EXHIBIT 10.19
RETIREMENT
AGREEMENT
AMONG
XXXXX X. XXXXXXXX
AND
FORTIS, INC. AND FORTIS INSURANCE N.V.
This Agreement is made and entered into this 19th day of July, 1999
("Agreement") by and among Xxxxx X. Xxxxxxxx ("Xxxxxxxx"), Fortis, Inc.
("Fortis"), and Fortis Insurance N.V. ("Parent").
BACKGROUND.
Xxxxxxxx has served as the CEO of Fortis since its creation in 1979 and
will be 60 years old on April 30, 2000. Fortis is owned by Parent. Xxxxxxxx will
retire on July 31, 2000. In connection with such retirement, Fortis has agreed
to provide to Xxxxxxxx the payments and benefits set out in this Agreement.
Parent is entering into this Agreement to provide Xxxxxxxx with its guaranty of
performance by Fortis. Fortis and Parent have taken such corporate actions as
may be necessary to authorize the entering into of this Agreement.
AGREEMENT.
In consideration of the mutual promises and undertakings in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency whereof being hereby acknowledged, Fortis, Parent and Xxxxxxxx do
hereby agree as follows:
1. RETIREMENT. Xxxxxxxx shall retire from being an officer and employee of
Fortis on July 31, 2000. Xxxxxxxx shall cease being CEO on or before
April 30, 2000, but will continue as Chairman of the Board until July
31, 2000. Xxxxxxxx shall, upon termination of his employment with
Fortis, be entitled to all of the rights and benefits under all
existing Fortis plans and programs that are applicable to him, with the
additional provisions that are in this Agreement.
2. 1999 COMPENSATION. Xxxxxxxx shall receive base pay and shall
participate in bonus and other programs for 1999 in the amounts and on
the terms previously approved.
3. 2000 BASE PAY AND SHORT TERM BONUS. Xxxxxxxx shall receive a pro rata
share of a base salary of $800,000 per year from January 1, 2000
through July 31, 2000, along with participation in the short-term bonus
to that date for his services. The amount of such short-term bonus will
be one-third of the targeted amount of $800,000.
4. LONG TERM INCENTIVE PLAN ("LTIP"). Xxxxxxxx shall receive grants under
the LTIP through the cycle beginning January 1, 1999. The provisions in
this Agreement as applied to Xxxxxxxx shall prevail where they are
inconsistent with the terms of the LTIP. All grants to Xxxxxxxx under
the LTIP, including amounts previously deferred and any other amounts
vested in Xxxxxxxx under earlier long term plans (including
modifications
thereof) benefiting Xxxxxxxx, shall be fully vested and non forfeitable
on his retirement on July 31, 2000. The performance of Fortis through
1999, plus the targeted performance of Fortis (i.e. 1.0 performance
rating) for the years remaining under the open cycles through 2001,
shall be used to determine the amount of LTIP bonus that will be paid
to him within 15 days of July 31, 2000, subject to his election of any
deferrals under the LTIP. Amounts credited shall be based on the value
of share equivalents as of June 30, 2000. Fortis agrees that Xxxxxxxx
shall be permitted deferrals with respect to his participation in the
LTIP, including amounts previously deferred and any other amounts
vested in Xxxxxxxx under earlier long term plans (including
modifications thereof), benefiting Xxxxxxxx, under the following
principles:
- The deferred amount will be deemed invested in one or
more of the options permitted under the Fortis
qualified plans in accordance with procedures
comparable to those applicable to participants in
such plans, if selected by Xxxxxxxx.
- The deferral may, at Xxxxxxxx'x election, extend for
up to 5 years after the later of termination as an
employee and termination as a member of the Board of
Directors of Fortis, but not beyond a change in
control of Parent. Fortis shall establish reasonable
procedures allowing Xxxxxxxx and his successors and
beneficiaries (as the case may be) to change the
deferral elected for some or all of the amounts
deferred, which procedures shall be designed so as
not to jeopardize the tax effectiveness of the
deferral.
- Xxxxxxxx may, in addition and at any time, elect to
require a distribution of some or all of the amounts
deferred prior to the then scheduled deferral date,
subject to a discount of the greater of $100,000 or
10% of the value otherwise being distributed, which
discount Fortis will retain.
