CORNETT EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into by and
between AMERICAN CAPITOL INSURANCE COMPANY ("Employer"), a Texas life
insurance company, and JOHN D. CORNETT ("Employee"), an individual resident
of Houston, Harris County, Texas.
1. Employment. Employer hereby employs Employee to perform the duties
and render the services hereinafter set forth and Employee hereby accepts
said employment and agrees to perform and render said duties and services
faithfully and diligently, all upon the terms and conditions and for the
term hereinafter set forth.
2. Duties. During the term of this Agreement, Employee will, during
customary working hours, devote his full time and attention and give his
best efforts and skill exclusively to the business, progress, success,
profit, advantage, benefit and interests of Employer and its parent,
subsidiary and/or affiliated corporations in the capacity of President,
Chief Operating Officer and a director of Employer, and shall diligently
perform such tasks and services as from time to time may be assigned to him
by the Board of Directors of the Employer or the Executive Committee of
such Board, or as may be specified in the Bylaws of Employer, or other
reasonable duties all of which duties, tasks, and/or services shall be such
as are usually considered to be within the scope of the position for which
he is employed or to which he may be assigned.
3. Term. The term of Employee's employment under this Agreement is three
years and six months, commencing April 1, 2000, and ending September 30,
2003, subject, however, to termination upon the occurrence of any of the
events specified in Section 8, 9 or 10 of this Agreement.
4. Compensation. As compensation for all services to be rendered by
Employee in any capacity hereunder, including services as a director or
officer of any parent, subsidiary, or affiliate of Employer as may be
properly designated or requested by Employer, Employer shall pay to
Employee a salary in equal semimonthly installments at an annual rate of
One Hundred Forty Five Thousand Dollars ($145,000.00) per year, effective
May 1, 2000.
5. Expenses. In addition to his base salary as provided in paragraph 4,
Employee shall be reimbursed for any and all reasonable costs and expenses
incurred by Employee in performance of his services and duties as specified
in this Agreement, including, but not limited to, business expenses
incurred in connection with travel and entertainment if, and only if, such
expenses are of a type deductible, in whole or in part, by Employer for
federal income tax purposes pursuant to the Internal Revenue Code of 1986,
as amended, and are otherwise within the travel and entertainment expense
guidelines published, from time to time, by Employer for its executive
officers and employees.
6. Employee Benefit Plans and Practices. During the term of this
Agreement, Employee shall have the right to participate in each of
Employer's benefit plans available to employees of Employer on terms
commensurate with Employee's position and compensation level, and
consistent with the terms of such plans. Employee shall also be entitled
to reasonable vacations, holidays and sick leave, as provided to other
officers of Employer and commensurate with his position and length of
service with Employer.
7. Other Benefits. The compensation and other benefits agreed to be paid
to Employee by Employer in this Agreement shall not operate in any manner
as a limitation of any type upon or as a direction, express or implied,
against the exercise by the Board of Directors of Employer, of its power,
authority and discretion to grant bonuses or other additional direct or
indirect benefits or compensation to or on behalf of Employee if, in the
business judgment of such Board, such action is in the best interest of
Employer.
8. Employee's Disability or Death.
(a) (1) In the event Employee shall, during the term of this
Agreement, become physically or mentally disabled (as hereinafter defined),
and if such disability may be reasonably expected to continue for thirty
(30) days or more, or in fact does continue for such period, two-thirds of
the semi-monthly salary payment provided in Section 4 hereof shall be paid
to him so long as he shall remain disabled during the balance of the term
of this Agreement.
(2) For federal income tax purposes, all payments provided for in
this section, to the extent that they do not represent disability benefits
provided under an insurance policy premiums for which are paid by Employee,
are intended to be taxable to Employee and deductible by the Employer.
(3) Upon the return to full-time employment by the Employee with the
Employer within one hundred eighty (180) days from the date of inception of
disability, the Employee shall receive his full compensation commencing
with the first calendar month following his resumption of full-time
employment. If the period of disability continues beyond one hundred
eighty (180) days after the inception of disability and Employee is, in the
opinion of Employer's Medical Director, after consultation with Employee's
personal physician, unable to resume full-time employment with the
Employer, the Employer may, by notice in writing, terminate this Agreement
and the disability benefits specified in (1) above shall be paid through
the end of the term of this Agreement.
(4) For purposes of this paragraph 13, "full-time employment" shall
mean the amount of time and attention which is commensurate and necessary
to perform the functions an duties which Employee was performing at the
inception of disability.
(5) "Disability" shall mean the inability, either mental or physical,
to perform the necessary functions of the Employee's position of employment
with the Employer, by reason of the illness or incapacity of Employee.
Employee shall be deemed to be disabled for the purpose of this Agreement
if Employer's Medical Director, after consultation with a licensed
physician or physicians of Employee's choice, shall determine that
Employee, whether by reason of accident, illness or mental or physical
infirmity, is permanently no longer able to carry on with adequate vigor
and competence the duties assigned him under this Agreement. Such
determination shall be binding on Employer and Employee.
