AGREEMENT dated as of December 4, 1997 (the "AGREEMENT"), between
ARM FINANCIAL GROUP, INC., a Delaware corporation (the "COMPANY"), and Dennis
L. Carr (the "EXECUTIVE").
WHEREAS, the Executive is currently employed by the Company in various
capacities and is rendering valuable services to the Company. The parties desire
to enter into this Agreement to provide certain assured severance benefits to
the Executive in the event of a Change in Control, as defined below, to further
the Company's aims to retain the Executive during an actual or attempted Change
in Control and to assure fair treatment of the Executive in the event of a
Change in Control;
NOW, THEREFORE, in order to induce the Executive to remain in his
present employment and in consideration of his agreement to continue his
employment subject to the terms and conditions hereof, this Agreement sets forth
the payments which the Company agrees will be provided to the Executive in the
event his employment is terminated in connection with a Change in Control.
1. DEFINITIONS
1.1 ANNUAL BONUS means the annual bonus awarded pursuant to the bonus
plan under which the cash bonuses of executives of the Company are awarded
(excluding any bonus under the Company's Sale Bonus Plan) or, if such amount is
not yet known, the most recent bonus awarded pursuant to such plan as of either
the Change in Control Date or the date on which the Executive's employment is
terminated, whichever is greater.
1.2 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
(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;
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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.
1.3 GOOD REASON shall mean any of the following (without the
Executive's prior written consent):
(1) 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; or
(ii) a relocation of the Executive's principal place of business
outside the Louisville, Kentucky metropolitan area and the Company fails to
agree to reimburse the Executive for reasonable relocation expenses on an
after-tax basis.
1.4 CHANGE IN CONTROL means the acquisition, directly or indirectly
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 of Directors or a sale of
all or substantially all of the assets of the Company to a Third Party.
1.5 CHANGE IN CONTROL DATE means the date on which a Change in
Control is consummated.
1.6 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
1.7 THIRD PARTY means any person, entity or group (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, Dean
Witter, Discover & Co., The Morgan Stanley Leveraged Equity Fund II, L.P. or
Morgan Stanley Capital Partners III, L.P.
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2. EFFECTIVENESS OF AGREEMENT
This Agreement shall become effective as of the date first set forth
above (the "EFFECTIVE DATE") and shall terminate on the second anniversary of
the Change in Control Date. The period commencing on the Change in Control Date
and ending on the second anniversary thereof is hereinafter referred to as the
"PROTECTED PERIOD".
3. COMPENSATION
3.1 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If, during the
Protected Period, the Executive's employment is terminated (except in the event
of death or Permanent Disability); (i) by the Company other than for Cause; or
(ii) by the Executive for "Good Reason," the Company shall make a lump sum
payment to the Executive in an amount equal to the sum of (i) and (ii) below:
(i) two times (A) the sum of (x) the higher of the Executive's
annual base salary in effect on the Change in Control Date or his annual
base salary in effect on the date of termination of his employment plus (y)
the Executive's Annual Bonus, multiplied by (B) a fraction, the numerator
which is equal to the number of months remaining in the Protected Period
and the denominator of which is equal to 24; PROVIDED, that in no event
shall such payment be less than 50% of the Executive's annual base salary
plus Annual Bonus; and
(ii) to the extent not previously paid to the Executive, an amount
equal to the Executive's Annual Bonus multiplied by a fraction the
numerator of which is the number of days that have elapsed during the
calendar year up to and including the date of termination and the
denominator of which is 365.
3.2 OTHER TERMINATIONS. In the event of the termination of the
Executive's employment with the Company for any reason other than as specified
in Section 3.1, the Company shall have no obligation to the Executive pursuant
to this Agreement.
3.3 ACCRUED AND UNPAID ANNUAL BONUS. In the event that the employment
of the Executive is terminated by the Company following the expiration of the
Protected Period, the Executive shall be entitled to receive any accrued but
unpaid Annual Bonus representing any portion of the Protected Period on the date
of such termination.
