Document:

CNO 09.30.2011 EX 10.32

Exhibit 10.32

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT, is entered into this 27th day of September, 2011, between CNO Financial Group, Inc., a Delaware corporation (the “Company” or “CNO”), and Edward J. Bonach (“Executive”).
    
WHEREAS, the Company and Executive entered into an Amended and Restated Employment Agreement dated May 26, 2010, they now desire to further amend and restate such agreement in connection with Executive's promotion to Chief Executive Officer, effective October 1, 2011.

WHEREAS, the continued services of Executive and his managerial and professional experience are of value to the Company.

WHEREAS, the Company desires to have the benefit and advantage of the services of Executive to assist the Company upon the terms and conditions set forth 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 agreement (the “Agreement”) shall be October 1, 2011 (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 October 1, 2014 (the “Term").  The Term shall not be automatically renewed and 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 Chief Executive Officer of the Company.  During the Term, Executive shall report exclusively to the Company's Board of Directors (the “Board”) regarding the performance of his duties.  As of the Effective Date, Executive shall be elected as a member of the Board.  Such Board membership will be subject to election by the shareholders of the Company at the 2012 annual meeting, and annually thereafter. 

4.    Extent of Services.  During the Term, subject to the direction and control of the Chief Executive Officer of the Company, Executive shall have the power and authority commensurate with his executive status and necessary to perform his duties hereunder.  Executive shall devote his entire employable time, attention and 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; provided, however, that this shall not be construed as 

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preventing Executive from serving on boards of professional, community, civic, education, charitable and corporate organizations on which he presently serves or 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-competition and non-solicitation provisions of Section 9 hereof); provided, however, that corporate organizations shall be limited to those mutually agreed upon by Executive and 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 Eight Hundred Thousand Dollars ($800,000) per year 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 Company.

(b)    In addition to Base Salary, Executive will have an opportunity to earn a bonus each year, as determined by the Company, with a target annual bonus equal to 125% of Executive's Base Salary (the “Target Bonus”) and a maximum annual bonus of 250% of Executive's Base Salary with respect to any calendar year, with such bonus payable at such time that other similar payments are made to other Company executives but in no event later than March 15 of the year following the year with respect to which such bonus was payable, unless the bonus amounts to be paid cannot be confirmed and paid on or before March 15, in which event the bonuses will be paid within 15 days after the bonus amounts have been confirmed by the Company.  For 2011, Executive's Target Bonus shall equal 100% of his Base Salary paid prior to October 1, 2011 plus 125% of his Base Salary paid from and after October 1, 2011, and his maximum bonus for 2011 shall equal 200% of his Base Salary paid prior to October 1, 2011 plus 250% of his Base Salary paid from and after October 1, 2011.  For purposes of clarification, annual executive bonuses are payable on or before March 15 of the year following the year with respect to which such bonuses are payable, if Executive remains employed with the Company through such date or as otherwise payable under Section 11 of this Agreement.  Notwithstanding the above, a pro-rata portion of the 2014 bonus will be paid at the same time that similar payments are made to other Company executives if Executive remains employed through the end of the Term.  The performance requirements for Target Bonuses will be based on financial and other objective targets that the Company's Board of Directors (the “Board”) or the Human Resources and Compensation Committee of the Board (the “Compensation Committee”) believes are reasonably attainable at the time that they are set.

(c)    Executive shall be eligible to participate in and receive future grants under any CNO stock or equity-based program offered to senior executives, subject to the discretion of the Board or the Compensation Committee. 

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6.    Additional 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 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 the Company's policies and procedures and Section 21 hereof; provided, however, that any such reimbursement will be made no later than March 15 of the year following the year in which the expense was incurred.  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 subsection (c); provided, however, that any such payment will be made no later than March 15 of the year following the year in which the income tax was incurred. 

(d)    Executive shall be permitted to make elective contributions to any Company-sponsored, non-qualified deferred compensation plan in accordance with the terms of such plan.

7.    Disability.  

(a)     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 (any such incapacity, a “Disability”), his Base Salary, bonus and other compensation provided herein shall continue while he remains employed by the Company; provided, that if such Disability (as determined in the Company's reasonable judgment, exercised in good faith) continues for at least three (3) consecutive months, the Company may terminate Executive's employment hereunder, in which case the Company within 10 business days shall pay Executive a cash payment 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 (“Unpaid Salary”), (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 earned based on performance under the goals and objectives of the applicable plan but not previously paid) (“Unpaid Bonus”) and (iii) Executive's then accrued but unused vacation (“Unpaid Vacation”) (the Unpaid Salary, Unpaid Bonus and Unpaid Vacation referred to sometimes together as the “Accrued Amounts”).  Additionally, in the event of a termination of employment due to Disability, the Company shall pay to Executive a pro-rata portion of the Target Bonus for the year in which the termination for Disability 

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occurred, payable at the same time when the bonus payment for the year of termination otherwise would have been paid pursuant to Section 5(b).  All options, restricted stock and/or other awards held by Executive on the date of termination for Disability shall vest only through the date of termination according to the normal vesting schedule applicable to such options or restricted stock and Executive shall be treated in accordance with the applicable award agreements.  

(b)     No payments or vesting under this Section 7 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 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, (c) must be disclosed to enable Executive properly to perform his duties under this Agreement or (d) was developed by Executive prior to his employment by the Company.  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 which 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 and for one year thereafter, Executive shall not, directly or indirectly, anywhere in the United

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States of America (i) render any services, as an agent, independent contractor, consultant or otherwise, or be employed or compensated by any other corporation, person or entity that is included on the list of companies that directly compete with the Company or any of its subsidiaries in the business of selling or providing annuity, life, accident or health insurance products or services, which list shall be (x) compiled by the Compensation Committee and provided to Executive prior to the Effective Date and (y) reviewed annually by the Compensation Committee (using the same methodology that was used to compile the initial list) to determine if there have been any changes in the Company's direct competitors, with any changes in the list of direct competitors to be provided to Executive promptly after such review; (ii) in any other 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 individual who was employed by the Company or any of its affiliates during the term of Executive's employment with the Company.  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.  During the Term:

(a)    Either the Company or Executive may terminate his employment at any time for any reason upon written notice to the other.  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's employment shall also terminate (i) upon the death of Executive or (ii) after Disability of Executive pursuant to Section 7 hereof.

(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) material breach by Executive of this Agreement not cured within 15 days after written notice to Executive by the Company, (B) a material breach of Executive's duty of loyalty to the Company or its affiliates not cured within 15 days after written notice to Executive by the Company, 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; 

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(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 felony or other crime involving moral turpitude; 

(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 three (3) consecutive days, without consent from the Company prior to the expiration of the three (3) day period; 

(v)  Executive's failure to take action or to abstain from taking action, as directed in writing by a member of the Board or a higher ranking executive of the Company or CNO, 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 Executive believes in good faith would be a violation of applicable law or where Executive acts (or refrains from taking action) in good faith in accordance with directions of a member of the Board or higher ranking executive but was unable to attain the desired results because such results were inherently unreasonable or unattainable.

