Exhibit 10.20
CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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Page
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1. General........................................................................ 1
2. Definitions.................................................................... 1
3. Participation.................................................................. 3
4. Incentive Plan Awards.......................................................... 3
5. Administration................................................................. 5
6. Miscellaneous.................................................................. 6
CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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1. GENERAL
(a) Purpose. This Conseco, Inc. 2005 Pay for Performance
Incentive Plan (the "Plan" or "P4P") is intended to assist Conseco, Inc., a
Delaware corporation (the "Company"), and its Affiliated Corporations in
attracting, retaining, motivating and rewarding employees who occupy key
positions and contribute to the growth and profitability of the Company and its
Affiliated Corporations through the award of certain incentives. The Plan also
is intended to enable the Committee to preserve the tax deductibility of
incentive awards under Section 162(m) of the Code, and to advance the interests
of the shareholders of the Company by providing performance-based incentives to
eligible individuals.
(b) Effective Date. The Plan shall become effective as of the
date of its adoption by the Board of Directors of the Company, subject to
stockholder approval, and shall continue in effect until terminated by the Board
pursuant to Section 6(a). No payment may be made hereunder prior to stockholder
approval of the Plan.
2. DEFINITIONS
(a) "Affiliated Corporations" shall include members of the controlled
group of corporations within the meaning of Section 1504 of the Code determined
without regard to Section 1504(b).
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(d) "Committee" means the committee designated by the Board to
administer the P4P. With respect to Covered Employees for whom the P4P is
intended to provide "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code, any Committee must consist solely of two
or more persons each of whom are "outside directors" within the meaning of
Section 162(m) of the Code. To the extent the Committee delegates authority
pursuant to Section 5(b), references to the Committee in the P4P shall, as
appropriate, be deemed to refer to the Committee's delegate.
(e) "Company" means Conseco, Inc.
(f) "Comparison Group" means the peer group of companies designated by
the Committee as the Comparison Group relative to a given Performance Cycle, as
described in Section 4(a)(i).
(g) "Covered Employee" has the meaning given such term under Section
162(m) of the Code.
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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(h) "Employer" means the Company and any Affiliated Corporation that
employs a Participant.
(i) "Fiscal Year" means the 12-month period beginning on each January
1 and ending on December 31 of the same calendar year.
(j) "Incentive Percentage" means the number determined by the
Committee as the percentage of a Participant's annual rate of salary in effect
for the last full payroll period of the Performance Period to be paid as an
Incentive Plan Award if the specified Performance Goals are achieved. The
Committee may establish different Incentive Percentages for individual
Participants or different classes of Participants, and/or the achievement of
different levels of the Performance Goals.
(k) "Incentive Plan Award" means an incentive compensation award under
the P4P, payment of which is contingent and based upon the attainment of the
Performance Goals with respect to a Performance Period.
(l) "Participant" means an employee of an Employer participating in
the Plan for a Performance Period as provided in Section 3.
(m) "P4P" means the Conseco, Inc. Pay For Performance Incentive Plan,
as it may be amended from time to time.
(n) "Performance Goals" means the pre-established objective
performance goals established by the Committee for each Performance Period.
Solely with respect to Covered Employees for any Performance Period for which
the P4P is intended to provide Qualified Performance-based Compensation,
Performance Goals shall be established by the Committee no later than 90 days
after the beginning of the Fiscal Year to which the Performance Goals relate
(and in the case of a Performance Period shorter than a Fiscal Year, no later
than the date on which 25% of the Performance Period has elapsed) and while the
attainment of the Performance Goals is substantially uncertain. The Performance
Goals may be based upon the performance of the Company, of any Affiliated
Corporation, of a division thereof, and/or of an individual Participant, using
one or more of the Performance Measures selected by the Committee. Separate
Performance Goals may be established by the Committee for the Company or an
Affiliated Corporation, or division thereof, or an individual. With respect to
Participants who are not Covered Employees, the Committee may establish other
subjective or objective goals, including individual Performance Goals, which it
deems appropriate. The preceding sentence shall also apply to Covered Employees
with respect to any Incentive Plan Award not intended at the time of grant to be
Qualified Performance-based Compensation. Performance Goals may be set at a
specific level, or may be expressed as a relative percentage to the comparable
measure at comparison companies or a defined index.
