Exhibit 10.9
EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of September 2,
2005, is between Conseco, Inc., a Delaware corporation ("Company"), and William
S. Kirsch ("Executive").
WHEREAS, the services of Executive and his managerial and professional
experience are of value to the Company;
WHEREAS, Executive and the Company executed an interim employment agreement
on August 12, 2004;
WHEREAS, the Company desires to continue to have the benefit and advantage
of the services of Executive, and each of Executive and the Company wishes to
amend and replace the existing employment agreement as provided for herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. Employment. The Company hereby employs Executive and Executive hereby
accepts employment upon the terms and conditions hereinafter set forth.
2. Term. The effective date of this Amended and Restated Employment
Agreement (the "Agreement") shall be the date set forth above (the "Effective
Date"). Subject to the provisions for termination as provided in Section 10
hereof, the term of Executive's employment under this Agreement shall be the
period beginning on the Effective Date and ending on December 31, 2009 (the
"Term"). The Term shall not be automatically renewed. The Term shall end upon
any earlier termination of Executive's employment with the Company.
3. Duties. During the Term, Executive shall be engaged by the Company in
the capacity of President and Chief Executive Officer of the Company,
responsible, along with the Chairman of the Company, for the overall management
of the Company. During the Term, Executive shall report to the Board of
Directors of the Company (the "Board") regarding the performance of his duties.
4. Extent of Services. During the Term, subject to the direction and
control of the Board, Executive shall have the power and authority commensurate
with his executive status and necessary to perform his duties hereunder.
Executive shall devote his reasonable best efforts to the business of the
Company and, during the Term, shall not, without the consent of the Company, be
actively engaged in any other business activity, whether or not such business
activity is pursued for gain, profit or other pecuniary advantage The foregoing
provisions of this Section 4, subject to Section 9 hereof, shall not be
construed as preventing Executive from serving the boards on which he currently
serves, and which are set forth on Appendix A hereto, as well as boards of
professional, community, civic, education, charitable and business organizations
on which he may choose to serve or investing his assets in such form or manner
as will not require any services on the part of Executive in the operation of
the affairs of the companies in which such investments are made (to the extent
not in violation of the non-compete provision in Section 9 hereof); provided,
however, that business organizations other than those listed on Appendix A shall
be limited to those mutually agreed upon by Executive and the Company, and that
the Board may subsequently determine, in good faith, that service on one or more
boards, including those
listed on Appendix A, is not permissible under the terms of this Agreement
because such service is not in the best interests of the Company.
5. Compensation. During the Term:
(a) As compensation for services hereunder rendered during the Term
hereof, Executive shall receive a base salary ("Base Salary") of Nine
Hundred Seventy-Five Thousand Dollars ($975,000) per year, effective May 1,
2005, payable in equal installments in accordance with the Company's
payroll procedure for its salaried executives. Salary payments and other
payments under this Agreement shall be subject to withholding of taxes and
other appropriate and customary amounts. Executive may receive increases in
his Base Salary from time to time, based upon his performance, subject to
approval of the Board or the Human Resources and Compensation Committee of
the Board (the "Compensation Committee").
(b) In addition to Base Salary, Executive will have an opportunity to
earn a bonus each year as determined by the Board or the Compensation
Committee thereof, with a target annual bonus equal to no less than 125% of
Executive's Base Salary (the "Target Bonus") and a maximum annual bonus of
250% of the Target Bonus with respect to any calendar year, with such bonus
payable at such time that similar payments are made to other Company
executives. For purposes of clarification, annual executive bonuses are
generally paid in March of the year following the year with respect to
which such bonuses are payable (but no later than March 15), if Executive
remains employed with the Company through such date or as otherwise payable
under Section 7 or Section 11. Notwithstanding the above, the full bonus
for the 2009 operating period will be paid at the same time that similar
payments are made to other Company executives (but not later than March 15
of the following year) if Executive remains employed through the end of the
Term. The Target Bonus and maximum bonus will be based on financial and
other objective targets that the Board or the Compensation Committee
believes are reasonably attainable at the time that they are set.
(c) Initial Equity Awards. Executive hereby acknowledges receipt on
August 17, 2004 of options to purchase 400,000 shares of common stock of
the Company at $16.20 per share and an award of 400,000 shares of
restricted stock of the Company (together, the "Initial Equity Awards").
