and other business expenses incurred by him
in the fulfillment of his duties hereunder upon presentation by the Executive of
an itemized account of such expenditures, in accordance with Company practices
consistently applied.
3. COMPENSATION
3.1. Base Salary. From the Effective Date, the Executive shall be
entitled to receive a base salary ("Base Salary") at a rate of $300,000 per
annum, payable in arrears in equal installments not less frequently than
semi-monthly, on the business day coincident with or immediately succeeding each
of the 15th day and the last day of each month, in accordance with the Company's
payroll practices, with such increases as may be provided in accordance with the
terms hereof. Once increased, such higher amount shall constitute the
Executive's annual Base Salary.
3.2. Annual Review. The Executive's Base Salary shall be reviewed by
the Board, based upon the Executive's performance and then current titles and
responsibilities, not less often than annually, and may be increased, but not
decreased, upon the recommendation of the Company's Chief Executive Officer(s),
based on his performance and upon the Board's view of the appropriate Base
Salary for the title and responsibilities assigned to the Executive from time to
time. In addition to any increases effected as a result of such review, the
Board at any time may in its sole discretion increase the Executive's Base
Salary.
3.3. Bonus. The Board has adopted a bonus plan under which the cash
bonuses of executives of the Company are determined. For each full or partial
year of his employment under this Agreement, the Executive shall be entitled to
participate in such bonus plan.
4. EMPLOYEE BENEFITS; INDEMNIFICATION
The Executive shall, during his employment under this Agreement, be
included to the extent eligible thereunder in all employee benefit plans,
programs or arrangements (including, without limitation, any plans, programs or
arrangements providing for retirement benefits, incentive compensation, profit
sharing, bonuses, disability benefits, health, dental
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and life insurance, or vacation and paid holidays) which shall be established by
the Company for, or made available to, its senior executives. The Company will
indemnify Executive to the fullest extent permitted by the laws of the State of
Delaware and the Certificate of Incorporation and By-Laws of the Company as in
effect on the date hereof, and the Company shall procure and maintain insurance
policies, to the extent reasonably available, for the benefit of its directors
and officers, including the Executive.
5. TERMINATION OF EMPLOYMENT
5.1. Termination without Cause; Resignation for Good Reason.
5.1.1. General. Subject to the provisions of Sections 5.1.2 and
5.1.3, if, prior to the expiration of the Employment Term, the Executive's
employment is terminated by the Company without Cause (as defined in Section
5.3), or if the Executive terminates his employment hereunder for Good Reason
(as defined in Section 5.4), the Company shall (x) continue to pay the Executive
severance pay in an amount equal to the Base Salary for the remainder of the
Employment Term or, if longer, for two years (such period being referred to
hereinafter as the "Severance Period"), at such intervals as the same would have
been paid had the Executive remained in the active service of the Company, and
(y) pay the Executive additional severance amounts for each full or partial
calendar year during the Severance Period in cash equal to the same percentage
of Base Salary as of the date of termination as the percentage of Base Salary
used in calculating bonus paid to the Executive for the year preceding the year
of termination. Such annual payments shall be payable at the time bonuses under
the applicable bonus plan are paid to the Company's executives generally, but in
no event later than March 1 of the year following the year in respect of which
each such annual payment is being made. The Executive shall have no further
right to receive any other compensation or benefits after such termination or
resignation of employment except as determined in accordance with the terms of
the employee benefit plans or programs of the Company.
5.1.2. Conditions Applicable to the Severance Period. If, during the
Severance Period, the Executive breaches his obligations under Section 7 of this
Agreement, the Company may, upon written notice to the Executive, terminate the
Severance Period and cease to make any further payments or provide any benefits
described in Section 5.1.1.
5.1.3. Death During Severance Period. In the event of the
Executive's death during the Severance Period, payments of the severance amounts
under this Section 5 shall continue to be made during the remainder of the
Severance Period to the beneficiary designated in writing for this purpose by
the Executive or, if no such beneficiary is specifically designated, to the
Executive's estate.
5.1.4. Date of Termination. The date of termination of employment
without Cause shall be the date specified in a written notice of termination to
the Executive (which
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date shall be coincident with or subsequent to the date of such notice). The
date of resignation for Good Reason shall be the date specified in the written
notice of resignation from the Executive to the Company (which date shall be
coincident with or subsequent to the date of such notice); provided, however,
that no such written notice shall be effective unless the cure period specified
in Section 5.4 has expired without the Company having corrected, to the
reasonable satisfaction of the Executive, the event or events subject to cure.