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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(o) "Performance Measure" means one or more of the following criteria,
on which Performance Goals may be based, subject to Section 4(a): (1) gross or
net revenue, premiums collected, new annualized premiums, and investment income,
(2) any earnings or net income measure, including earnings from operations,
earnings before taxes, earnings before interest and/or taxes and/or
depreciation, statutory earnings before realized gains (losses), or net income
available to common shareholders, (3) operating earnings per common share
(either basic or diluted); (4) return on assets, return on investment, return on
capital, return on equity, or return on tangible equity; (5) economic value
created; (6) operating margin or profit margin; (7) net interest margin; (8)
asset quality; (9) stock price or total stockholder return; and (10) strategic
business criteria, consisting of one or more objectives based on meeting
specified market penetration, total market capitalization, business retention,
new product generation, rate increase actions, geographic business expansion
goals, cost targets (including cost of capital), investment portfolio yield,
risk-based capital, statutory capital, BCAR, tax net operating loss utilization,
customer satisfaction, employee satisfaction, agency ratings, management of
employment practices and employee benefits, supervision of litigation and
information technology, and goals relating to acquisitions or divestitures of
subsidiaries, affiliates or joint ventures. ] The targeted level or levels of
performance with respect to such business criteria may be established at such
levels and in such terms as the Committee may determine, in its discretion,
including in absolute terms, on a per share basis (either basic or diluted), as
a goal relative to performance in prior periods, or as a goal compared to the
performance of one or more comparable companies or an index covering multiple
companies.
(p) "Performance Period" means a Fiscal Year or other period of time
(which may be longer or shorter than a Fiscal Year) set by the Committee.
(q) "Qualified Performance-based Compensation" has the meaning given
such term under Section 162(m) of the Code and the regulations promulgated
thereunder.
3. PARTICIPATION
Individuals eligible to participate in the P4P shall consist of officers and
other employees of an Employer whom the Committee determines have the potential
to contribute significantly to the success of the Company and its Affiliated
Corporations. For each Performance Period the Committee shall determine which
officers and other employees shall participate in the P4P. For any Performance
Period for which Incentive Plan Awards are intended to be Qualified
Performance-based Compensation, the Committee shall designate the Covered
Employees eligible to participate in the P4P no later than the 90th day of the
Fiscal Year (or, in the case of a Performance Period shorter than a Fiscal Year
after no later than the date on which 25% of the Performance Period has
elapsed), so long as the attainment of the Performance Goals is still
substantially uncertain.
4. INCENTIVE PLAN AWARDS
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2005 Pay For Performance Incentive Plan
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(a) Determination of Incentive Plan Awards.
(i) The Committee shall, promptly after the date on which the
necessary financial, individual or other information for a particular
Performance Period becomes available, determine and certify in writing the
degree to which each of the Performance Goals has been attained. Performance
Goals shall, to the extent applicable, be based upon generally accepted
accounting principles. The Committee may adjust Performance Goals to take into
account the effect of the following, subject to Section 6(j): Changes in
accounting standards that may be required by the Financial Accounting Standards
Board, the Securities and Exchange Commission or any other rulemaking body after
the Performance Goal is established; realized investment gains and losses;
extraordinary, unusual, non-recurring or infrequent items; currency
fluctuations; acquisitions; divestitures; litigation losses; financing
activities; expenses for restructuring or productivity initiatives; other
non-operating items; new laws, cases or regulatory developments that result in
unanticipated items of gain, loss, income or expense; executive severance
arrangements; and other items as the Committee determines to be required so that
the operating results of the Company, division, or an Affiliated Corporation
shall be computed on a comparative basis from Performance Period to Performance
Period. Determination by the Committee or its designee shall be final and
conclusive on all parties, but shall be based on relevant objective information
or financial data. The Committee may also, in its discretion, adjust a P4P Award
based on other factors it deems relevant and appropriate; provided, however,
that the Committee may only exercise such discretion to reduce, and not to
increase, a P4P Award unless such award was not intended to be Qualified
Performance- based Compensation.