The Initial Equity Awards shall be governed by the terms and conditions of
the applicable award agreements, subject to Section 11(d) of this
Agreement.
(d) Ongoing Equity Awards. Executive shall be eligible to participate in
and receive future grants under any Company stock option or equity-based
program, subject to the discretion of the Board or the Compensation
Committee.
(e) The Company will consider in 2006, but shall not be obligated to
adopt, an unfunded supplemental defined contribution arrangement for
Executive, depending on performance and such other factors as the Company
deems relevant.
6. Fringe Benefits. During the Term:
(a) Executive shall be entitled to participate in such existing
executive benefit plans and insurance programs offered by the Company, or
which it may adopt from time to time, for its executive management or
supervisory personnel generally, in accordance with
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the eligibility requirements for participation therein. Nothing herein
shall be construed so as to prevent the Company from modifying or
terminating any executive benefit plans or programs, or executive fringe
benefits, that it may adopt from time to time.
(b) Executive shall be entitled to six weeks of vacation with pay each
year.
(c) Executive may incur reasonable expenses for promoting the Company's
business, including expenses for entertainment, travel, and similar items.
The Company shall reimburse Executive for all such reasonable expenses upon
Executive's periodic presentation of an itemized account of such
expenditures in accordance with Company procedures. The Company agrees to
pay Executive an additional amount to cover the incremental additional
income taxes incurred by Executive, if any, with respect to payment or
reimbursement of any reasonable business expenses pursuant to this Section
6(c).
(d) Inclusive of any and all existing or future life insurance
coverages, Company will endeavor to add any additional coverage on term
basis (no residual value) to ensure coverage up to $2 million total
coverage (face amount) on Executive's life. The Company will bear the cost
of such additional coverage so long as such cost, not including the cost
attributable to any Company-wide benefit plan, does not exceed $50,000
annually. In the event such cost exceeds $50,000 annually, then Executive
shall bear any such excess cost.
7. Disability. If Executive shall become physically or mentally disabled
during the Term to the extent that his ability to perform his duties and
services hereunder is materially and adversely impaired, his Base Salary, bonus
and other compensation provided herein shall continue while he remains employed
by the Company; provided, that if such disability (as confirmed by competent
medical evidence) continues for at least six (6) consecutive months, the Company
may terminate Executive's employment hereunder, in which case the Company
immediately shall pay Executive cash payments equal to (i) his annual Base
Salary as provided in Section 5(a) hereof to the extent earned but unpaid as of
the date of termination, (ii) the bonus payable pursuant to Section 5(b) for the
fiscal year of the Company ending prior to the date of termination (to the
extent not previously paid) (the "Unpaid Prior Year's Bonus"), and (iii) one
times his annual Base Salary as provided in Section 5(a) hereof. All stock
options, restricted stock and/or other awards held by Executive shall be treated
in accordance with the applicable grant agreements, provided that for purposes
of vesting such options, restricted stock and other awards, Executive shall be
credited with one additional year of service and provided further that the
unvested portion of the stock options, restricted stock and/or other awards
shall be immediately forfeited. No payments or vesting under this paragraph will
be made if such disability arose primarily from (a) chronic use of intoxicants,
drugs or narcotics (other than drugs prescribed to Executive by a physician and
used by Executive for their intended purpose for which they had been prescribed)
or (b) intentionally self-inflicted injury or intentionally self-induced
illness.
8. Disclosure of Information. Executive acknowledges that in and as a
result of his employment with the Company, he has been and will be making use
of, acquiring and/or adding to confidential information of the Company and its
affiliates of a special and unique nature and value. As a material inducement to
the Company to enter into this Agreement and to pay to Executive the
compensation stated in Section 5, as well as any additional benefits stated
herein, Executive covenants and agrees that he shall not, at any time while he
is employed by the Company or at any time thereafter, directly or indirectly,
divulge or disclose for any purpose whatsoever, any confidential information
(whether or not specifically labeled or identified as "confidential
information"), in any form or medium, that has been obtained by or disclosed to
him as a result of
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his employment with the Company and which the Company or any of its affiliates
has taken appropriate steps to safeguard, except to the extent that such
confidential information (a) becomes a matter of public record or is published
in a newspaper, magazine or other periodical available to the general public,
other than as a result of any act or omission of Executive, (b) is required to
be disclosed by any law, regulation or order of any court or regulatory
commission, department or agency, in which event Executive shall give prompt
notice of such requirement to the Company to enable the Company to seek an
appropriate protective order or confidential treatment, or (c) must be disclosed
to enable Executive properly to perform his duties under this Agreement. Upon
the termination of Executive's employment, Executive shall return such
information (in whatever form) obtained from or belonging to the Company or any
of its affiliates that he may have in his possession or control.