(c)    The Company may terminate Executive's employment in a Control Termination.  A "Control Termination" shall mean any termination by the Company (or its successor) of Executive's employment for any reason within six months in anticipation of or within two years following a Change in Control.

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 

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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 or the board of directors of the Company's 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 (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; or 
(iii) the consummation of a merger, consolidation or reorganization with or into the Company 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 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, following a transaction, 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)    At Executive's option, he may terminate employment with the Company "With Reason" provided one or more of the following conditions are met: (i) any material diminution in the nature or scope of Executive's authority, duties or responsibilities (other than as a result of a going private transaction); (ii) any reduction in Executive's Base Salary or Target Bonus without his consent; (iii) Executive is required to locate more than 50 miles from the Company's offices in Carmel, Indiana or Chicago, Illinois, without Executive's consent; (iv) Executive is required to report to anyone other than the Board; or (v) there is a "Change in Control" as defined in Section 10(c) 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 Board or outstanding securities entitled to vote with respect to the Board fails to affirm and guarantee the Company's current and future obligations under this Agreement; provided that the events described in clauses (i) - (v) above shall constitute With Reason only if the Company fails to cure such event (if capable of being cured) within 30 days after receipt from Executive of written notice of the event which constitutes With Reason; provided, further, that With Reason shall cease to exist for an event on the 60th day following the 

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later of its occurrence or Executive's knowledge thereof, unless Executive has given the Company written notice thereof prior to such date.
		
	 . 
	(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 or With Reason.

		
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	Payments Following Termination.

(a)    In the event that Executive's employment is terminated by the Company for Just Cause or if Executive voluntarily resigns, then (i) the Company within 10 business days shall pay Executive a cash payment of his Base Salary as provided in Section 5(a) hereof that was earned but unpaid as of the date of termination (the “Termination Date”) and (ii) no bonus for the year of termination will be earned or paid to Executive.  All stock options, restricted stock and/or other awards held by Executive on the Termination Date shall be treated in accordance with the applicable award agreements. 

(b)    In the event Executive's employment is terminated by the death of Executive, then the Company shall pay Executive's estate within 30 days (i) the Accrued Amounts and (ii) a pro-rata portion of the Target Bonus for the year in which his death occurs.  All stock options, restricted stock and/or other awards held by Executive on the Termination Date shall be treated in accordance with the applicable award agreements.

(c)    In the event that Executive is terminated by the Company without Just Cause (and other than a termination due to expiration of the Term, death, Disability or a Control Termination) or by Executive With Reason, then the Company shall pay Executive within 30 days of the Termination Date (i) the Accrued Amounts and (ii) a cash lump sum equal to the sum of his annual Base Salary and Target Bonus.  Additionally, following such a termination, Executive shall be entitled to receive a bonus pursuant to Section 5(b) based on the Company's actual performance for the year in which Executive is terminated (prorated for the partial year period ending on the Termination Date), payable at the same time when such bonus amount normally would have been paid pursuant to Section 5(b).  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 (“Welfare Benefits”) until the earliest of (A) 12 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 on the Termination Date shall be treated in accordance with the applicable award agreements. 

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(d)    In the event that Executive is terminated by the Company (or its successor) in a Control Termination as so defined, then the Company shall pay Executive within 30 days of the Termination Date (i) the Accrued Amounts and (ii) a cash lump sum equal to two times the sum of (A) his Target Bonus and (B) his annual Base Salary.  Additionally, following such a termination, Executive shall be entitled to receive (i) a bonus pursuant to Section 5(b) based on the Company's actual performance during the year in which Executive is terminated (prorated for the partial year period ending on the Termination Date).  Executive and his family shall be entitled to continued participation in all Welfare Benefits 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 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 upon the occurrence of the Change in Control shall be treated in accordance with the applicable award agreements.   

(e)    Notwithstanding anything to the contrary, payment of any severance under this Agreement is conditioned upon the execution by Executive of a separation and release agreement in a form acceptable to the Company and the observation of such waiting or revocation periods, if any, before and after execution of the agreement by Executive as are required by law, such as, for example, the waiting or revocation periods required for a waiver and release to be effective with respect to claims under the Age Discrimination in Employment Act, provided that the Company delivers to Executive such agreement within seven days of the Termination Date.

12.    Character of Termination Payments.  The amounts payable to Executive 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 during the Term.  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.

13.    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, 

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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.

14.    Arbitration of Disputes; Injunctive Relief.

(a)    Arbitration.  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 selection 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.  All reasonable costs and expenses (including fees and disbursements of counsel) incurred by Executive pursuant to this Section 14 shall be paid on behalf of or reimbursed to Executive promptly by the Company; provided, however, that in the event the Company prevails in such proceedings, Executive shall immediately repay all such amounts to the Company.

(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.  

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15.    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 its General Counsel, in the case of the Company.

16.    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.

17.    Entire Agreement.  Other than any equity award agreements entered into pursuant to the CNO Amended and Restated Long-Term Incentive Plan or any subsequent incentive 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 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, and upon termination of Executive's employment with the Company Executive will not be entitled to receive any severance or other payments beyond those specified in this Agreement.  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.

18.    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.

19.    Indemnification.  If Executive was or is made a party or is threatened to be made a party to or is otherwise involved (including involvement as a witness) in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he is or was an officer or employee of the Company or any of its affiliates, Executive shall be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by Executive in connection therewith and such indemnification shall continue as to Executive if he ceases to be an officer or employee and shall inure to the benefit of Executive's heirs, executors and administrators; provided, however, that the Company shall indemnify Executive in connection with a proceeding (or part thereof) initiated by Executive only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Company.  The right to indemnification conferred in this paragraph shall include the obligation of the Company to pay the expenses incurred in defending any such proceeding in advance of its final disposition (an “Advance of Expenses”); provided, however, that, if and to the extent that the Delaware General Corporation 

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Law requires, an Advance of Expenses incurred by Executive in his capacity as an officer or employee shall be made only upon delivery to the Company of an undertaking, by or on behalf of Executive, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Executive is not entitled to be indemnified for such expenses under this paragraph or otherwise.