(b) Eligibility and Amount of Incentive Plan Award.
(i) To be eligible for payment of any P4P Award, the Participant
must: (x) have performed the Participant's duties to the satisfaction of the
Committee; (y) have not engaged in any act deemed by the Committee to be
inimical to the best interest of the Company or an Affiliated Corporation; and
(z) otherwise complied with Company and Employer policies at all times prior to
the date the P4P Award is actually paid. No P4P Award shall be paid to any
Participant who does not satisfy each of the above. In addition, unless the
Committee determines otherwise, the Participant must be employed by the Company
or an Affiliated Corporation on the day on which the P4P Award is scheduled to
be paid in accordance with Section 4(c), except in the event termination is due
to the Participant's death, disability (as defined in Section 422(c) of the
Code) or retirement (after attainment of age 55), or a separate agreement
entered into between the Participant and his or her Employer specifically
provides otherwise; provided however, that no Participant shall receive such a
P4P Award upon retirement or pursuant to a separate agreement entered into
between the Participant and his or her Employer unless such award was not
intended to be Qualified Performance-based Compensation. In the event of a
Participant's death, disability or retirement, the P4P Award shall be prorated
based upon the period of employment during the Performance Period. The Committee
may, in its sole discretion, reduce, eliminate or increase any P4P Award for any
individual or group, except that the
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2005 Pay For Performance Incentive Plan
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amount of any P4P Award intended to be Qualified Performance-based Compensation
may not be increased above the amount determined under Section 4(a) hereof.
(ii) The P4P Award shall be determined by multiplying the
Incentive Percentage applicable to the Participant by the Participant's annual
rate of salary in effect for the last full payroll period of the Performance
Period to which the P4P Award pertains. In no event, however, will a P4P Award
for a Covered Employee exceed $5,000,000 for a Fiscal Year Performance Period
(or in the case of a Performance Period other than a Fiscal Year, an amount that
bears the same ratio to $5,000,000 as the Performance Period bears to a Fiscal
Year).
(iii) The Committee shall have the discretion and authority to
make adjustments to any P4P Award in circumstances where, during the Performance
Period: (1) a Participant leaves the Employer and is rehired as a Participant;
(2) a Participant is hired, promoted or transferred into a position eligible for
P4P participation; (3) a Participant transfers between eligible P4P positions
with different Incentive Percentages or Performance Goals; (4) a Participant
transfers to a position not eligible to participate in the P4P; (5) a
Participant becomes eligible for an incentive from another incentive plan
maintained by the Company or Affiliated Corporation; (6) a Participant is on a
leave of absence; and (7) similar circumstances deemed appropriate by the
Committee, consistent with the purpose and terms of the P4P; provided however,
that the Committee shall not be authorized to increase the amount of the P4P
Award payable to a Covered Employee if the amount was intended to be Qualified
Performance-based Compensation.
(c) Payment of Award. Unless the Committee provides otherwise, P4P
Awards will be paid in cash or cash equivalent within 75 days of the end of the
applicable Performance Period to which the award pertains, but in no event prior
to certification by the Committee as provided in Section 4(a). If any portion of
a P4P Award payable to a Covered Employee that is intended to be Qualified
Performance-based Compensation for any reason is not deductible, payment of that
portion shall, at the Committee's discretion, be deferred until the earliest
date it may be paid and deducted; provided however, that any such deferral shall
be made in compliance with a plan designed to comply with the requirements of
Section 409A of the Code. Further, if the Participant is on administrative
suspension at the time payment would otherwise be made, payment shall be delayed
until the matter is resolved by the Employer. No payment shall be made if the
Committee determines the qualification requirements of Section 4(b)(i) have not
been satisfied by the Participant.
