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.......................................................... 4
5. Administration................................................................. 6
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 Section2(o).
(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.
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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4. INCENTIVE PLAN AWARDS
(a) Determination of Incentive Plan Awards.
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
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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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 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) and in no event
past the date that would otherwise qualify the P4P Award as a "short-term
deferral" as that term is defined in Treasury Regulation 1.409A-1(b) promulgated
under Section 409A of the Code. 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.
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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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 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.
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CONSECO, INC.
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2005 Pay For Performance Incentive Plan
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(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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CONSECO, INC.
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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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CONSECO, INC.
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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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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.
(m) For purposes of this Plan, references to an award term or event
(including any authority or right of the Company or a Participant) being in
compliance with Section 409A shall mean, for an award that is a "deferral" under
Section 409A (a "409A Award"), that the term or event will not cause the
Participant to be liable for payment of interest or a tax penalty under Section
409A and, for an award that is not considered a "deferral" under Section 409A (a
"non-409A Award"), that the term or event will not cause the award to be treated
as a deferral subject to Section 409A. Other provisions of the Plan
notwithstanding, the terms of any 409A Award and any Non-409A Award, including
any authority of the Company and rights of the Participant with respect to the
Award, shall be limited to those terms permitted under Section 409A, and any
terms not permitted under Section 409A shall be automatically modified and
limited to the extent necessary to conform with Section 409A. For this purpose,
other provisions of the Plan notwithstanding, the Company shall have no
authority to accelerate distributions relating to 409A Awards in excess of the
authority permitted under Section 409A, and any distribution subject to Section
409A(a)(2)(A)(i) (separation from service) to a "key employee" as defined under
Section 409A(a)(2)(B)(i), shall not occur earlier than the earliest time
permitted under Section 409A(a)(2)(B)(i).
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