9. Covenants Against Competition and Solicitation. Executive acknowledges
that the services he is to render to the Company and its affiliates are of a
special and unusual character, with a unique value to the Company and its
affiliates, the loss of which cannot adequately be compensated by damages or an
action at law. In view of the unique value to the Company and its affiliates of
the services of Executive for which the Company has contracted hereunder,
because of the confidential information to be obtained by, or disclosed to,
Executive as set forth in Section 8 above, and as a material inducement to the
Company to enter into this Agreement and to pay to Executive the compensation
stated in Section 5 hereof, as well as any additional benefits stated herein,
and other good and valuable consideration, Executive covenants and agrees that
throughout the period Executive remains employed or compensated hereunder (other
than pursuant to Section 11) and for one year thereafter, Executive shall not,
directly or indirectly, anywhere in the United States of America (i) render any
services, as an agent, independent contractor, consultant or otherwise, or
become employed or compensated by any other corporation, person or entity that
derives a non-incidental portion of its revenue from the business of selling or
providing annuity, life, accident or health insurance products or services; (ii)
in any manner compete with the Company or any of its affiliates with respect to
lines of business that the Company and its affiliates derive more than a
non-incidental portion of their revenue from or with respect to which the
Company and its affiliates have made a significant investment in; (iii) solicit
or attempt to convert to other insurance carriers or other corporations, persons
or other entities providing these same or similar products or services provided
by the Company and its affiliates, any customers or policyholders of the Company
or any of its affiliates or (iv) solicit for employment or employ any employee
of the Company or any of its affiliates. Should any particular covenant or
provision of this Section 9 be held unreasonable or contrary to public policy
for any reason, including, without limitation, the time period, geographical
area, or scope of activity covered by any restrictive covenant or provision, the
Company and Executive acknowledge and agree that such covenant or provision
shall automatically be deemed modified such that the contested covenant or
provision shall have the closest effect permitted by applicable law to the
original form and shall be given effect and enforced as so modified to whatever
extent would be reasonable and enforceable under applicable law.
10. Termination.
(a) Either the Company or Executive may terminate his employment at any
time for any reason upon written notice to the other. In addition, the
Company may terminate Executive's employment for Just Cause pursuant to
Section 10(b) below or in a Control Termination pursuant to Section 10(c)
below. Executive may terminate his employment for Good Reason pursuant to
Section 10(d) below. Executive's employment shall also terminate (i) upon
the death of Executive or (ii) after disability of Executive pursuant to
Section 7 hereof.
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(b) The Company may terminate Executive's employment at any time for
Just Cause. For purposes of this Agreement, "Just Cause" shall mean: (i)(A)
a material breach by Executive of this Agreement, (B) a material breach of
Executive's duty of loyalty to the Company or its affiliates, or (C)
willful malfeasance or fraud or dishonesty of a substantial nature in
performing Executive's services on behalf of the Company or its affiliates,
which in each case is willful and deliberate on Executive's part and
committed in bad faith or without reasonable belief that such breach or
action is in the best interests of the Company or its affiliates; (ii)
Executive's use of alcohol or drugs (other than drugs prescribed to
Executive by a physician and used by Executive for their intended purposes
for which they had been prescribed) or other repeated conduct, which
materially and repeatedly interferes with the performance of his duties
hereunder, which materially compromises the integrity or the reputation of
the Company or its affiliates, or which results in other substantial
economic harm to the Company or its affiliates; (iii) Executive's
conviction by a court of law, admission that he is guilty, or entry of a
plea of nolo contendere with regard to a crime involving moral turpitude or
any felony; (iv) Executive's unscheduled absence from his employment duties
other than as a result of illness or disability, for whatever cause, for a
period of more than ten (10) consecutive days, without consent from the
Company prior to the expiration of the ten (10) day period; (v) Executive's
failure to take action or to abstain from taking action, as directed by the
Board or a Committee thereof either in writing or reflected in minutes of a
meeting of such Board or Committee, where such failure continues after
Executive has been given written notice of such failure and at least five
(5) business days thereafter to cure such failure, or (vi) any intentional
wrongful act or omission by Executive that results in the restatement of
the Company's financial statements due to a violation of the Sarbanes-Oxley
Act of 2002.