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.Section 409A.  This Agreement is intended to comply with Section 409A of the Code and will be interpreted accordingly.  References under this Agreement to Executive's termination of employment shall be deemed to refer to the date upon which Executive has experienced a “separation from service” within the meaning of Section 409A of the Code.  Notwithstanding anything herein to the contrary, (i) if at the time of Executive's separation from service with the Company Executive is a “specified employee” as defined in Section 409A of the Code (and any related regulations or announcements thereunder) and the deferral of the commencement of any payments or benefits otherwise payable hereunder or payable under any other compensatory arrangement between Executive and the Company or any of its affiliates as a result of such separation from service is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six months following Executive's separation from service (or the earliest date as is permitted under Section 409A of the Code), at which point all payments deferred pursuant to this Section 21 shall be paid to Executive in a lump sum and (ii) if any payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner that does not cause such an accelerated or additional tax.  To the extent any reimbursements or in-kind benefits due to Executive under this Agreement constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(l)(iv).  Additionally, to the extent that Executive's receipt of any in-kind benefits from the Company or its affiliates must be delayed pursuant to this Section 21 due to his status as a “specified employee,” Executive may elect to instead purchase and receive such benefits during the period in which the provision of benefits would otherwise be delayed by paying the Company (or its affiliates) for the fair market value of such benefits (as determined by the Company in good faith) during such period.  Any amounts paid by Executive pursuant to the preceding sentence shall be reimbursed to Executive as described above on the date that is six months following his separation from service.  Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A of the Code.  The Company shall consult with Executive in good faith regarding the implementation of the provisions of this Section 21, provided that neither the Company nor any of its employees or representatives shall have any liability to Executive with respect thereto.

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22.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.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written, effective as of the Effective Date.

COMPANY:
CNO FINANCIAL GROUP, INC.

/s/ Susan L. Menzel                                   
Susan L. Menzel
Executive Vice President, Human Resources

    
EXECUTIVE:

/s/ Edward J. Bonach                                 
Edward J. Bonach

13agreement.htm

 

 

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT AGREEMENT (this “Agreement”), dated as of July 27, 2011 by and among Greenlight Capital Re, Ltd. (the “Company”), Greenlight Reinsurance, Ltd. (the “Subsidiary”, and together with the Company, the “Employer”) and Barton Hedges (“Executive”).

 

WHEREAS, the Subsidiary previously entered into an amended and restated employment agreement with Executive dated as of December 30, 2008 (the “Prior Agreement”) pursuant to which the Executive serves as the President and Chief Underwriting Officer of the Subsidiary; and

 

WHEREAS, the Employer desires retain the services of Executive as CEO of each of the Company and the Subsidiary (the “CEO”) as of the August 15, 2011 (the “Effective Date”) and Executive desires to be employed by the Employer in such capacity as of the Effective Date; and

 

WHEREAS, the parties hereto desire that this Agreement automatically supersede the Prior Agreement on August 15, 2011.

 

NOW, THEREFORE, IN CONSIDERATION of the premises and the mutual covenants set forth below, the parties hereby agree as follows:

 

1. Employment.  The Employer hereby agrees to employ Executive as the CEO, and Executive hereby accepts such employment, on the terms and conditions hereinafter set forth.

 

2. Employment Period.  The period of employment of Executive by the Company under this Agreement (the “Employment Period”) shall commence on the Effective Date and shall continue until terminated by the Employer or the Executive in accordance with Section 6 of this Agreement.  Executive’s employment shall at all times be “at will” and not for a definite duration, and nothing contained herein shall confer upon Executive any contractual right to continued employment.

 

3. Position and Duties.  During the Employment Period, Executive shall serve as CEO and shall report directly to the Board of Directors of the Company (the “Board”). Executive shall have those powers and duties normally associated with the position of CEO of entities comparable to the Employer and such other powers and duties as may be prescribed by the Board; provided that, such other powers and duties are consistent with Executive’s position as CEO and do not violate any applicable laws or regulations.  Executive shall perform his duties to the best of his abilities and shall devote all of his working time, attention and energies to the performance of his duties for the Employer.  During the Employment Period, it is anticipated that Executive shall also serve as a member of the Board for no additional compensation, subject to his continued election to serve on the Board by the Company’s shareholders.  If requested by the Board, Executive shall also serve as an officer and/or director of other subsidiaries or affiliates of the Employer for no additional compensation.

 

4. Place of Performance.  The Employer’s principal place of business is the Cayman Islands.  Executive shall be required to maintain a residence in the Cayman Islands as necessary to perform his duties hereunder.  During the Employment Period, Executive shall comply with all Company policies, as may be amended from time to time, including, without limitation, conducting the business affairs of the Employer such that neither entity is deemed to be engaging in a trade or business within the United States.

 

5. Compensation and Related Matters.

 

(a) Base Salary and Bonus.  During the Employment Period, the Subsidiary shall pay Executive a base salary at the rate of not less than US $500,000 per year (“Base Salary”).  Executive’s Base Salary shall be paid in equal installments in accordance with the Subsidiary’s customary payroll practices.  The Board shall periodically review Executive’s Base Salary for increase (but not decrease), consistent with the compensation practices and guidelines of the Subsidiary.  If Executive’s Base Salary is increased by the Board, such increased Base Salary shall then constitute the Base Salary for all purposes of this Agreement.  In addition to Base Salary, during the Employment Period, Executive shall be eligible for an annual bonus based on pre-established individual and Company performance metrics established by the Board (the “Bonus”).  Executive shall be eligible to receive a discretionary Bonus with a target of 100% of Base Salary.  Any Bonus earned during a calendar year shall be paid in accordance with the bonus payment provisions of the Company’s applicable compensation plan (the “Compensation Plan”), as amended from time to time, and shall be subject to such other terms and conditions as are set forth therein.

 

(b) Expenses.  During the Employment Period, the Subsidiary shall promptly reimburse Executive for all reasonable out-of-pocket expenses incurred by Executive in the ordinary course of the Employer’s business and properly incurred and reported to the Subsidiary in accordance with its expense reimbursement policies and procedures. Notwithstanding anything herein to the contrary or otherwise, except to the extent any expense, reimbursement or in-kind benefit provided pursuant to this Section 5(b) does not constitute a “deferral of compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) : (i) the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive during any calendar year will not affect the amount of expenses eligible for reimbursement or in-kind benefits provided to Executive in any other calendar year, (ii) the reimbursements for expenses for which Executive is entitled to be reimbursed shall be made on or before the last day of the calendar year following the calendar year in which the applicable expense is incurred and (iii) the right to payment or reimbursement or in-kind benefits hereunder may not be liquidated or exchanged for any other benefit.

 

(c) Vacation.  During the Employment Period, Executive shall be entitled to five (5) weeks of paid vacation per year to be used and accrued in accordance with the Employer’s policies as they may be established from time to time.  In addition to vacation, Executive shall be entitled to the number of sick days, personal days and national holidays per year to which other senior executive officers of the Employer with similar tenure are entitled under the Employer’s policies, but in no event less than the minimum days mandated by Cayman Islands statutory requirements.