If no date of resignation is specified in the written notice from the Executive
to the Company, the date of termination shall be the first day following such
expiration of such cure period.
5.2. Termination for Cause; Resignation Without Good Reason.
5.2.1. General. If, prior to the expiration of the Employment Term,
the Executive's employment is terminated by the Company for Cause, or the
Executive resigns from his employment hereunder other than for Good Reason, the
Executive shall be entitled to payment of his Base Salary as then in effect
through and including the date of termination or resignation. The Executive
shall have no further right to receive any other compensation or benefits after
such termination or resignation of employment, except as determined in
accordance with the terms of the employee benefit plans or programs of the
Company.
5.2.2. Date of Termination. Subject to the proviso to Section 5.3,
the date of termination for Cause shall be the date specified in a written
notice of termination to the Executive. The date of resignation without Good
Reason shall be the date specified in the written notice of resignation from the
Executive to the Company (which date shall be coincident with or subsequent to
the date of such notice), or if no date is specified therein, 10 business days
after receipt by the Company of written notice of resignation from the
Executive.
5.3. Cause. Termination for "Cause" shall mean termination of the
Executive's employment because of:
(i) any act or omission that constitutes a material breach by the
Executive of any of his material obligations under this Agreement (other
than by reason of his death or Permanent Disability);
(ii) the continued failure or refusal of the Executive to perform
the material duties required of him as an employee of the Company (other
than by reason of his death or Permanent Disability);
(iii) any willful material violation by the Executive of any law or
regulation applicable to the business of the Company or any of its
subsidiaries, or the Executive's conviction of a felony, or any willful
perpetration by the Executive of a common law fraud; or
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(iv) any other willful misconduct by the Executive which is
materially injurious to the financial condition or business reputation of,
or is otherwise materially injurious to, the Company or any of its
subsidiaries or affiliates;
provided, however, that if any such Cause relates to the Executive's obligations
under this Agreement and (x) is susceptible to cure and (y) does not constitute
a repetition of such Cause, the Company shall not terminate the Executive's
employment hereunder unless the Company first gives the Executive notice of its
intention to terminate and of the grounds for such termination, and the
Executive has not, within 10 business days following receipt of the notice,
cured such Cause, or in the event such Cause is not susceptible to cure within
such 10 business day period, the Executive has not taken all reasonable steps
within such 10 business day period to cure such Cause as promptly as practicable
thereafter.
5.4. Good Reason. For purposes of this Agreement, "Good Reason"
shall mean any of the following (without the Executive's prior written consent):
(i) a decrease in the Executive's base rate of compensation or a
failure by the Company to pay material compensation due and payable to the
Executive in connection with his employment;
(ii) a relocation of the Executive's principal place of business
outside the Louisville, Kentucky metropolitan area;
(iii) a sale of substantially all of the Company's business to
persons, entities or groups (as defined under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) that are not, directly or
indirectly through one or more intermediaries, in control of, controlled
by, or under common control with, the Company, Morgan Stanley Group, Inc.
or The Morgan Stanley Leveraged Equity Fund II, L.P. ("Third Parties"); or
(iv) a Change in Control (as defined in Section 5.5 below).
5.5. Change in Control. As used herein, the term "Change in Control"
means the acquisition, through merger or otherwise in a single transaction or a
series of transactions, by a Third Party, of equity securities of the Company
entitling such Third Party to elect a majority of the members of the Board.
6. DEATH OR DISABILITY
In the event of termination of the Executive's employment by reason
of death or Permanent Disability (as hereinafter defined), the Executive (or his
estate, as applicable) shall be entitled to Base Salary and benefits determined
under Sections 3 and 4 hereof through the date of termination or, in the case of
disability, through the later of the date of
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termination or the date (not later than one year following the date of
termination) on which the Executive commences to receive disability benefits
(including, a pro rata cash bonus for the year of death or disability). Other
benefits shall be determined in accordance with the benefit plans maintained by
the Company, and the Company shall have no further obligation hereunder. For
purposes of this Agreement, "Permanent Disability" means a physical or mental
disability or infirmity of the Executive that prevents the normal performance of
substantially all his duties as an employee of the Company, which disability or
infirmity shall exist, or in the opinion of an independent physician is
reasonably likely to exist, for any continuous period of 180 days.
7. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION
7.1. Nonsolicitation. For so long as the Executive is employed by
the Company and continuing for two years thereafter, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, as a
sole proprietor, member of a partnership, stockholder or investor, officer or
director of a corporation, or as an employee, associate, consultant or agent of
any person, partnership, corporation or other business organization or entity
other than the Company: (x) solicit or endeavor to entice away from the Company
or any of its subsidiaries any person or entity who is, or, during the then most
recent 12-month period, was employed by, or had served as an agent or key
consultant of, the Company or any of its subsidiaries (in the case of a
consultant, only if such solicitation or enticement is reasonably likely to
cause a termination of or otherwise materially interferes with the continued
relationship between the Company and such consultant); or (y) solicit or
endeavor to entice away from the Company or any of its subsidiaries any existing
or reasonably anticipated (to the general knowledge of the Executive or the
public) policy, contract or other business with any person or entity who is, or
was within the then most recent 12-month period, a customer or client (or
reasonably anticipated (to the general knowledge of the Executive or the public)
to become a customer or client) of the Company or any of its subsidiaries.
7.2. Confidentiality. The Executive covenants and agrees with the
Company that he will not at any time, except in performance of his obligations
to the Company hereunder or with the prior written consent of the Company,
directly or indirectly, disclose any secret or confidential information that he
may learn or has learned by reason of his association with the Company or any of
its subsidiaries and affiliates. The term "confidential information" includes
information not previously disclosed to the public or to the trade by the
management of the Company or otherwise in the public domain, with respect to the
products, facilities, applications and methods, trade secrets and other
intellectual property, systems, procedures, manuals, confidential reports,
product price lists, customer lists, technical information, financial
information (including the revenues, costs or profits associated with any of the
Company's products or services), business plans, prospects or opportunities, but
shall exclude any information which (i) is or becomes available to the public or
is generally known in the industry or industries in which the Company operates
other than as a result of
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disclosure by the Executive in violation of his agreements under this Section
7.2 or (ii) the Executive is required to disclose under any applicable laws,
regulations or directives of any government agency, tribunal or authority having
jurisdiction in the matter or under subpoena or other process of law.
7.3. No Competing Employment. For so long as the Executive is
employed by the Company and, in the case of a termination by the Company for
Cause or a resignation by the Executive without Good Reason, continuing for two
years thereafter, the Executive shall not, directly or indirectly, as a sole
proprietor, member of a partnership, stockholder or investor (other than a
stockholder or investor owning not more than a 5% interest), officer or director
of a corporation, or as an employee, associate, consultant or agent of any
person, partnership, corporation or other business organization or entity other
than the Company or any of its subsidiaries, render any service to or in any way
be affiliated with a competitor (or any person or entity that is reasonably
anticipated (to the general knowledge of the Executive or the public) to become
a competitor) of the Company or any of its subsidiaries in the business of
accumulation products and other insurance businesses in which the Company or any
of its subsidiaries is engaged. Notwithstanding anything contained in this
Section 7.3 to the contrary, the period of applicability of this Section 7.3
shall be extended an additional day for each day on which the Executive is in
breach of this Section 7.3.
7.4. Exclusive Property. The Executive confirms that all
confidential information is and shall remain the exclusive property of the
Company. All business records, papers and documents kept or made by the
Executive relating to the business of the Company shall be and remain the
property of the Company, except for such papers customarily deemed to be the
personal copies of the Executive.
7.5. Limitation on Comments. At no time during or after the
Employment Term shall the Executive utter, issue or circulate any false,
inappropriate or disparaging statements, remarks or rumors about the Company,
Morgan Stanley Group, Inc., The Morgan Stanley Leveraged Equity Fund II, L.P. or
any of their respective affiliates. Similarly, at no time during the Employment
Term or thereafter shall the Company, Morgan Stanley Group, Inc., The Morgan
Stanley Leveraged Equity Fund II, L.P. or any of their respective affiliates
utter, issue or circulate any false, inappropriate or disparaging statements,
remarks or rumors about the Executive.