No termination shall be deemed to be a termination by the Company for Just
Cause if the termination is as a result of Executive refusing to act in a manner
that would be a violation of applicable law, or where Executive takes reasonable
actions in good faith as directed by a resolution of the Board or of a Committee
thereof.
(c) The Company may terminate Executive's employment in a Control
Termination. A "Control Termination" shall mean any termination by the
Executive for Good Reason or any termination by the Company (or its
successor) of Executive's employment for any reason other than for Just
Cause, in either case within six months prior to and in anticipation of, or
within two years following, a Change in Control of the Company.
The term "Change in Control" shall mean the occurrence of any of the
following:
(i) the acquisition (other than an acquisition in connection with a
"Non-Control Transaction") by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) of "beneficial ownership" (as such term is
defined in Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of securities of the Company or its Ultimate Parent
representing 51% or more of the combined voting power of the then
outstanding securities of the Company or its Ultimate Parent entitled to
vote generally with respect to the election of the board of directors of
the Company or its Ultimate Parent; or
(ii) as a result of or in connection with a tender or exchange
offer or contest for election of directors, individual board members of
the Company or of the
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Ultimate Parent (identified as of the date of commencement of such
tender or exchange offer, or the commencement of such election contest,
as the case may be) cease to constitute at least a majority of the board
of directors of the Company or, if applicable, of the Ultimate Parent;
or
(iii) the consummation of a merger, consolidation or reorganization
with or into the Company or the Ultimate Parent unless (x) the
stockholders of the Company immediately before such transaction
beneficially own, directly or indirectly, immediately following such
transaction securities representing 51% or more of the combined voting
power of the then outstanding securities entitled to vote generally with
respect to the election of the board of directors of the Company (or its
successor) or, if applicable, the Ultimate Parent and (y) individual
board members of the Company (identified as of the date that a binding
agreement providing for such transaction is signed) constitute at least
a majority of the board of directors of the Company or, if applicable,
the Ultimate Parent (or its successor) or, if applicable, the Ultimate
Parent (a transaction to which clauses (x) and (y) apply, a "Non-Control
Transaction").
For purposes of this Agreement, "Ultimate Parent" shall mean the parent
corporation (or if there is more than one parent corporation, the ultimate
parent corporation) that, directly or indirectly, beneficially owns a majority
of the voting power of the outstanding securities entitled to vote with respect
to the election of the board of directors of the Company (or its successor).
(d) Executive may terminate his employment at any time with Good Reason.
For purposes of this Agreement, "Good Reason" shall mean the occurrence of
any of the following during the Term: (i) any material diminution in the
nature or scope of Executive's authority, duties or responsibilities from
those Executive had as of the date hereof, (ii) a failure to maintain
Executive as sole President and Chief Executive Officer of the Company;
(iii) causing or requiring Executive to report to anyone other than the
Board, (iv) reducing the hiring or firing authority of Executive as in
effect as of the date hereof, (v) requiring relocation without the consent
of Executive, (vi) any reduction in Executive's Base Salary or Target Bonus
opportunity without the consent of the Executive, (vii) a Change in Control
occurs and, following Executive's written request made prior to the Change
in Control, the ultimate parent entity or entities directly or indirectly
gaining control of a majority of the Company's Board or outstanding
securities entitled to vote with respect to the Company's Board fails to
affirm and guarantee the Company's current and future obligations under
this Agreement or (viii) any material breach of any provision of this
Agreement by the Company which is not remedied by the Company within thirty
(30) days after receipt of written notice from Executive specifying such
breach.
(e) Upon termination of Executive's employment with the Company for any
reason (whether voluntary or involuntary), Executive shall be deemed to
have voluntarily resigned from all positions that Executive may then hold
with the Company and any of its affiliates; provided that such deemed
resignation shall not adversely affect Executive's rights to compensation
or benefits under this Agreement and shall not affect the determination of
whether Executive's termination was for Just Cause.