5. ADMINISTRATION
(a) General. The P4P shall be administered by the Committee. Subject
to the provisions of the P4P, the Committee shall have full discretionary
authority to administer and interpret the P4P, to exercise all powers either
specifically granted to it under the P4P or as are necessary or advisable in the
administration of the P4P, to decide the facts in any
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2005 Pay For Performance Incentive Plan
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case arising under the P4P, to prescribe, amend and rescind rules and
regulations relating to the P4P, to require performance reports on which it can
base its determinations under Section 4(a), and to make all other determinations
necessary or advisable for the administration of the P4P, all of which shall be
binding on all persons, including the Company, Affiliated Corporations, the
Participants (or any person claiming any rights under the P4P from or through
any Participant), and any shareholder of the Company. A majority of the
Committee shall constitute a quorum, and, provided a quorum is present (or
unanimous written consent is otherwise obtained), the Committee shall act
pursuant to a majority vote of those present. No member of the Board or the
Committee shall be liable for any action taken or determination made in good
faith with respect to the P4P or any Plan Award.
(b) Delegation. Except to the extent prohibited by applicable law or
the applicable rules of a stock exchange, the Committee may allocate all or any
portion of its responsibilities and powers to any one or more of its members,
may delegate all or any part of its responsibilities and powers for
administering the P4P to one or more persons as the Committee deems appropriate,
and at any time revoke the allocation or delegation; provided however, the
Committee may not delegate its responsibilities under the Plan relating to any
Covered Employee's P4P Award intended to be Qualified Performance-based
Compensation to the extent delegation is prohibited under Section 162(m) of the
Code.
6. MISCELLANEOUS
(a) Amendment and Termination.
(i) The Board may at any time amend or terminate the P4P (in
whole or in part) without the approval of the shareholders of the Company,
except as otherwise provided in this Section 6(a). Neither the Company nor any
Affiliated Corporation is obligated to continue this P4P.
(ii) Unless terminated earlier by the Committee, the Plan shall
terminate on the fifth anniversary of the effective date. No further P4P Awards
may be granted under the Plan following the termination date, but outstanding
P4P Awards for Performance Periods begun prior to the Plan termination date
shall continue in accordance with their terms.
(iii) Any amendment to the P4P that changes the class of
individuals of an Employer eligible to participate, changes the Performance
Measures or the formula used or increases the maximum dollar amount that may be
paid to a Participant for a Performance Period shall not be effective with
respect to Plan Awards to Covered Employees intended to be Qualified
Performance-based Compensation unless the amendment is approved by shareholders
before the Plan Award is paid.
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2005 Pay For Performance Incentive Plan
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(b) Effect of Incentive Plan Awards on Other Compensation.
(i) Plan Awards shall not be considered eligible pay under other
plans, benefit arrangements, or fringe benefit arrangements of the Company or an
Affiliated Corporation, unless otherwise provided under the terms of other
plans.
(ii) To the extent provided in the applicable benefit plan or
benefit arrangement of the Company or an Affiliated Corporation, amounts payable
as Plan Awards will be reduced in accordance with the Participant's compensation
reduction election, if any, in effect under other plans at the time the Plan
Award is otherwise payable.
(c) No Guarantee, No Funding. The payment of a Plan Award for any
Performance Period does not guarantee any person eligibility for or payment of a
Plan Award for any other Performance Period. Plan Awards shall be paid solely
from the general assets of the Participant's Employer, to the extent the
payments are attributable to services for the Employer. To the extent any person
acquires a right to receive payments from an Employer under the P4P, the right
is no greater than the right of any other unsecured general creditor.