- An amount equal to the deferred amount will be put in
a trust for the benefit of Xxxxxxxx during the
deferral period after retirement. The trust will be
designed to prevent any portion of the amount from
being taxable to Xxxxxxxx until actually paid to
Xxxxxxxx.
- Fortis shall establish reasonable procedures,
including the procedures referred to above, for
implementing and managing the deferral program, which
procedures shall be subject to Xxxxxxxx'x approval,
which will not be unreasonably withheld; shall be
developed in consultation with Xxxxxxxx and shall be
designed so as not to jeopardize the tax
effectiveness of the deferral
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5. EURO-OPTIONS. No Euro-options will be granted to Xxxxxxxx in 2000. All
outstanding Euro-options previously granted to Xxxxxxxx shall vest in
Xxxxxxxx and become non-forfeitable on any termination of Xxxxxxxx'x
employment with Fortis. In addition, the Euro-option plan will be
amended to provide that all options granted under the plan will be
exercisable for 3 years after the later of retirement as an employee or
as a member of the Board of Directors of Fortis.
6. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("SERP"). Beginning on August 1,
2000, Xxxxxxxx shall receive a Joint and 100% Survivor Annuity in
accordance with terms of the SERP as currently in effect of $800,000
annually, less the amounts provided in Section 3.01(b), (c), and (d) of
the SERP Plan, with all other provisions of the SERP, including
Xxxxxxxx'x Joinder Agreement, being applicable to such payments;
provided that, in the event that Xxxxxxxx shall have died prior to
August 1, 2000 and his wife shall then survive, for the avoidance of
doubt, his wife shall receive the specified annuity beginning as of
August 1, 2000. In addition, after the annuity payments have commenced,
Xxxxxxxx or his wife, at any time, may elect to take a prompt lump sum,
actuarially determined as provided in the SERP, in place of the annuity
payments, and such lump sum payment shall be subject to a discount of
the greater of $100,000 or 10% of the lump sum value. Xxxxxxxx and his
wife shall be entitled to reasonable financial information about Fortis
to assist them in making a decision about a lump sum payment. The
provisions in this paragraph shall take precedence over the SERP and
Xxxxxxxx'x Joinder Agreement to the extent that the provisions are
inconsistent with the SERP or the Joinder Agreement, including the
election being made by this Agreement for Xxxxxxxx to have a Joint and
100% Survivor Annuity under the SERP rather than the current election
in the Joinder Agreement.
7. BOARD MEMBERSHIPS. Xxxxxxxx shall continue as a member of the Boards of
Directors of Fortis, the mutual funds managed by Fortis, the charitable
funds primarily supported by Fortis, and other such Fortis related
directorships as may be appropriate. Fortis intends to continue to seek
to elect Xxxxxxxx to such directorships for so long as is reasonable
and appropriate under the circumstances, but no longer than while
Fortis controls such entity or manages the mutual funds, and Xxxxxxxx
shall be entitled to the fees and expenses paid for directors that are
not employees of Fortis.
8. HEALTH BENEFITS. As generally now provided to retirees, Fortis shall
provide Xxxxxxxx and his wife with the right to participate in the
Fortis group insurance program fully and in the same manner as they
have participated while Xxxxxxxx was an employee until Xxxxxxxx and his
wife are 65, and Xxxxxxxx and his wife will be obligated to pay Fortis
the amounts that are customarily charged to Fortis retirees for
participating in the insurance program. Xxxxxxxx shall receive the same
benefits after age 65 as are provided to other Fortis retirees
similarly situated.
9. INSTALLMENT PAYMENTS, RELEASE AND NO COMPETE AGREEMENT. Fortis shall
pay to Xxxxxxxx, his designated beneficiary or his estate, 12 equal
quarterly payments in advance of $157,000 each, beginning on August 1,
2000 and two equal annual payments of $607,000 each, beginning on
August 1, 2003 and Xxxxxxxx shall agree to provide designated
consulting services and not to compete with Fortis for a designated
period,
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with such payments, such services and such non compete to be included
in a separate agreement between Fortis and Xxxxxxxx. In addition, as
have all participants in the SERP, Xxxxxxxx has agreed in the Joinder
Agreement to the SERP that the payment of the SERP payments is
contingent on his continuing not to compete with Fortis, as well as
certain other restrictions, for a period of one-year following
termination of his employment.