 

(d) Welfare and Pension Plans; Tax Preparation. During the Employment Period, Executive shall be entitled to participate in such employee benefit plans and insurance programs offered by the Employer (including, without limitation, the Subsidiary’s statutory pension plan), or which it may adopt from time to time, for its employees, in accordance with Cayman Islands Laws and regulations from time to time in force and in accordance with the eligibility requirements for participation therein.  In addition, during the Employment Period, the Subsidiary shall promptly reimburse Executive for his reasonable expenses incurred in having an accountant assist and prepare his annual tax return (such reimbursements to be made in accordance with Section 5(b) above).

 

(e) Housing Allowance.  During the Employment Period, Executive shall be entitled to receive a Cayman Islands housing allowance of US $6,000 per month, payable no later than the end of the next succeeding calendar month after the month to which the payment relates.  Executive will be responsible for any taxes due on such allowance.

 

(f) Stock Options.

 

(i) As soon as practicable following the Effective Date, the Company will grant Executive a stock option (an “Option”) to acquire 100,000 shares of the Company’s Class A Ordinary Shares, $0.10 par value per share (“Shares”) at an exercise price per Share equal to the fair market value per Share as of the date of grant under such terms and conditions as provided for under the Company’s existing stock incentive plan (the “Plan”) which are not inconsistent with clauses (ii) and (iii) below.

 

(ii) The Options described herein shall be granted subject to the following terms and conditions:  (A) the Options shall be granted under and subject to the Plan; (B) the exercise price per Share subject to the Options shall be equal to the fair market value per Share as of the date of grant; (C) the Options shall be vested 25% on the date of grant and as to 25% of the Shares subject thereto on each of the first three anniversaries of the date of grant; provided, that, the Options shall cease to vest upon Executive’s termination of employment with the Employer; (D) the Options shall be exercisable for the ten (10) year period following the date of grant; provided, that, except as otherwise provided herein, upon Executive’s termination of employment with the Employer for any reason, any unvested portion of the Options shall automatically terminate and the vested portion of the Options shall remain exercisable for 90 days after Executive’s termination of employment with the Employer; and (E) the Options shall be evidenced by, and subject to, a stock option agreement whose terms and conditions are consistent with the terms hereof.

 

(iii) The Options shall provide that upon a termination of employment by the Employer for Cause (as defined below), the Options (whether or not vested) shall terminate.  Upon a termination of employment due to Executive’s death or Disability (as defined below), any unvested portion of the Options shall terminate and any vested portion shall remain exercisable for the remainder of its term.  Upon a termination of employment by the Employer without Cause or by Executive for Good Reason (as defined below), any unvested portion of the Options shall vest, and the Options (including the portion which becomes vested pursuant to this clause (iii)) shall remain exercisable for the remainder of their term.

 

(iv) Subject to Executive's continuing employment with the Employer on the relevant date of grant, for each year after 2011, on the third Nasdaq trading day following the Company’s release of earnings results for the quarterly periods ended on each of June 30, the Company shall grant Executive an additional Option as of such date with a Black-Scholes value of $500,000.  All Options granted pursuant to this Section 5(f)(iv) shall be subject to the same terms and conditions as provided in Section 5(f) (ii) – (iii) above.

 

(g) Equity Compensation. Executive shall be eligible to receive discretionary long-term incentive equity awards in accordance with Company practice.

 

6. Termination.  Executive’s employment hereunder may be terminated under the following circumstances:

 

(a) Death.  Executive’s employment hereunder shall terminate upon his death.

 

(b) Disability.  If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been substantially unable to perform his duties hereunder for an entire period of at least 90 consecutive days or 180 non-consecutive days within any 365-day period, the Employer shall have the right to terminate Executive’s employment hereunder for “Disability,” and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement.

 

(c) Cause.  The Employer shall have the right to terminate Executive’s employment for Cause, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement.  For purposes of this Agreement, “Cause” shall mean Executive’s (i) habitual drug or alcohol use which impairs the ability of Executive to perform his duties hereunder; (ii) conviction by a court of  competent jurisdiction, or plea of “no contest”  or guilty to a felony; (iii) engaging in fraud, embezzlement or any other willful misconduct with respect to the Employer or any of its affiliates (collectively, the “Group”); (iv) willfully violating the Restrictive Covenants set forth in Section 9 of this Agreement; (v) willfully failing or refusing to perform his duties hereunder (other than such failure caused by Executive’s Disability or while on vacation) after a written demand for performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has failed or refused to perform his duties; or (vi) breach of any material provision of this Agreement or any Group policies related to conduct which is not cured, if curable, within ten (10) days after written notice thereof.  The Employer shall have the right to suspend Executive with pay in order to investigate any event which it reasonably believes may provide a basis to terminate Executive’s employment for Cause and such action shall not give Executive Good Reason to terminate his employment.

 

(d) Good Reason.  Executive may terminate his employment with the Employer for “Good Reason” within thirty (30) days after Executive has knowledge of the occurrence, without Executive’s written consent, of one of the following events that has not been cured, if curable, within thirty (30) days after written notice thereof has been given by Executive to the Employer and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement.  “Good Reason” shall be limited to the following:  (i) any material and adverse change to Executive’s title or duties which is inconsistent with his duties set forth herein, (ii) a reduction of Executive’s Base Salary, (iii) a failure by the Employer to comply with any other material provisions of this Agreement, or (iv)  a Change in Control of the Company (as defined below).  For purposes of this Agreement, the term “Change in Control of the Company” means the occurrence of one of the following events: (i) any “person” or “group” becomes the “beneficial owner” (as such terms are used in Rule 13d-3 promulgated under the U.S. Securities Exchange Act of 1934, as amended, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 51% or more of the Shares (measured by voting power rather than number of Shares); provided, however, that an event described in this clause (i) shall not be deemed to be a Change in Control of the Company if any of following becomes such a beneficial owner: (A) any tax-qualified, broad-based employee benefit plan sponsored or maintained by the Employer or any other member of the Group, (B) any Company underwriter temporarily holding securities pursuant to an offering of such securities, or (C) any person or group pursuant to a Non-Qualifying Transaction (as defined in clause (ii)); or (ii) the Company consolidates or merges with or into any other person or group or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets and the assets of the Company’s direct and indirect subsidiaries (on a consolidated basis) to any other person or group, in either one transaction or a series of related transactions which occur within six months, other than a consolidation or merger or disposition of assets: (A) of or by the Company into or to a 100% owned subsidiary of the Company, or (B) pursuant to a transaction in which the outstanding Shares are changed into or exchanged for securities or other property with the effect that the beneficial owners of the outstanding Shares immediately prior to such transaction, beneficially own, directly or indirectly, at least a majority of the Shares (measured by voting power rather than number of shares) of the surviving corporation or the person or group to whom the Company’s assets are transferred immediately following such transaction (any transaction which satisfies the criteria specified in (A) or (B) above shall be deemed to be a “Non-Qualifying Transaction”).