11. Payments Following Termination.
(a) In the event Executive's employment is terminated by the Company for
Just Cause as so defined, or if Executive resigns (other than where such
resignation is for Good
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Reason), then the Company shall pay Executive a cash payment equal to his
annual Base Salary as provided in Section 5(a) hereof to the extent earned
but unpaid as of the date of termination (the "Unpaid Salary"). No bonus
will be earned or paid after the date of termination. All stock options,
restricted stock and/or other awards held by Executive shall be treated in
accordance with the applicable grant agreements, provided that the unvested
portion of the stock options, restricted stock and/or other awards shall be
immediately forfeited.
(b) In the event Executive's employment is terminated by the death of
Executive, then the Company shall pay Executive's estate, as soon as
practicable, (i) a cash payment equal to one times Executive's Base Salary
described in Section 5(a), (ii) the Unpaid Salary, and (iii) the Unpaid
Prior Year's Bonus. All stock options, restricted stock and/or other awards
held by Executive shall be treated in accordance with the applicable grant
agreements, provided that for purposes of vesting such options, restricted
stock and other awards, Executive shall be credited with one additional
year of service and provided further that the unvested portion of the
Initial Equity Awards shall be immediately forfeited.
(c) In the event that Executive is terminated by the Company without
Just Cause, or that Executive's employment is terminated by the Executive
for Good Reason, other than in a Control Termination, and other than
pursuant to Section 7, then the Company shall pay Executive, in a lump sum
within 10 business days after the date of termination (i) the Unpaid
Salary, (ii) the sum of the Unpaid Prior Year's Bonus plus the Target Bonus
(prorated for the partial year period ending on the date of termination),
(iii) a cash payment equal to two times his annual Base Salary as provided
in Section 5(a) hereof, and (iv) a cash payment equal to two times the
Target Bonus. In addition, Executive and his family shall be entitled to
continued participation in all medical, health and life insurance plans at
the same benefit level at which he and his family were participating on the
date of termination until the earliest of (A) 24 months after the date of
termination, (B) the date upon which Executive attains 65 years of age; or
(C) the date, or dates, Executive receives substantially similar coverage
and benefits under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis). All stock options, restricted stock and/or
other awards held by Executive shall be treated in accordance with the
applicable grant agreements, provided that Executive shall receive
additional vesting credit (but not above 100%) of the Initial Equity Awards
as if he had remained employed by the Company until the next succeeding
anniversary of the Grant Date, and that, solely for this purpose, the
restricted stock component of the Initial Equity Awards shall be deemed to
vest on the same dates as are applicable to the stock option component of
that award. Thus, for example, if Executive were terminated by the Company
without Just Cause after the first anniversary of the Grant Date, but
before the second anniversary thereof, both the stock options and
restricted stock comprising the Initial Equity Award would be considered
50% vested for this purpose.
(d) In the event that Executive's employment terminates in a Control
Termination, the Company shall pay Executive, within five business days
after the date of termination, (i) the Unpaid Salary, (ii) the sum of the
Unpaid Prior Year's Bonus and the Target Bonus (prorated for the partial
year period ending on the date of his termination of employment), (iii) a
cash payment equal to three times his annual Base Salary as provided in
Section 5(a) hereof, and (iv) a cash payment equal to three times the
Target Bonus. In addition, Executive and his family shall be entitled to
continued participation in all medical,
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health and life insurance plans at the same benefit level at which he and
his family were participating on the date of termination until the earliest
of (A) 36 months after the date of termination, (B) the date upon which
Executive attains 65 years of age; or (C) the date, or dates, Executive
receives substantially similar coverage and benefits under the plans and
programs of a subsequent employer (such coverage and benefits to be
determined on a coverage by coverage, or benefit by benefit basis). All
stock options, restricted stock and/or other awards held by Executive shall
be treated in accordance with the applicable grant agreements (including
the vesting provisions thereof), provided that any unvested portion of the
Initial Equity Awards shall vest upon the later of the date of the Control
Termination or the Change in Control date. (By way of clarification, should
the date of Control Termination precede the Change in Control date, Initial
Equity Awards that were unvested on the date of the Control Termination
shall become fully vested on the Change of Control date.)
(e) Notwithstanding anything herein to the contrary, (i) the Company
shall alter the timing of any payment due to executive hereunder to the
extent required to comply with Section 409A of the Code (as defined below),
and (ii) in the event that Executive's employment terminates, the Company
shall pay to Executive, in accordance with its standard payroll practice,
Executive's accrued but unused vacation.