(d) Tax Withholding. The Participant's Employer shall have the right
to deduct from all payments made under the P4P any federal, state or local taxes
required by law to be withheld with respect to the payments.
(e) Governing Law. The provisions of the P4P shall be interpreted,
construed, and administered in accordance with the referenced provisions of the
Code and with the laws of the State of Delaware.
(f) Awards Not Transferable. Subject to Section 6(h), no amount
payable to, or held under the P4P for the account of, any Participant, spouse or
beneficiary shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to so
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the
same shall be void; nor shall any amount payable to, or held under the P4P for
the account of, any Participant be in any manner liable for such Participant's
debts, contracts, liabilities, engagements, or torts, or be subject to any legal
process to levy upon or attach.
(g) No Contract. This P4P shall not be deemed a contract of employment
with any Participant, nor shall any provision hereof affect the right of the
Company or any Affiliated Corporations to terminate a Participant's employment.
(h) Payments to Minors and Incompetents; Death. If any Participant,
spouse or beneficiary entitled to receive any benefits hereunder is a minor or
is deemed by the Committee or is adjudged to be legally incapable of giving
valid receipt and discharge for such benefits, they will be paid to such person
or institution as the Committee may designate or to the duly
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2005 Pay For Performance Incentive Plan
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appointed guardian. Such payment shall, to the extent made, be deemed a complete
discharge of any such payment under the Plan. In the event of a Participant's
death prior to payment of any Plan Award to which Participant is otherwise
entitled, payment shall be made to the Participant's then-effective beneficiary
or beneficiaries in accordance with the beneficiary designation on file with the
Company. If no such beneficiary designation is in effect, payments shall be made
to the Participant's estate.
(i) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission of any terms of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board or a committee thereof to adopt such other incentive arrangements,
apart from the Plan, as it may deem desirable, including incentive arrangements
and awards which do not qualify under Section 162(m) of the Code, and such other
arrangements may be either applicable generally or only in specific cases.
(j) Compliance with Section 162(m) of the Code. It is the intent of
the Company that compensation under the Plan payable to Covered Employees shall
constitute Qualified Performance-based Compensation unless otherwise determined
by the Committee at the time of allocation of an award. Accordingly, the terms
of Section 4 and other provisions of the Plan, including the definitions and
other terms used therein, shall be interpreted in a manner consistent with
Section 162(m) of the Code. If any provision of the Plan or any document
relating to an award that is designated as intended to comply with Section
162(m) of the Code does not comply or is inconsistent with the requirements of
Section 162(m) of the Code, such provision shall be construed or deemed amended
to the extent necessary to conform to such requirements, and no provision shall
be deemed to confer upon the Committee or any other person discretion to
increase the amount of compensation otherwise payable in connection with any
such award upon attainment of the applicable performance objectives.
Notwithstanding the foregoing, however, whenever the Committee determines that
it is advisable to grant or pay Plan Awards that do not qualify as Qualified
Performance-based Compensation, the Committee may make grants or payments
without satisfying the requirements of Section 162(m) of the Code, provided,
however, that any such determination must be made prior to the time that any
such grant or payment is made.
(k) Severability; Entire Agreement. If any of the provisions of this
Plan or any award document is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability, and the remaining provisions shall not be affected thereby;
provided, that, if any of such provisions is finally held to be invalid,
illegal, or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan and any award
documents contain the entire agreement of the parties with respect to the
subject matter thereof and, unless specified
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2005 Pay For Performance Incentive Plan
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otherwise, supersede all prior agreements, promises, covenants, arrangements,
communications, representations and warranties between them, whether written or
oral, with respect to the subject matter thereof.
(l) Captions. The captions contained in the P4P are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of the Plan, nor do they in any way affect the
construction of any provision of the Plan.
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