 

(e) Without Cause.  The Employer shall have the right to terminate Executive’s employment hereunder without Cause at any time by providing Executive with a Notice of Termination and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.

 

(f) Without Good Reason.  Executive shall have the right to terminate his employment hereunder without Good Reason by providing the Employer with a Notice of Termination at least one hundred and eighty (180) days prior to such termination, and such termination shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.

 

7. Termination Procedure.

 

(a) Notice of Termination.  Any termination of Executive’s employment by the Employer or by Executive (other than termination pursuant to Section 6(a)) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13 of this Agreement.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

 

(b) Date of Termination.  “Date of Termination” shall mean (i) if Executive’s employment is terminated by his death, the date of his death, (ii) if Executive’s employment is terminated pursuant to Section 6(b), thirty (30) days after Notice of Termination (provided that Executive shall not have returned to the substantial performance of his duties on a full-time basis during such thirty (30) day period), (iii)  if Executive’s employment is terminated pursuant to Section 6(f), one hundred and eighty (180) days after Notice of Termination and (iv) if Executive’s employment is terminated for any other reason, the date on which a Notice of Termination is given or any later date that is within seventy-five (75) days after the giving of such notice as set forth in such Notice of Termination; provided, that, if applicable, the Notice of Termination shall not be effective until the cure period has expired and such event or events leading to such termination have not yet been cured.

 

8. Compensation Upon Termination.  In the event Executive’s employment is terminated other than due to the Executive’s death, the Subsidiary shall provide Executive with the payments set forth below and shall not be required to provide any other payments or benefits to Executive upon such termination.  Executive acknowledges and agrees that the payments set forth in this Section 8 constitute liquidated damages for termination of his employment and that prior to receiving any such payments under this Section 8, other than the Accrued Obligations (as defined below), and as a material condition thereof, Executive shall, if requested by the Employer, sign and agree to be bound by a general release of claims (a “Release”) against the Employer and its affiliates related to Executive’s employment (and termination of employment) with the Employer in such form as the Board reasonably determines; provided, that, if Executive should fail to execute such Release within 45 days following the later of (i) Executive’s Date of Termination or (ii) the date Executive actually receives an execution copy of such Release (which shall be delivered to Executive within ten (10) business days following his Date of Termination and if not timely delivered, this release condition will be deemed waived by the Company with respect to payments under this Section 8), the Subsidiary shall not have any obligations to provide the payments contemplated under this Section 8; provided further, that such release shall not limit, release or waive Executive’s right to indemnification as provided for under Section 11 of this Agreement or otherwise by law or contract and shall not impose additional restrictive covenants of the type provided for under Section 9 of this Agreement.  Upon Executive’s termination of employment for any reason, upon the request of the Board, he shall resign any membership or positions that he then holds with the Employer or any of its affiliates.

 

(a) Termination By the Employer without Cause or By Executive for Good Reason.  If Executive’s employment is terminated by the Employer without Cause or by Executive for Good Reason:

 

(i) the Subsidiary shall pay to Executive: (A) his (1) accrued, but unpaid Base Salary earned through the Date of Termination and any accrued, but unused vacation pay through the Date of Termination payable as soon as practicable following such termination, but in no event later than two and one half months following the Date of Termination, and (2) earned, but unpaid Bonus earned under the terms of the Compensation Plan for years prior to the year in which the Date of Termination occurs payable in accordance with the terms of such plan (collectively, the “Accrued Obligations”); (B) the target Bonus Executive would have earned for the year of termination assuming targets had been achieved, pro-rated based on the number of days Executive was employed by the Employer during the year over the number of days in such year (the “Pro-Rated Bonus”) payable as soon as practicable following such termination, but in no event later than two and one half months following the Date of Termination; and

 

(ii) commencing on the Severance Payment Date (as defined below) and provided Executive does not breach Section 9 of this Agreement following his termination in which case all payments under this clause (ii) shall cease, the Subsidiary pay to Executive an amount equal to the sum of his annual rate of Base Salary and target Bonus (assuming targets had been achieved) payable over twelve (12) months in substantially equal monthly installments (the “Severance Payment”).  For purposes of this Agreement, the “Severance Payment Date” shall mean the 60th day following the  Date of Termination.  Notwithstanding the foregoing, if the Board (or its delegate) determines in its discretion that severance payments due under this Section 8(a)(ii) are “nonqualified deferred compensation” subject to Section 409A of the Code and that Executive is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance issued thereunder, then such severance payments shall commence on the first payroll date following the six month anniversary of the Date of Termination (the “Specified Employee Severance Payment Date”) (with the first such payment being a lump sum equal to the aggregate severance payments Executive would have received during the prior six-month period if no such delay had been imposed).  In no event will the last installment payment be made later than December 31 of the year following the year in which such severance amounts are no longer subject to a substantial risk of forfeiture (within the meaning of Section 457A of the Code).  For purposes of this Agreement, whether Executive is a “specified employee” will be determined in accordance with the written procedures adopted by the Board which are incorporated by reference herein; and

 

(iii) the Subsidiary shall provide Executive, his spouse and his dependents with the health insurance benefits that they were receiving immediately prior to the Date of Termination (the “Continued Benefits”), for one year following the Date of Termination; provided, that, if the Subsidiary  is unable to continue the health insurance benefits following the Date of Termination, the Subsidiary shall pay Executive the cost of similar health insurance benefits, not to exceed the cost the Subsidiary would incur if Executive had continued to remain in the Subsidiary’s health plans, such payments to be made no later than the one year anniversary of the Date of Termination;

 

(iv) the Subsidiary shall promptly reimburse Executive pursuant to Section 5 for reasonable expenses incurred, but not paid prior to such termination of employment; and

 

(v) Executive shall be entitled to any other rights, compensation and/or benefits as may be due to Executive in accordance with the terms and provisions of any agreements, plans or programs of the Employer.

 

(b) Termination By the Employer for Cause or By Executive Without Good Reason.  If Executive’s employment is terminated by the Employer for Cause or by Executive (other than for Good Reason):

 

(i) the Subsidiary shall pay Executive, in accordance with the relevant payment provisions set forth in Section 8(a)(i), the Accrued Obligations;

 

(ii) the Subsidiary shall promptly reimburse Executive pursuant to Section 5 for reasonable expenses incurred, but not paid prior to such termination of employment; and

 

(iii) Executive shall be entitled to any other rights, compensation and/or benefits as may be due to Executive in accordance with the terms and provisions of any agreements, plans or programs of the Employer.