12. Tax Indemnity Payments.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that the aggregate payments or
distributions by the Company or its affiliated companies to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of the Agreement or otherwise but
determined without regard to any additional payments required under this
Section 12(a) "Payment"), constitute "parachute payments" (as such term is
defined under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code") or any successor provision, and the regulations promulgated
thereunder (collectively, "Section 280G")) which exceed three times
Executive's "base amount" (as such term is defined under Section 280G) by
at least One Hundred Thousand Dollars ($100,000) and are therefore subject
to the excise tax imposed by Section 4999 of the Code or any successor
provision (collectively, "Section 4999") or any interest or penalties with
respect to such excise tax (the total excise tax, together with any
interest and penalties, are hereinafter collectively referred to as the
"Excise Tax")), then Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any Federal, state
or local income and employment taxes and Excise Tax (and any interest and
penalties imposed with respect to any such taxes) imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. If the Payments exceed three times
the Executive's "base amount," but by an amount of less than One Hundred
Thousand Dollars ($100,000), such Payments shall be reduced by the least
amount necessary to bring such Payments below three times the Executive's
"base amount".
(b) Subject to the provisions of Section 12(c) hereof, all
determinations required to be made under this Section 12, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's public accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations
both to the
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Company and Executive within fifteen (15) business days of the receipt
of notice from Executive that there has been a Payment, or such earlier
time as is requested by the Company. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, Executive may appoint another nationally
recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be deemed to be the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 12, shall be paid by the Company to Executive within five
(5) days of the receipt of the Accounting Firm's determination (it being
understood, however, that the Gross Up Payment may, if permitted by law, be
paid directly to the applicable taxing authorities). If the Accounting Firm
determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion that failure to report the Excise Tax on
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and Executive. As a
result of the uncertainty in the application of Section 4999 at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should
have been made by the Company ("Underpayment"), or that Gross-Up Payments
will have been made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made
hereunder. In either such event, the Accounting Firm shall determine the
amount of the Underpayment or Overpayment that has occurred. In the event
that the Company exhausts its remedies pursuant to Section 12(c) and
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of Executive. In the case of an Overpayment, Executive
shall, at the direction and expense of the Company, take such steps as are
reasonably necessary (including, if reasonable, the filing of returns and
claims for refund), and otherwise reasonably cooperate with the Company to
correct such Overpayment; provided, however, that (i) Executive shall not
in any event be obligated to return to the Company an amount greater than
the net after-tax portion of the Overpayment that he has retained or has
recovered as a refund from the applicable taxing authorities and (ii) this
provision shall be interpreted in a manner consistent with the intent of
Section 12(a) hereof to make Executive whole, on an after-tax basis, from
the application of Section 4999.
(c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require a payment by
the Company, or a change in the amount of the payment by the Company of,
the Gross-Up Payment. Such notification shall be given as soon as
practicable after Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid; provided that the failure to give any notice
pursuant to this Section 12(c) shall not impair Executive's rights under
this Section 12 except to the extent the Company is materially prejudiced
thereby. Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which Executive gives such notice to
the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies Executive
in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
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(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim; provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold Executive harmless, on an after-tax basis, for any Excise Tax
or income, employment or other tax (including interest and penalties
with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 12(c) hereof, the Company shall control all
proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct
Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided further, that if the Company
directs Executive to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to Executive on an
interest-free basis and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax or income, employment or other
tax (including interest or penalties with respect to any such taxes)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and provided further, that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 12(c) hereof, Executive becomes entitled to
receive, and receives, any refund with respect to such claim, Executive
shall (subject to the Company's complying with the requirements of Section
12(c) hereof) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 12(c), a determination is made that Executive
shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be
10
repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
13. Character of Termination Payments. The amounts payable to Executive
hereunder upon any termination of his employment shall be considered severance
pay in consideration of past services rendered on behalf of the Company and his
continued service from the date hereof to the date he becomes entitled to such
payments and shall be the sole amount of severance pay to which Executive is
entitled from the Company and its affiliates upon termination of his employment.
Executive shall have no duty to mitigate his damages by seeking other employment
and, should Executive actually receive compensation from any such other
employment, the payments required hereunder shall not be reduced or offset by
any such other compensation.