10. INDEMNIFICATION. Fortis shall provide to Xxxxxxxx the most complete
indemnity protection (including rights to advancement of expenses)
currently provided by the by-laws of Fortis with respect to the period
during which he is an officer or director of Fortis, and, for a period
of 6 years thereafter, Fortis shall keep in place a directors' and
officers' liability policy or policies covering Xxxxxxxx to the extent
such coverage is provided for other current or former senior executives
or directors of Fortis.
11. RELEASE.
(a) Xxxxxxxx forever releases Fortis, its parents,
subsidiaries and other affiliates and as to each of the foregoing
persons: (A) its agents; (B) its officers; (C) its employees; (D) its
directors; and (E) any trustee, administrator or officer of any benefit
or pension plan which is administered or operated in whole or in part
for the benefit of current or former employees of Fortis (other than
with respect to any payments to which Xxxxxxxx is entitled under any
benefit plan following execution of this Agreement), from and against
any and all claims, damages, and liabilities whatsoever, whether known
or unknown, absolute or contingent, accrued or unaccrued that he may
have as of the date of this Agreement, including but not limited to all
claims arising from or in any way connected with Xxxxxxxx'x employment
by Fortis and Xxxxxxxx'x termination from employment, but excluding any
claims, damages or liabilities associated with any breach by Fortis of
the terms of this Agreement or the Consulting, Non Compete and Payments
Agreement of even date herewith ("Special Agreement") or of Fortis
obligations to provide Xxxxxxxx with benefits or compensation that is
referred to in this Agreement or that is accrued, vested or earned as
of Xxxxxxxx'x termination of employment. This release includes but is
not limited to all claims of: (i) wrongful discharge, including claims
of retaliatory discharge; (ii) breach of contract; (iii) age
discrimination; (iv) disability/handicap discrimination; (v) violations
of the federal Employee Retirement Income Security Act; and (vi) any
claim based upon tort, equity or any violation of any state or federal
statute or municipal employment laws, regulations, executive orders or
other requirements. As a condition of any payments to be made by Fortis
under this Agreement, Xxxxxxxx agrees to execute a further release
identical in substance to the provisions of this Paragraph 11 as shall
be requested by Fortis effective on Xxxxxxxx'x termination of
employment date.
(b) Fortis, on behalf of itself and its subsidiaries,
hereby releases Xxxxxxxx from any claims, damages, and liabilities
whatsoever, whether known or unknown, absolute or contingent, accrued
or unaccrued as of the date of this Agreement (excluding any claims,
damages or liabilities associated with any breach by Xxxxxxxx of the
terms of this Agreement or the Special Agreement). Fortis agrees to
execute a further release
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identical in substance to the provisions of this Paragraph 11 as shall
be requested by Xxxxxxxx effective on Xxxxxxxx'x termination of
employment date.
12. EXTINGUISHMENT OF AGE DISCRIMINATION CLAIM. Xxxxxxxx acknowledges that
in addition to other claims arising out of his employment his execution
of this Agreement extinguishes any claim which Xxxxxxxx may have
against Fortis or its agents, officers, directors or employees under
the Federal Age Discrimination in Employment Act and any state or local
law which protects persons 40 years of age and older from age
discrimination.
13. CONSULTATION RIGHTS. Xxxxxxxx acknowledges that Xxxxxxxx has been
advised to consult with an attorney regarding this document; and
Xxxxxxxx further acknowledges that Xxxxxxxx may consult with the United
States Department of Labor, Equal Employment Opportunity Commission or
any state or local authority having jurisdiction over the matters
addressed in this Agreement in regard to this Agreement and the
releases contained in this Agreement. Xxxxxxxx further acknowledges
that Xxxxxxxx has been provided by Fortis with a full and ample
opportunity to present this Agreement to an attorney of Xxxxxxxx'x
choosing, and to the United States Department of Labor, the Equal
Employment Opportunity Commission or any state or local authority
having jurisdiction over the matters addressed in this Agreement.