 

(c) Disability.  During any period that Executive fails to perform his duties hereunder as a result of incapacity due to physical or mental illness (“Disability Period”), Executive shall continue to receive his full compensation and benefits under this Agreement until his employment is terminated pursuant to Section 6(b), the cash portion of which shall be off-set, on a dollar for dollar basis, by any insurance or social security payments made to Executive relating to such disability.  In the event Executive’s employment is terminated for Disability pursuant to Section 6(b):

 

(i) the Subsidiary shall pay to Executive as soon as practicable following such termination, the Accrued Obligations and the Pro-Rated Bonus, in accordance with the relevant payment provisions set forth in Section 8(a)(i); and

 

(ii) commencing on the Severance Payment Date, the Subsidiary shall continue to pay Executive, in monthly installments, his annual rate of Base Salary for the lesser of (A) one year following the Date of Termination or (B) until such time as any Employer long-term disability benefit plan becomes available to Executive.  Notwithstanding the foregoing, if the Board (or its delegate) determines in its discretion that payments due under this Section 8(c)(ii) are “nonqualified deferred compensation” subject to Section 409A of the Code and that Executive is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and the regulations and other guidance issued thereunder, then such payments shall commence on the Specified Employee Severance Payment Date (with the first such payment being a lump sum equal to the aggregate severance payments Executive would have received during the prior six-month period if no such delay had been imposed).  In no event will the last installment payment be made later than December 31 of the year following the year in which such severance amounts are no longer subject to a substantial risk of forfeiture (within the meaning of Section 457A of the Code); and

 

(iii) the Subsidiary shall provide Executive, his spouse and his dependents with the Continued Benefits for the lesser of (A) one year following the Date of Termination or (B) until such time as any Employer long-term disability benefit plan becomes available to Executive; provided, that, if the Subsidiary  is unable to continue the health insurance benefits following the Date of Termination, the Subsidiary shall pay Executive the cost of similar health insurance benefits, not to exceed the cost the Subsidiary would incur if Executive had continued to remain in the Subsidiary’s health plans, such payments to be made no later than the one year anniversary of the Date of Termination; and

 

(iv) the Subsidiary shall promptly reimburse Executive pursuant to Section 5 for reasonable expenses incurred, but not paid prior to such termination of employment; and

 

(v) Executive shall be entitled to any other rights, compensation and/or benefits as may be due to Executive in accordance with the terms and provisions of any agreements, plans or programs of the Employer.

 

(d) Death.  If Executive’s employment is terminated by his death:

 

(i) the Subsidiary shall pay to Executive’s beneficiary, legal representatives or estate, as the case may be, the Accrued Obligations and Pro-Rated Bonus, in accordance with the relevant payment provisions set forth in Section 8(a)(i); and

 

(ii) the Subsidiary shall promptly reimburse Executive’s beneficiary, legal representatives, or estate, as the case may be, pursuant to Section 5 for reasonable expenses incurred, but not paid prior to such termination of employment; and

 

(iii) Executive’s spouse and dependents shall be entitled to continue receiving health insurance benefits that they were receiving as of the Date of Termination for one (1) year following Executive’s death; provided, that, if the Subsidiary is unable to continue the health insurance benefits following the Date of Termination, the Subsidiary shall pay Executive’s spouse and dependents the cost of similar health insurance benefits, not to exceed the cost the Company would incur if Executive had continued to remain in the Subsidiary’s health plans, such payments to be made no later than the one year anniversary of the Date of Termination; and

 

(iv) Executive’s beneficiary, legal representatives or estate, as the case may be, shall be entitled to any other rights, compensation and benefits as may be due to any such persons or estate in accordance with the terms and provisions of any agreements, plans or programs of the Employer.

 

9. Restrictive Covenants.

 

(a) Acknowledgments.  Executive acknowledges that:  (i) as a result of Executive’s employment by the Employer, Executive has obtained and will obtain Confidential Information (as defined below); (ii) the Confidential Information has been developed and created by the Group at substantial expense and the Confidential Information constitutes valuable proprietary assets; (iii) the Group will suffer substantial damage and irreparable harm which will be difficult to compute if, during the Employment Period and thereafter, Executive should enter a Competitive Business (as defined herein) in violation of the provisions of this Agreement; (iv) the nature of the Group’s business is such that it could be conducted anywhere in the world and that it is not limited to a geographic scope or region; (v) the Group will suffer substantial damage which will be difficult to compute if, during the Employment Period or thereafter, Executive should solicit or interfere with the Group’s employees, clients or customers or should divulge Confidential Information relating to the business of the Group; (vi) the provisions of this Agreement are reasonable and necessary for the protection of the business of the Group; (vii) the Employer would not have hired or continued to employ Executive and the Company would not have granted the Options unless he agreed to be bound by the terms hereof; and (viii) the provisions of this Agreement will not preclude Executive from other gainful employment.  “Competitive Business” as used in this Agreement shall mean any business which competes, directly or indirectly, with any aspect of the Group’s business.  “Confidential Information” as used in this Agreement shall mean any and all confidential and/or proprietary knowledge, data, or information of the Group including, without limitation, any: (A) trade secrets, drawings, inventions, methodologies, mask works, ideas, processes, formulas, source and object codes, data, programs, software source documents, works of authorship, know-how, improvements, discoveries, developments, designs and techniques, and all other work product of the Group, whether or not patentable or registrable under trademark, copyright, patent or similar laws; (B) information regarding plans for research, development, new service offerings and/or products, marketing, advertising and selling, distribution, business plans, business forecasts, budgets and unpublished financial statements, licenses, prices and costs, suppliers, customers or distribution arrangements; (C) any information regarding the skills and compensation of employees, suppliers, agents, and/or independent contractors of the Group; (D) concepts and ideas relating to the development and distribution of content in any medium or to the current, future and proposed products or services of the Group; (E) information about the Group’s investment program, trading methodology, or portfolio holdings; or (F) any other information, data or the like that is labeled confidential or orally disclosed to Executive as confidential.

 

(b) Confidentiality.  In consideration of the benefits provided for in this Agreement, Executive agrees not to, at any time, either during the Employment Period or thereafter, divulge, use, publish or in any other manner reveal, directly or indirectly, to any person, firm, corporation or any other form of business organization or arrangement and keep in the strictest confidence any Confidential Information, except (i) as may have been disclosed by the Executive in the good faith performance of his duties hereunder, (ii) with the Employer’s express written consent, (iii) to the extent that any such information is in or becomes in the public domain other than as a result of Executive’s breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other government process and in such event, Executive shall cooperate with the Employer in attempting to keep such information confidential.  Upon the request of the Employer, Executive agrees to promptly deliver to the Employer the originals and all copies, in whatever medium, of all such Confidential Information.

 

(c) Non-Compete.  In consideration of the benefits provided for in this Agreement, Executive covenants and agrees that during the Employment Period and for a period of six (6) months following the termination of his employment for whatever reason, or following the date of cessation of the last violation of this Agreement, or from the date of entry by a court of competent jurisdiction of a final, unappealable judgment enforcing this covenant, whichever of the foregoing is last to occur, he will not, for himself, or in conjunction with any other person, firm, partnership, corporation or other form of business organization or arrangement (whether as a shareholder, partner, member, principal, agent, lender, director, officer, manager, trustee, representative, employee or consultant), directly or indirectly, be employed by, provide services to, in any way be connected, associated or have any interest in, or give advice or consultation to any Competitive Business.