4. NONSOLICITATION; CONFIDENTIALITY; NONCOMPETITION
4.1 NONSOLICITATION. During the Protected Period (whether or not the
Executive remains an employee of the Company (or its successor)), the Executive
shall not, without the
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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.
4.2 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 disclosure by the Executive in violation of his
agreements under this Section 4.2 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.
4.3 NO COMPETING EMPLOYMENT. During the Protected Period, 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 businesses in which the Company or any
of its subsidiaries is engaged; PROVIDED, HOWEVER, that this Section 4.3 shall
not apply in the event that the Executive's employment is terminated by the
Company
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without Cause or by the Executive with Good Reason. For purposes of this Section
4.3 only, "Good Reason" shall include a termination by the Executive as a result
of his refusal to relocate even if the Company has agreed to reimburse him for
his reasonable relocation expenses. Notwithstanding anything contained in this
Section 4.3 to the contrary, the period of applicability of this Section 4.3
shall be extended an additional day for each day on which the Executive is in
breach of this Section 4.3.
4.4 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.
4.5 LIMITATION ON COMMENTS. At no time during or after the Protected
Period shall the Executive utter, issue or circulate any false, inappropriate or
disparaging statements, remarks or rumors about the Company, The Morgan Stanley
Leveraged Equity Fund II, L.P., Morgan Stanley Capital Partners III, L.P. or
Morgan Stanley Capital Partners, the private equity unit of Morgan Stanley, Dean
Witter, Discover & Co. Similarly, at no time during the Protected Period or
thereafter shall the Company, The Morgan Stanley Leveraged Equity Fund II, L.P.,
Morgan Stanley Capital Partners III, L.P., or Morgan Stanley Capital Partners,
the private equity unit of Morgan Stanley, Dean Witter, Discover & Co., utter,
issue or circulate any false, inappropriate or disparaging statements, remarks
or rumors about the Executive.
4.6 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 4 by the other (in the case of the
Executive, a breach of Section 4.1, 4.2, 4.3, 4.4 or 4.5 and in the case of the
company, a breach of Section 4.5) 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 from engaging in activities prohibited by this
Section 4 or such other relief as may be required specifically to enforce any of
the covenants in this Section 4. If for any reason, it is held that the
restrictions under this Section 4 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 4 as will
render such restrictions valid and enforceable.
5. 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 Louisville, Kentucky before one arbitrator
of exemplary qualifications and stature, who shall be
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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.
6. MISCELLANEOUS
6.1 NOTICES. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
ARM Financial Group, Inc.
515 W. Market Street
Louisville, Kentucky 40202
Telecopier No.: (502) 582-7903
Attention: Co-Chairman of the Board
To the Executive:
ARM Financial Group, Inc.
515 W. Market Street
Louisville, Kentucky 40202
Telecopier No.: (502) 582-7903
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.
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6.2 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.
6.3 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. Any business
entity succeeding to substantially all of the business of the Company by
purchase, merger, consolidation, sale of assets or otherwise, shall be bound by
and shall adopt and assume this Agreement and the Company shall obtain the
assumption of this Agreement by such successor.
6.4 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.
6.5 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.
6.6 GOVERNING LAW. This Agreement shall be governed by in accordance
with the laws of the State of New York.
6.7 EXPIRATION DATE. This Agreement shall terminate and be null, void
and of no further force or effect in the event that a Change in Control has not
occurred by June 30, 1998, (unless the parties otherwise agree in writing to a
later date).
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6.8 SURVIVAL. Subject to Section 6.7, Sections 3.3, 4, 5 and 6.2
shall survive the termination of this Agreement.
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/ Frank V. Sica
----------------------------
Name
Title:
EXECUTIVE
/s/ Dennis L. Carr
----------------------------
Dennis L. Carr