Xxxxxxxx has consulted with an attorney, who has reviewed this
Agreement. Xxxxxxxx waives Xxxxxxxx'x rights to pursue any claim or
grievance through any of the aforesaid agencies (other than in regard
to enforcing Xxxxxxxx'x rights under this Agreement, under the Special
Agreement or referred to in this Agreement). If any agency or attorney
pursues any such claim or grievance on behalf of Xxxxxxxx and against
Fortis, or its agents, directors, shareholders, officers or employees,
Xxxxxxxx will instruct the agency and attorney to terminate and abandon
the claim or grievance.
14. RECEIPT OF AGREEMENT AND OPPORTUNITY FOR REVIEW. Xxxxxxxx acknowledges
that Xxxxxxxx has been apprised that he is legally entitled to consider
this Agreement for twenty-one (21) days before executing the Agreement.
Xxxxxxxx has reviewed and is satisfied with the terms of this Agreement
as executed and waives any further opportunity for review except as
provided in Paragraph 15.
15. REVOCATION OF AGREEMENT. Fortis acknowledges that Xxxxxxxx may cancel
this Agreement within seven (7) days after executing the Agreement.
This Agreement shall be final and binding unless revoked by Xxxxxxxx
within seven (7) days after execution. If Xxxxxxxx revokes this
Agreement under the terms of this Paragraph 15, this Agreement and the
Special Agreement shall be null and void and of no force or effect. In
the event Xxxxxxxx exercises this right to revoke this Agreement,
Xxxxxxxx shall notify Fortis's designated agent for this purpose, in
writing prior to the expiration of the seven (7) day period in
accordance with the notice provisions set forth in Paragraph 9 of the
Special Agreement.
16. PARENT'S GUARANTY. Parent has joined this Agreement to guarantee prompt
satisfaction of each and every obligation of Fortis to Xxxxxxxx and his
wife hereunder and under the
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agreements and plans benefiting Xxxxxxxx and his wife after Xxxxxxxx'x
retirement and such guaranty shall be unconditional, legally binding
and irrevocable.
17. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the state of New York, without regard for
any conflict of law principles that might make some other law
applicable. The provisions of this Agreement shall be deemed severable
and the invalidity or the enforceability of any one or more of the
provisions hereof shall not affect the validity and enforceability of
the other provisions hereof. This Agreement may be executed in any
number of counterparts, but all such counterparts shall constitute one
and the same instrument. This Agreement shall also be for the benefit
of Xxxxxxxx'x wife and shall be binding on the parties and their
respective heirs, beneficiaries, successors and assigns, except that no
party will be relieved of such party's obligations hereunder by virtue
of any transfer of the Agreement.
18. AGREEMENT TO ARBITRATE.
(a) Except as set forth in Paragraph 18(b), any claim,
controversy or dispute arising out of or relating to this Agreement, on
which an amicable understanding cannot promptly be reached, to the
maximum extent allowed by applicable law and irrespective of the type
of relief sought, shall be submitted to and resolved by arbitration,
and such arbitration shall be the sole remedy for such matter. Such
arbitration shall be heard and conducted in New York, New York and
shall be conducted expeditiously in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"), as
such rules shall be in effect on the date of delivery of demand for
arbitration, with the exception that the arbitrators may not award any
punitive or exemplary damages or any damages other than compensatory.
The prevailing party may be awarded costs and expenses, including
reasonable attorneys' fees. The award rendered by the arbitrators shall
be final, binding and non-appealable, and judgment upon such award may
be entered by any court having jurisdiction thereof.
(b) Any claims in equity pursuant to which a party is
seeking a temporary restraining order or an injunction may be pursued
in court.
19. SPECIAL PROVISIONS DEALING WITH TERMINATION OF XXXXXXXX'X EMPLOYMENT.
(a) If Xxxxxxxx'x employment with Fortis is terminated
prior to July 31, 2000 because of Xxxxxxxx'x death or disability,
because Fortis terminates such employment without Cause as hereinafter
defined, or for any other reason, other than voluntary termination of
employment by Xxxxxxxx or termination of Xxxxxxxx'x employment by
Fortis for Cause, all provisions of this Agreement shall apply to the
parties as if Xxxxxxxx had retired on July 31, 2000.