 

(d) Non-Solicitation of Employees. In consideration of the benefits provided for in this Agreement, Executive covenants and agrees that during the Employment Period and for a period of one (1) year thereafter, Executive shall not, without the prior written permission of the Employer, (i) directly or indirectly solicit, employ or retain, or have or cause any other person or entity to solicit, employ or retain, any person who is employed or is providing services to the Group at the time of his termination of employment or was or is providing such services within the twelve (12) month period before or after his termination of employment or (ii) request or cause any employee of the Group to breach or threaten to breach any terms of said employee’s agreements with the Group or to terminate his employment with the Group.

 

(e) Non-Solicitation of Clients and Customers.  In consideration of the benefits provided for in this Agreement, Executive covenants and agrees that during the Employment Period and for a period of one (1) year thereafter, he will not, for himself, or in conjunction with any other person, firm, partnership, corporation or other form of business organization or arrangement (whether as a shareholder, partner, member, lender, principal, agent, director, officer, manager, trustee, representative, employee or consultant), directly or indirectly:  (i) solicit or accept any business that is directly related to the business of the Group from any person or entity who, at the time of, or at the time during the twenty-four (24) month period preceding, termination was an existing or prospective customer or client of the Group; (ii) request or cause any of the Group’s clients or customers to cancel or terminate any business relationship with the Group involving services or activities which were directly or indirectly the responsibility of Executive during his employment or (iii) pursue any Group project known to Executive upon termination of his employment that the Group is actively pursuing (or was actively pursuing within six months of termination) while the Group is (or is contemplating) actively pursuing such project.

 

(f) Post-Employment Property. The parties agree that any work of authorship, invention, design, discovery, development, technique, improvement, source code, hardware, device, data, apparatus, practice, process, method or other work product whatever (whether patentable or subject to copyright, or not, and hereinafter collectively called “discovery”) related to the business of the Group that Executive, either solely or in collaboration with others, has made or may make, discover, invent, develop, perfect, or reduce to practice during the Employment Period, whether or not during regular business hours and created, conceived or prepared on the Group’s premises or otherwise shall be the sole and complete property of the Group.  More particularly, and without limiting the foregoing, Executive agrees that all of the foregoing and any (i) inventions (whether patentable or not, and without regard to whether any patent therefor is ever sought), (ii) marks, names, or logos (whether or not registrable as trade or service marks, and without regard to whether registration therefor is ever sought), (iii) works of authorship (without regard to whether any claim of copyright therein is ever registered), and (iv) trade secrets, ideas, and concepts ((i) - (iv) collectively, “Intellectual Property Products”) created, conceived, or prepared on the Group’s premises or otherwise, whether or not during normal business hours, shall perpetually and throughout the world be the exclusive property of the Group, as shall all tangible media (including, but not limited to, papers, computer media of all types, and models) in which such Intellectual Property Products shall be recorded or otherwise fixed.  Executive further agrees promptly to disclose in writing and deliver to the Employer all Intellectual Property Products created during his engagement by the Employer, whether or not during normal business hours.  Executive agrees that all works of authorship created by Executive during his engagement by the Employer shall be works made for hire of which the Group is the author and owner of copyright. To the extent that any competent decision-making authority should ever determine that any work of authorship created by Executive during his engagement by the Employer is not a work made for hire, Executive hereby assigns all right, title and interest in the copyright therein, in perpetuity and throughout the world, to the applicable Group entity.  To the extent that this Agreement does not otherwise serve to grant or otherwise vest in the Group all rights in any Intellectual Property Product created by Executive during his engagement by the Employer, Executive hereby assigns all right, title and interest therein, in perpetuity and throughout the world, to the Employer.  Executive agrees to execute, immediately upon the Employer’s reasonable request and without charge, any further assignments, applications, conveyances or other instruments, at any time after execution of this Agreement, whether or not Executive is engaged by the Employer at the time such request is made, in order to permit the Group and/or its respective assigns to protect, perfect, register, record, maintain, or enhance their rights in any Intellectual Property Product; provided, that, the Employer shall bear the cost of any such assignments, applications or consequences.   Upon termination of Executive’s employment with the Employer for any reason whatsoever, and at any earlier time the Employer so requests, Executive will immediately deliver to the custody of the person designated by the Employer all originals and copies of any documents and other property of the Employer in Executive’s possession, under Executive’s control or to which he may have access.

 

(g) Non-Disparagement. Executive acknowledges and agrees that he will not defame or publicly criticize the services, business, integrity, veracity or personal or professional reputation of the Group and its respective officers, directors, partners, executives or agents thereof in either a professional or personal manner at any time during or following the Employment Period.

 

(h) Enforcement.  If Executive commits a breach, or threatens to commit a breach, of any of the provisions of this Section 9, the Employer shall have the right and remedy to have the provisions specifically enforced by any court having jurisdiction, it being acknowledged and agreed by Executive that the services being rendered hereunder to the Employer are of a special, unique and extraordinary character and that any such breach or threatened breach will cause irreparable injury to the Group and that money damages will not provide an adequate remedy to the Group.  Such right and remedy shall be in addition to, and not in lieu of, any other rights and remedies available to the Employer at law or in equity.  Accordingly, Executive consents to the issuance of an injunction, whether preliminary or permanent, consistent with the terms of this Agreement.  In addition, the Employer shall have the right to cease making any payments or provide any benefits to Executive under this Agreement in the event he breaches any of the provisions hereof (and such action shall not be considered a breach under the Agreement).

 

(i) Blue Pencil.  If, at any time, the provisions of this Section 9 shall be determined to be invalid or unenforceable under any applicable law, by reason of being vague or unreasonable as to area, duration or scope of activity, this Agreement shall be considered divisible and shall become and be immediately amended to only such area, duration and scope of activity as shall be determined to be reasonable and enforceable by the court or other body having jurisdiction over the matter and Executive and the Employer agree that this Agreement as so amended shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

 

(j) EXECUTIVE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS SECTION 9 AND HAS HAD THE OPPORTUNITY TO REVIEW ITS PROVISIONS WITH ANY ADVISORS AS HE CONSIDERED NECESSARY AND THAT EXECUTIVE UNDERSTANDS THIS AGREEMENT’S CONTENTS AND SIGNIFIES SUCH UNDERSTANDING AND AGREEMENT BY SIGNING BELOW.