(b) Employer and Employee understand and agree that Employer carries
group disability insurance on behalf of Employee, premiums for which are
shared by Employer and Employee. As long as Employer maintains such
insurance coverage on behalf of Employee during the term of this Agreement,
Employee agrees to pay his share of the costs thereof at the same
proportional rate at which he is presently paying for such coverage. All
salary payments by Employer to Employee under this Section 8 shall be
reduced by the amount of any disability payments made to Employee during
the same period of disability and by reason of such disability from any
Employer plan then in effect and providing disability benefits.
Notwithstanding anything in this Section 8 to the contrary, any
determination of the disability of the Employee shall be made by the
carrier providing such disability insurance under the Employer plan then in
effect, and consistent with the definition of disability set forth in the
insurance policy funding such plan, and such determination will be binding
on Employer and Employee.
(c) In the event that Employee shall die during the term of this
Agreement, the Agreement shall terminate as of the last day of the calendar
month during which his death shall occur, and Employer shall pay to the
estate of Employee the compensation which would otherwise be payable to
Employee up to the end of the month in which his death occurs, and no
further payments hereunder will be due to the estate or heirs of Employee.
9. Termination Without Cause. This Agreement may be terminated without
cause by Employer or Employee as follows:
9.1 By Employer. Without cause, Employer may terminate this
Agreement at any time upon sixty (60) days written notice to Employee. If
the date of such termination is prior to October 1, 2002, Employee shall
receive a severance allowance equal to the base salary specified in
paragraph 4 of this Agreement, which shall be paid to him in equal semi-
monthly installments for a period of eighteen (18) months following such
termination. If the date of such termination by Employer occurs during the
term of this Agreement but on or after October 1, 2002, Employer shall be
obligated to continue to pay Employee his base salary specified in
paragraph 4 of this Agreement for the number of months remaining between
the date of such termination and the end of the term of this Agreement, or
a minimum of six (6) months, whichever is greater. Notwithstanding the
foregoing, if during such severance allowance period, Employee shall become
employed or otherwise receives any earnings (other than investment income),
Employee shall notify Employer of the same, and Employer shall reduce the
sums otherwise due Employee pursuant to this Section 9.1 by the amount of
such earnings. Beginning not later than 30 days following such
termination, Employee shall use reasonable efforts to become gainfully
employed or to be gainfully occupied so as to mitigate Employer's
obligation to Employee as set forth in this Section 9.1, provided, however,
Employee shall be under no obligation to seek out or accept any employment
or gainful occupation that is not commensurate with his experience or
profession. Any payments made by Employer to Employee under this Section
9.1 shall be in lieu of any other compensation or accrued vacation or other
benefits otherwise due Employee.
9.2 By Employee. Without cause, Employee may terminate this
Agreement upon thirty (30) days' written notice to Employer at any time on
and after April 1, 2003. In such event, Employee shall continue to render
his services at the option of Employer up to the effective date of
termination and if such services are continued, he shall be paid his
regular compensation up to the date of his termination, but no severance
allowance shall be paid to him. Upon the payment of regular compensation
up to the effective date of his termination (and payment for accrued, but
unused vacation, if any), all obligations of Employer to Employee hereunder
shall be satisfied.
10. Termination for Cause. The Employer may terminate this Agreement at
any time for cause upon giving the Employee written notice of such
termination at least thirty (30) days prior to the date on which such
termination shall take effect. As used herein, "cause" shall mean any of
the following events:
(a) The Employee's conviction of, or plea of guilty or nolo
contendere to a felony or a crime involving moral turpitude; or
(b) Willful misconduct or a substantial neglect of duties which in
the judgment of the Employer's Board of Directors may adversely affect the
Employer; or
(c) Upon the Employee's failure to perform substantially all of the
services reasonably required of him pursuant to this Agreement for any
reason, other than Employee's sickness, disability, or absence for vacation
or personal or family emergency circumstances.
If the Employer terminates this Agreement pursuant to the provisions
of this Section, all salary and benefits due the Employee pursuant to this
Agreement shall be paid to Employee to the date of termination, and upon
such payment all obligations of Employer to Employee hereunder shall be
satisfied.
11. Disclosure of Information. Employee recognizes and acknowledges that
he will have access to certain confidential information and data of the
Employer and of corporations affiliated with Employer, and that such
information and data constitutes valuable, special and unique property of
the Employer. The Employee will not, during or after the term of this
Agreement, without the prior approval of the Board of Directors of
Employer, voluntarily disclose any such confidential information or data to
any person or firm, corporation, association or other entity, or use such
confidential information or data for any reason or purpose, otherwise than
for the benefit of Employer. As used herein, "confidential information and
data" means information disclosed to Employee or known by Employee as a
consequence of or through his employment by the Employer, not generally
known in the life and health insurance industry in which the Employer is
engaged, about the products, processes, systems and services of Employer
and its affiliated corporations, including, but not necessarily limited to,
computer programs and software, identities of and information concerning
companies or blocks of business that may be available for acquisition,
lists of policyholders and reinsurers, copies of insurance policies and
reinsurance agreements, information contained in accounting or actuarial
studies or reports performed by or at the request of Employer and its
affiliated corporations, and internal documents relating to company
policies, procedures, methods or positions. Upon termination of his
employment with the Company, all documents, records, notebooks, and similar
collections or compilations of such confidential information or data,
including all copies thereof, then in Employee's possession or in the
possession of third parties under the control of Employee, whether prepared
by him or others, will be delivered to the Employer by Employee. The
obligations of this Section shall not apply to confidential information and
data that: (i) at the time of Employee's employment by Employer was in the
public domain; (ii) is or becomes generally available in the public domain
other than pursuant to a breach by Employee of his obligations under this
Section; or (iii) Employee can show was acquired, or is acquired after the
date of this Agreement, from a third party and such third party did not
obtain such confidential information and data from any Employee of Employer
subject to or in violation of obligations similar to those set forth in
this Section.