(b) If Xxxxxxxx'x employment with Fortis is terminated by
Xxxxxxxx voluntarily prior to July 31, 2000 or if Xxxxxxxx'x employment
is terminated by Fortis for Cause prior to July 31, 2000, Fortis shall
be entitled to elect to cancel this Agreement or to treat such
termination as a retirement by Xxxxxxxx as of July 31, 2000. If Fortis
elects to cancel this Agreement, it must act within 15 days of
Xxxxxxxx'x termination of employment by giving written notice to
Xxxxxxxx in the manner provided in the Special
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Agreement. A cancellation of this Agreement shall be deemed to be a
cancellation of the Special Agreement. A cancellation of this Agreement
means that all of its provisions will be of no further force and effect
and Xxxxxxxx shall be entitled to whatever other existing Fortis plans,
benefits and agreements that are applicable to Xxxxxxxx in accordance
with the terms thereof.
(c) "Cause" for purposes of this Agreement shall mean a
termination of Xxxxxxxx'x employment by Fortis due to his willful gross
act, or willful gross omission, in violation of his lawful obligations
to Fortis, including, without limitation, the following: Xxxxxxxx'x
conviction of a felony that is connected with or related to the
performance of his obligations as an employee of Fortis; the willful
perpetration by Xxxxxxxx of a gross fraud against or affecting Fortis;
or Xxxxxxxx'x willful participation in or willful allowance of the
commission by any of Xxxxxxxx'x subordinates of any act of commercial
bribery affecting or connected with Fortis or Xxxxxxxx'x duties to
Fortis; provided, however, Xxxxxxxx shall be given written notice of
any matter that Fortis believes is Cause and shall be given 30 days to
cure any such matter that Fortis considers Cause, and any such matter
that shall have been so cured shall no longer constitute Cause.
In witness whereof the parties hereto have duly executed this Agreement
the day and year first above written.
FORTIS, INC. FORTIS INSURANCE
HOLDING N.V.
/s/ J. XXXXX XXXXXXX /s/ X. X. XXXXXXXX
-------------------------- ------------------------
Authorized Officer Authorized Officer
/s/ XXXXX X. XXXXXXXX
--------------------------
XXXXX X. XXXXXXXX
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March 22, 2000
FORTIS
Solid partners, flexible solutions
Fortis Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000 XXX
Fortis Insurance X.X.
Xxxxxxxxxxxxxx 0
XX - 0000 XX XXXXXXX
XXXXX X. XXXXXXXX
Chairman &
Chief Executive Officer
FORTIS, INC.
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone
(000) 000-0000
Facsimile
(000) 000-0000
Dear Gentlemen:
Paragraph 4 of my Retirement Agreement dated July 19, 1999, provides that I may
defer some or all of my Long Term Incentive Plan earnings, that an amount equal
to the deferred portion of the LTIP will be put in a trust and that the deferred
amount will be deemed to be invested in the investment options permitted under
the Fortis qualified plans. I have elected to cause this deferral. However, it
has now been concluded that, as the investment options available in the
qualified plans are not available to the general public, it is not appropriate
to limit the deemed investments to those investment options.
In order to cure this defect, I would like to amend Paragraph 4 of my Retirement
Agreement to provide that the following investments will be the permissible
deemed investments of the deferred amount: (1) investments that are
substantially the same as the investment options permitted under the Fortis,
Inc. Employees' Uniform Profit Sharing Plan (or the successor of such plan), (2)
any investment product that is offered by Fortis, Inc. or any of its affiliates
to customers on a regular commercial basis, (3) split dollar life insurance and
loans related to such split dollar life insurance, and (4) any other publicly
traded investments.
-8-
I confirm that I will be entitled to receive for my LTIP deferred amount,
pursuant to Paragraph 4 of my Retirement Agreement, only the value of the
deferred amount, as such amount may increase or decrease based on the deemed
investment of such amount. In other words, I will bear the burden of bad
investments and have the benefit of good investments.