7.6. Injunctive Relief. Without intending to limit the remedies
available to the parties hereto, the parties acknowledge that a breach of any of
the covenants contained in this Section 7 by the other (in the case of the
Executive, a breach of Section 7.1, 7.2, 7.3, 7.4 or 7.5 and in the case of the
Company, a breach of Section 7.5) may result in material and irreparable injury
to the other party for which there is no adequate remedy at law, that it will
not be possible to measure damages for such injuries precisely and that, in the
event of such a breach or threat thereof, the damaged party shall be entitled to
seek a temporary restraining order and/or a preliminary or permanent injunction
restraining the breaching party
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from engaging in activities prohibited by this Section 7 or such other relief as
may be required specifically to enforce any of the covenants in this Section 7.
If for any reason, it is held that the restrictions under this Section 7 are not
reasonable or that consideration therefor is inadequate, such restrictions shall
be interpreted or modified to include as much of the duration and scope
identified in this Section 7 as will render such restrictions valid and
enforceable.
8. ARBITRATION
Any dispute or controversy arising under or in connection with this
Agreement that cannot be mutually resolved by the parties hereto shall be
settled exclusively by arbitration in New York, New York before one arbitrator
of exemplary qualifications and stature, who shall be selected jointly by the
Company and the Executive, or, if the Company and the Executive cannot agree on
the selection of the arbitrator, shall be selected by the American Arbitration
Association (provided that any arbitrator selected by the American Arbitration
Association shall not, without the consent of the parties hereto, be affiliated
with the Company or the Executive or any of their respective affiliates).
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The parties hereby agree that the arbitrator shall be empowered to
enter an equitable decree mandating specific enforcement of the terms of this
Agreement. The Company shall bear all expenses of the arbitrator incurred in any
arbitration hereunder and shall reimburse the Executive for any related
reasonable legal fees and out-of-pocket expenses directly attributable to such
arbitration; provided that such legal fees are calculated on an hourly, and not
on a contingency fee, basis; and provided, further, that the Executive shall
bear all expenses of the arbitrator and all of his legal fees and out-of-pocket
expenses (and reimburse the Company for its portion of such expenses) if the
arbitrator or relevant trier-of-fact determines that the Executive's claim or
position was frivolous and without reasonable foundation.
9. MISCELLANEOUS
9.1. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
ARM Financial Group, Inc.
239 S. Fifth Street, 12th Floor
Louisville, Kentucky 40202-3271
Telecopier No.: (502) 582-0903
Attention: General Counsel
with a copy to:
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Morgan Stanley & Co. Incorporated
1251 Avenue of the Americas
New York, New York 10020
Telecopier No.: (212) 703-7951
Attention: Mr. Frank V. Sica
To the Executive:
ARM FINANCIAL GROUP, INC.
239 S. Fifth Street, 12th Floor
Louisville, Kentucky 40202-3271
Telecopier No.: (502) 582-0903
or to such other address as either party may have furnished to the other in
writing in accordance herewith. All such notices shall be conclusively deemed to
be received and shall be effective, (i) if sent by hand delivery, upon receipt,
(ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt
by the sender of such transmission or (iii) if sent by registered or certified
mail, on the fifth day after the day on which such notice is mailed.
9.2. Severability. Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
9.3. Assignment. The Company's rights and obligations under this
Agreement shall not be assignable by the Company except as incident to a
reorganization, merger or consolidation, or transfer of all or substantially all
of the Company's business and properties (or portion thereof in which the
Executive is employed). Neither this Agreement nor any rights hereunder shall be
assignable or otherwise subject to hypothecation by the Executive. Nothing
herein is intended to affect the provisions of Sections 5.4(iv) and (v).
9.4. Entire Agreement. Except as expressly set forth herein, this
Agreement represents the entire agreement of the parties concerning the subject
matter hereof and shall supersede any and all previous contracts, arrangements
or understandings between the Company and the Executive. This Agreement may be
amended at any time by mutual written agreement of the parties hereto.
9.5. Withholding. The payment of any amount pursuant to this
Agreement shall be subject to applicable withholding and payroll taxes, and such
other deductions as may be required under the Company's employee benefit plans,
if any.
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9.6. Governing Law. This Agreement shall be governed by in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and the Executive has hereunto set his hand, as of the day and year
first above written.
ARM FINANCIAL GROUP, INC.
By: /s/ John Franco
-------------------------------
John Franco
Co-Chief Executive Officer
By: /s/ Martin H. Ruby
-------------------------------
Martin H. Ruby
Co-Chief Executive Officer
EXECUTIVE
/s/ John R. Lindholm
---------------------------------
John R. Lindholm