 

10. Resolution of Differences Over Breaches of Agreement.  The parties shall use good faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or the breach thereof, first in accordance with the Employer’s internal review procedures, except that this requirement shall not apply to any claim or dispute under or relating to Section 9 of this Agreement.  If despite their good faith efforts, the parties are unable to resolve such controversy or claim through the Employer’s internal review procedures, then such controversy or claim shall be resolved by binding arbitration for resolution in New York, New York in accordance with the rules and procedures of the Employment Dispute Resolution Rules of the American Arbitration Association then in effect.  The decision of the arbitrator shall be final and binding on both parties, and any court of competent jurisdiction may enter judgment upon the award.  Each party shall pay its own expenses, including legal fees, in such dispute and shall split the cost of the arbitrator and the arbitration proceedings.

 

11. Indemnification.  The Employer agrees that if Executive is made a party or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Executive is or was a director or officer of the Employer or any other entity within the Group or is or was serving at the request of the Employer or any other member of the Group as a director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise (each such event, an “Action”), Executive shall be indemnified and held harmless by the Employer to the fullest extent permitted by applicable law and authorized by the Company’s or the Subsidiary’s by-laws and/or charter, as the same exists or may hereafter be amended, against all expenses incurred or suffered by Executive in connection therewith, except for willful misconduct or any acts (or omissions) of gross negligence by Executive.

 

12. Successors; Binding Agreement.  The rights and benefits of Executive hereunder shall not be assignable, whether by voluntary or involuntary assignment or transfer by Executive.  This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Employer, and the heirs, executors and administrators of Executive, and shall be assignable by the Employer to any entity acquiring substantially all of the assets of the Company and/or the Subsidiary, whether by merger, consolidation, sale of assets or similar transactions.

 

13. Notice.  For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered either personally or by overnight, certified or registered mail, return receipt requested, postage prepaid, addressed, in the case of Executive, to the last address on file with the Employer and if to the Employer, to its executive offices or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

14. Governing Law.  This Agreement is governed by, and is to be construed and enforced in accordance with, the laws of the State of New York without regard to principles of conflicts of laws.  If, under such law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified or altered to conform thereto or, if that is not possible, to be omitted from this Agreement, and the invalidity of any such portion shall not affect the force, effect and validity of the remaining portion hereof.

 

15. Amendment.  No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification has been approved by the Board and is agreed to in a writing signed by Executive and a member of the Board (excluding Executive or any other member of the Board who is also an employee of the Employer), and such waiver is set forth in writing and signed by the party to be charged.  No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

 

16. Survival.  The respective obligations of, and benefits afforded to, Executive and the Employer as provided in Section 9 and Section 11 of this Agreement shall survive the termination of this Agreement.

 

17. No Conflict of Interest.  During the Employment Period, Executive shall not, directly or indirectly, render service, or undertake any employment or consulting agreement with another entity without the express written consent of the Board.

 

18. Counterparts.  This Agreement may be executed in two or more-counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

 

19. Entire Agreement.  This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto in respect of such subject matter.  Any prior agreement of the parties hereto in respect of the subject matter contained herein, including, without limitation, the Prior Agreement, is hereby terminated and canceled as of the Effective Date.

 

20. Section Headings.  The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.

 

21. Withholding.  All payments hereunder shall be subject to any required withholding of Federal, state and local taxes pursuant to any applicable law or regulation.

 

22. Representation.  Executive represents and warrants to the Employer, and Executive acknowledges that the Employer has relied on such representations and warranties in employing Executive, that neither Executive’s duties as an employee of the Employer nor his performance of this Agreement will breach any other agreement to which Executive is a party, including without limitation, any agreement limiting the use or disclosure of any information acquired by Executive prior to his employment by the Employer.  In the course of performing  Executive’s work for the Employer, Executive will not disclose or make use of any information, documents or materials that Executive is under any obligation to any other party to maintain in confidence.  In addition, Executive represents and warrants and acknowledges that the Employer has relied on such representations and warranties in employing Executive, that he has not entered into, and will not enter into, any agreement, either oral or written, in conflict herewith.  If it is determined that Executive is in breach or has breached any of the representations set forth herein, the Employer shall have the right to terminate Executive’s employment for Cause.

 

23. Section 409A of the Code.

 

(a) It is the intent of the parties to this Agreement that no payments under this Agreement be subject to the additional tax on deferred compensation imposed by Section 409A of the Code.  To the extent that the parties determine that Executive would be subject to the additional 20% tax imposed on certain deferred compensation arrangements pursuant to Section 409A of the Code as a result of any provision of this Agreement, then the applicable provisions of Code Section 409A shall supersede such provision herein and such provision shall be deemed amended in the manner that, in the parties’ judgment, fulfills the intent of the parties and avoids application of such additional tax, and the parties hereby agree to promptly execute any amendment reasonably necessary to implement this Section 23. Notwithstanding the foregoing, the Employer does not guarantee that any payment hereunder complies with or is exempt from Section 409A of the Code, and neither the Employer, nor its executives, directors, officers, or affiliates shall have any liability with respect to any failure of any payments or benefits herein to comply with or be exempt from Section 409A of the Code. 

 

(b) Except as otherwise specifically provided, amounts payable under this Agreement, other than those expressly payable on a deferred or installment basis, will be paid as promptly as practicable after earned or vested and, in any event, within two and one-half (21⁄2) months after the end of the first calendar year in which such amounts are no longer subject to a substantial risk of forfeiture, as such term is defined in Section 409A of the Code.

 

(c) Each payment made under this Agreement will be treated as a separate payment for purposes of Section 409A of the Code and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments.

 

(d) To the extent required by Section 409A of the Code, “termination of employment” (or any similar terms) shall mean “separation from service” (as defined in Treasury Regulations Section 1.409A-1(h) and the default presumptions thereof).

 

(e) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A of the Code, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, and (iii) such payments shall be made on or before the last day of Employee’s taxable year following the taxable year in which the expense was incurred.

 

(f) In no event will Employee be permitted to elect the year of payment with respect to any compensation payable hereunder.

 

24. Review by Counsel.  Executive represents and warrants that this Agreement is the result of full and otherwise fair faith bargaining over its terms following a full and otherwise fair opportunity to have legal counsel for Executive review this Agreement and to verify that the terms and provisions of this Agreement are reasonable and enforceable.  Executive acknowledges that he has read and understands the foregoing provisions and that such provisions are reasonable and enforceable.  This Agreement has been jointly drafted by both parties.

 

[SIGNATURE PAGE FOLLOWS]

  

  

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

GREENLIGHT CAPITAL RE, LTD.

By:    /s/ Ian M Isaacs                                                                 

Name: Ian M. Isaacs

Title: Director

GREENLIGHT REINSURANCE, LTD.

By:   /s/ Ian M Isaacs                                                                                                                              

Name: Ian M. Isaacs

Title: Director

/s/ Barton Hedges     

    Barton Hedges

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