This request does not involve any economic cost or hardship to Fortis and
clarifies a previous ambiguity in the agreement. Therefore, I would very much
appreciate receiving a signed copy of this letter to confirm this change to my
Retirement Agreement.
Sincerely,
XXXXX X. XXXXXXXX
Chairman &
Chief Executive Officer
FORTIS, INC.
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telephone
(000)000-0000
Facsimile
(000)000-0000
/s/ XXXXX X. XXXXXXXX
-------------------------
Xxxxx X. Xxxxxxxx
Fortis Inc. Dated: 3/23/00
/s/ J. XXXXX XXXXXXX
-------------------------
Authorized Officer
Fortis, Insurance, N.V. Dated: 4/5/00
/s/ X. X. XXXXXXXX
-------------------------
Authorized Officer
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XXXXX X. XXXXXXXX
000 Xxxxxx Xxx. 00
Xxxxxxxxxxxxxx, XX 00000
Telephone (000) 000-0000
Facsimile (607) 397-8004
August 2, 2000
Fortis Inc.
Xxx Xxxxx Xxxxxxxxx Xxxxx,
00xx Xxxxx
Xxx Xxxx XX 00000 XXX
Fortis Insurance N.V.
Archimedeslaan 6
NL -- 3584 BA UTRECHT
Regarding: Amendment to Retirement Agreement dated July 19, 1999
Gentlemen:
Paragraph 4 of my Retirement Agreement dated July 19, 1999 provides that I may
defer some or all of my Long Term Incentive Plan earnings but not beyond a
change in control of Fortis Insurance N.V. My SERP, referred to in paragraph 6
of the Retirement Agreement, has been affected by the recent amendment to the
SERP plan to eliminate the provision requiring payment of a lump sum in the
event of a change in control as defined in the SERP plan. I am asking Fortis to
amend my Retirement Agreement with respect to the effect of a change in control
on the deferral of my LTIP benefits referred to in Paragraph 4 and my SERP
benefits referred to in Paragraph 6 in the manner provided in this letter.
If Fortis undergoes a change in control (as determined under the Fortis, Inc.
SERP) and, at any time after such change in control, the market capitalization
of the Person which obtains direct or indirect control of Fortis (or the
successor of such Person) is less than Twenty Billion United States Dollars for
a period of at least five (5) consecutive business days, then Fortis shall
distribute to Xxxxxxxx or his wife, as appropriate, the amounts due under his
SERP and his LTIP in a lump sum distribution, (i) in the case of the LTIP, no
later than ten (10) days following the date such final determination is made and
in accordance with the terms of the Rabbi Trust, and (ii) in the case of the
SERP, no later than thirty (30) days following the date such final determination
is made. Fortis shall notify Xxxxxxxx in writing as soon as practicable after a
change in control has occurred. Fortis shall notify Xxxxxxxx if it becomes aware
that the market capitalization of such Person has fallen below such minimum, or
be liable for any failure to do so.
If the Person that obtains direct or indirect control of Fortis (or the
successor of such Person) is not a business entity whose stock is publicly
traded on an established securities market, then (i) the words "fair market
value" shall be substituted for the words "market capitalization" in the
paragraph above and (ii) if Xxxxxxxx, his wife or any beneficiary notifies
Fortis in writing that information will not be reasonably available to determine
the fair market value of such Person,
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then such Person shall be deemed to have a fair market value of less than Twenty
Billion United States Dollars for a period of at least five (5) business days.
This request does not involve any economic cost or hardship to Fortis since the
lump sum amount for the annuity payment is discounted to reflect the earlier
payment and the deferred LTIP amount should be the amount in the Rabbi Trust as
it may change from time to time. Therefore, I would very much appreciate
receiving a signed copy of this letter to confirm this change to my Retirement
Agreement.
Sincerely,
/s/ XXXXX X. XXXXXXXX
-----------------------------
Xxxxx X. Xxxxxxxx
Fortis, Inc. Dated: 8/4/2000
/s/ J. XXXXX XXXXXXX X. X. Xxxxxxx
-----------------------------
Authorized Officer
Fortis Insurance, N.V. Dated: 8/21/2000
/s/ X. X. XXXXXXXX X. X. Xxxxxxxx
-----------------------------
Authorized Officer
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