14. Representations of the Parties.
(a) The Company represents and warrants to Executive that (i) this
Agreement has been duly authorized, executed and delivered by the Company
and constitutes valid and binding obligations of the Company; and (ii) the
employment of Executive on the terms and conditions contained in this
Agreement will not conflict with, result in a breach or violation of,
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
pursuant to: (A) the certificate of formation, (B) the terms of any
indenture, contract, lease, mortgage, deed of trust, note, loan agreement
or other agreement, obligation, condition, covenant or instrument to which
the Company is a party or bound or to which its property is subject, or (C)
any statute, law, rule, regulation, judgment, order or decree applicable to
the Company, or any regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company.
(b) Executive represents and warrants to the Company that: (i) this
Agreement has been duly executed and delivered by Executive and constitutes
a valid and binding obligation of Executive; and (ii) neither the execution
of this Agreement by Executive nor his employment by the Company on the
terms and conditions contained herein will conflict with, result in a
breach or violation of, or constitute a default under any agreement,
obligation, condition, covenant or instrument to which Executive is a party
or bound or to which his property is subject, or any statute, law, rule,
regulation, judgment, order or decree applicable to Executive of any court,
regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over Executive or any of his property.
15. Arbitration of Disputes; Injunctive Relief.
(a) Except as provided in subsection (b) below, any controversy or claim
arising out of or relating to this Agreement or the breach thereof, shall
be settled by binding arbitration in the City of Indianapolis, Indiana, in
accordance with the laws of the State of Indiana by three arbitrators, one
of whom shall be appointed by the Company, one by Executive, and the third
of whom shall be appointed by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the Chief Judge of the United States
District Court for the Southern District of Indiana. The arbitration shall
be conducted in accordance with the rules of the American Arbitration
Association, except with respect to the election of arbitrators, which
shall be as provided in this Section. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
Each party shall
11
pay its own costs and expenses incurred in connection with the enforcement
of this Agreement, regardless of the final outcome.
(b) Executive acknowledges that a breach or threatened breach by
Executive of Sections 8 or 9 of this Agreement will give rise to
irreparable injury to the Company and that money damages will not be
adequate relief for such injury. Notwithstanding paragraph (a) above, the
Company and Executive agree that the Company may seek and obtain injunctive
relief, including, without limitation, temporary restraining orders,
preliminary injunctions and/or permanent injunctions, in a court of proper
jurisdiction to restrain or prohibit a breach or threatened breach of
Section 8 or 9 of this Agreement. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of
damages from Executive.
16. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by registered mail to
his residence, in the case of Executive, or to the business office of the
General Counsel of the Company, in the case of the Company.
17. Waiver of Breach and Severability. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by either party. In the
event any provision of this Agreement is found to be invalid or unenforceable,
it may be severed from the Agreement, and the remaining provisions of the
Agreement shall continue to be binding and effective.
18. Entire Agreement. Other than any equity award agreements entered into
pursuant to the Conseco, Inc. 2003 Long-Term Equity Incentive Plan, or amended,
or any subsequent equity award plan, this instrument contains the entire
agreement of the parties and, as of the Effective Date, supersedes all other
obligations of the Company and its affiliates to Executive under other
agreements or otherwise. The compensation and benefits to be paid under the
terms of this Agreement are in lieu of all other compensation or benefits to
which Executive is entitled from the Company and its affiliates. This Agreement
may not be changed orally, but only by an instrument in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
19. Binding Agreement and Governing Law; Assignment Limited. This Agreement
shall be binding upon and shall inure to the benefit of the parties and their
lawful successors in interest (including, without limitation, Executive's
estate, heirs and personal representatives) and, except for issues or matters as
to which federal law is applicable, shall be construed in accordance with and
governed by the laws of the State of Indiana. This Agreement is personal to each
of the parties hereto, and neither party may assign or delegate any of its
rights or obligations hereunder without the prior written consent of the other.
20. No Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not intended to confer
third-party beneficiary rights upon any other person.
21. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written, effective as of the Effective Date.
COMPANY
CONSECO, INC.
/s/ R. Glenn Hilliard
-------------------------
By: R. Glenn Hilliard
Its: Executive Chairman
EXECUTIVE:
/s/ William S. Kirsch
-------------------------
William S. Kirsch
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Appendix A
Memberships & Affiliations
Northwestern University - Board of Trustees
Children's Inner City Educational Fund - Board of Directors
Sun Capital - Board of Advisors
Stanford Law School - Dean's Circle
Stanford Law School Board of Visitors
Boise Cascade - Board of Directors