12. Other Employment. During the term of this Agreement, Employee shall
not, without the prior written approval of Employer, seek out, engage in,
negotiate for or accept any employment, commercial activity or enterprise
or gainful occupation with any other employer, person or entity. Employee
shall promptly report to Employer in writing any offer of employment or
proposal that Employee enter into negotiations leading to an offer of
employment received by Employee from any other party. Notwithstanding
anything to the contrary herein contained, at any time on or after April 1,
2003, Employee may seek out, negotiate for and accept employment or gainful
occupation with any other employer, person or entity. If Employee accepts
such alternate employment or gainful occupation he shall provide to
Employer not less than one month advance written notice specifying the date
on which his employment with Employer shall terminate, and at the end of
such time, all obligations of Employer to Employee or Employee to Employer
hereunder shall terminate. During such period beginning on or after April
1, 2003, while making reasonable efforts to continue to perform his
responsibilities for Employer, Employee may devote such time in the office
or outside of the office of Employer, during or after regular office hours,
as may reasonably be appropriate to pursue alternate employment or gainful
occupation, and for such purpose he may make reasonable use of Employer's
facilities and secretarial assistance.
13. Other Permissible Activities. Notwithstanding any provision herein
contained, Employee shall not be prohibited from engaging in non-profit,
charitable or community activities, investing or trading in stocks or bonds
or other forms of passive investment for Employee's account or family
account, so long as such activities do not substantially interfere with
Employee's performance hereunder.
14. Purchase of Cornett Stock. Employer and Employee have entered into a
certain "Cornett Stock Purchase Agreement" dated April 1, 1997, which is
incorporated herein by reference thereto for all purposes, which shall
survive any termination of this Agreement as provided therein and be
separately enforceable by Employee in accordance with its terms.
15. Miscellaneous.
15.1 Notices. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed to be delivered three business days
after deposit in the United States mail, postage prepaid, certified or
registered mail, return receipt requested, addressed as follows:
If to Employer: American Capitol Insurance Company
10555 Richmond Avenue
Houston, Texas 77042
Attention: William F. Guest
If to Employee: John D. Cornett
10922 Burgoyne
Houston, Texas 77042
Notice given in any other manner shall be effective when received by the
addressee. The address for notice may be changed by notice given in
accordance with this provision.
15.2 Amendments. This Agreement and any attachments incorporated by
reference constitute the entire agreement between the parties and may not
be amended, supplemented, waived, or terminated except by written
instrument executed by the parties.
15.3 Waiver. No waiver of any provision of this Agreement shall
constitute a waiver of any other provision of this Agreement, nor shall
such waiver constitute a waiver of any subsequent breach of such provision.
15.4 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective successor and
assigns. Notwithstanding anything herein to the contrary, this Agreement
is not assignable by Employee.
15.5 Governing Law. The validity, construction, and enforcement of
this Agreement shall be governed by the laws of the State of Texas. In the
event of a dispute concerning this Agreement, the parties agree that venue
lies in a court of competent jurisdiction in Harris County, Texas.
15.6 Severability. If any provision of this Agreement is declared
unenforceable by a court of last resort, such declaration shall not effect
the validity of any other provisions of this Agreement.
15.7 Construction. The headings contained in this Agreement are for
reference purposes only and shall not affect this Agreement in any manner
whatsoever. Whenever required by the context, any gender shall include any
other gender, the singular shall include the plural, and the plural shall
include the singular.
15.8 Time for Performance. If the time for performance of any
obligation set forth in this Agreement falls on a Saturday, Sunday, a legal
holiday, or a day on which the offices of Employer are officially closed
for any reason, compliance with such obligation on the next business day
following such Saturday, Sunday or legal holiday shall be deemed
acceptable.
15.9 Counterparts. This Agreement may be executed in multiple and/or
separate counterparts, each of which shall be deemed an original but all of
which shall be deemed one instrument.
15.10 Authorization. The making and performance by Employer of this
Agreement have been duly authorized by all necessary corporate actions of
Employer, and the undersigned representative of Employer is fully empowered
and authorized to execute this Agreement on its behalf.
This Agreement is executed to be effective as of April 1, 2000.
EMPLOYER: EMPLOYEE:
AMERICAN CAPITOL INSURANCE COMPANY
By: /s/William F. Guest /s/John D. Cornett
--------------------------- ----------------------------
William F. Guest, Chairman John D. Cornett
